E-commerce, or what we might informally call online shopping, is practically synonymous with Amazon (NASDAQ:AMZN) in the minds of many stock traders.
However, the emergence of other contenders means that there are less expensive alternatives to Amazon in the realm of e-commerce stocks.
It’s sometimes a fuzzy category because traditional brick-and-mortar retailers like Walmart (NYSE:WMT) and Target (NYSE:TGT) have made forays into the online-retail space. To alleviate the fuzziness, I’ve handpicked three worthy e-commerce stocks which primarily focus on online sales — and which might actually present a better deal than Amazon stock.
E-commerce Stock to Buy: Alibaba (BABA)
Sometimes traders refers to this company as the Chinese version of Amazon. The analogy makes sense because Alibaba (NYSE:BABA) has a massive presence in China.
The coronavirus from China has hit global e-commerce hard, but Alibaba CEO and Executive Chairman Daniel Zhang made an excellent point about the potential for a sector- and company-specific rebound: “17 years ago, the e-commerce business experienced tremendous growth after SARS. We believe that adversity will be followed by change in behavior among consumers and enterprises and bring ensuing opportunities.”
The coronavirus-induced drawdown in Chinese equities presents an opportunity as Alibaba is a tremendous revenue generator, as evidenced by the company’s solid third-quarter earnings figures. Percentage-basis growth in the company’s quarterly revenue (+38%), non-GAAP earnings per share (+49%), new retail business revenue (+128%), international retail business (+27%), local consumer service revenue (+47%) and cloud-computing revenue (+62%) suggest a company with outstanding rebound potential when coronavirus fears subside.
While Amazon might be the granddaddy of them all, Shopify (NYSE:SHOP) is a worthwhile addition to the collection e-commerce competitors due to its unique angle: providing a one-stop-shop for online sellers to set up virtual stores to sell directly to shoppers.
Until the coronavirus panic set in, Shopify stock was on a tear and rightfully so: the platform’s merchant base comprises over a million businesses and the company’s revenues increased by a whopping 47% year-over-year during 2019’s first nine months.
Moreover, Shopify COO Harley Michael Finkelstein has constructed a compelling case to go shopping for Shopify stock on the coronavirus dip. As he pointed out during the company’s fourth-quarter conference call, Shopify’s “merchants did great, generating more than $61 billion in GMV [gross merchandise volume] in 2019, generating an average of more than $1 billion per week last year and positioning Shopify merchants on an aggregated basis as the second largest e-commerce retailer in the U.S.” — an understated but apt reference to Jeff Bezos’s behemoth.
Perhaps the best way to tackle the Amazon monster is not to compete with it, and Etsy (NASDAQ:ETSY) has managed to sidestep much of the fierce e-commerce competitive landscape with a strictly niche approach.
By appealing to buyers and sellers of handmade goods, Etsy conveys a sense of authenticity that seems to capture the spirit of the millennial shopper — a powerful consumer segment that loves to shop online.
If you’re seeking numbers to back this up, look no further than the company’s fourth-quarter earnings results, which sent Etsy stock soaring on an overall red day for the equities markets. The consensus estimates for quarterly earnings per share ($0.16) and revenue ($264.9 million) were handily beaten by Shopify’s actual results of nearly $270 million in revenues and earnings of $0.25 per share. Needham analysts, who have assigned a price target of $64 for Etsy shares, commented that the company “anticipated a fairly strong fourth quarter and Etsy delivered” — and if the forward momentum persists, the stock could continue to deliver considerable gains regardless of the Amazon factor.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.