The biggest phenomenon in the business world in the last 25 years, Amazon (NASDAQ:AMZN), essentially started the concept of e-commerce. From humble beginnings as an online bookstore to a seemingly impregnable digital empire, it is the benchmark by which all technology and innovative firms compare themselves to. Naturally, everyone is curious as to what crop of stocks to buy could potentially become the next AMZN stock.
To be fair, it may take many years, perhaps decades for a successor to appear, if one appears at all. Taking nothing away from the company, Amazon did benefit from other fortuitous factors that will be hard pressed to repeat themselves. Primarily, the e-commerce firm positioned itself in a pivotal market at the dawn of the internet. That establishment stamped a perhaps permanent association with consumption for Generation Z, which grew up knowing nothing but digitalization.
Further, management made a wise decision not to pigeonhole itself as just an e-commerce platform. Taking its resources to other areas, Amazon moved into disparate markets, such as cloud computing, content streaming and even groceries. Therefore, for stocks to buy that potentially could be the next Amazon, they must be versatile and have the potential to do so.
Granted, this is a tall order, probably the tallest in the investment sector. Nevertheless, some stocks to buy are available which may give Amazon some hearty competition in certain arenas. Mainly, if there’s going to be a dent against the internet behemoth, it’s in the international realm. These companies just might have the edge to take on the king.
- Pinterest (NYSE:PINS)
- MercadoLibre (NASDAQ:MELI)
- Sea Limited (NYSE:SE)
- JD.com (NASDAQ:JD)
- Rakuten (OTCMKTS:RKUNY)
- Fast Retailing (OTCMKTS:FRCOY)
- The RealReal (NASDAQ:REAL)
Before we dive in, I just want to clarify that I’m not guaranteeing anything. Obviously, Amazon is both a business phenomenon and a beneficiary of incredibly good fortune. However, these stocks to buy may be able to expand their niche, giving Amazon at least something to think about.
Stocks to Buy: Pinterest (PINS)
Although not directly an e-commerce firm, Pinterest represents an important ancillary component of digital consumption thanks to its image sharing and social media service platform. Now before I get into it, let me keep it real — prior to the novel coronavirus pandemic, I wasn’t a big believer in Pinterest as one of the stocks to buy. Following the disaster, though, the narrative for PINS stock makes sense.
On the patently obvious level, the health crisis forced millions of workers to operate remotely, leaving a lot of free time to browse the internet. Heck, without a boss looking over your shoulder, you can pretty much do whatever you want, so long as you keep up appearances. Naturally, this helped broaden engagement for the Pinterest platform, as folks used digital window shopping as a form of therapy.
Moving forward, this social sharing movement can become ingrained. As I mentioned in another InvestorPlace article, it can take anywhere from 18 to 254 days for a habit to form. So we’re more than a year into these lockdowns, I’d say that PINS stock has a cynical pathway to possibly become the next Amazon.
In terms of equity unit price tag, MercadoLibre is steadily approaching Amazon levels. At time of writing, MELI stock was trading a few bucks shy of $1,400. A little more than a two-banger and MELI is there.
An Argentine company headquartered in the U.S. and specializing in operating online marketplaces for e-commerce and online auctions, MercadoLibre lives up to its name, which translates to “free market” in Spanish. Aside from its home market, the company has operations in several lucrative regions, including Brazil, Colombia, Costa Rica, Panama and Mexico.
Further, MercadoLibre is a trusted brand in the Central and South American markets, which not only bolsters the company’s primary revenue channels but also supports synergistic businesses, such as its payment app Mercado Pago.
To be fair, MELI stock easily qualifies as one of the stocks to buy on paper. To fundamentally supplant Amazon is another story altogether. One of the challenges is that in countries like Mexico, the population still loves using cash. With Amazon providing cash transaction options, this is a tough battle brewing south of the border.
Sea Limited (SE)
As one of the leading internet platform providers in Southeast Asia and Taiwan, Sea Limited offers a wide range of services, including entertainment (e.g., video games), e-commerce and digital financial services, via its three subsidiaries — Garena, Shopee and SeaMoney.
Over the years, SE stock has made the list of compelling stocks to buy primarily for its ridiculous revenue growth. In 2017, the company delivered $414 million. Preliminary results for 2020 shows a top-line sales haul of $4.38 billion. Better yet, there may be more growth on the horizon, which should make Amazon look at its rearview mirror.
In an article for Benzinga, I mentioned that Southeast Asia is enjoying an internet boon, with the connected market hitting $105 billion last year. Further, “Industry experts anticipate that this pivotal part of the world will generate $309 billion in gross merchandise value by 2025. That’s up $9 billion from last year’s forecast.”
True, Amazon is a global vacuum cleaner, sucking up viable businesses and integrating them under its vast umbrella. However, companies like Sea Limited may have a fighting chance on their home turf because they obviously know the local customs and culture so well.
Even though it’s on this list of stocks to buy, I’m going to be upfront with you: don’t get into JD.com shares just yet. Wait until the present volatility dies down. Considering that at time of writing, JD stock closed down below its 200-day moving average (which is below the 50-DMA for clarity), the technical situation does not look comforting.
Based on a mixture of Fibonacci retracement levels and some technical analysis, I anticipate that shares will fall to between $60 to $65. So in my opinion, now isn’t a great time to buy.
However, assuming that JD stock gets to the aforementioned price zone, you may want to consider taking a shot. While questions about global economic stability cloud the bigger picture, I can’t help but notice that China got out of the coronavirus mess relatively unscathed. Therefore, it might be worth taking a wager.
Of course, China is an export-centric economy, so you won’t want to go too crazy. But if you don’t mind risk and are not patriotically motivated with your portfolio, this might be right up your alley.
Japanese e-commerce firm Rakuten made some noise a few years ago when it ran a commercial about how to pronounce the brand name. An advertisement kiosk gave people money if they pronounced it correctly. The thing is, while none of them actually said it correctly, they were still rewarded for their attempts.
That’s neither here nor there, but I thought it was pretty funny. What really made news for Rakuten is that the company recently raised the equivalent of $2.1 billion from institutional investors Japan Post Holdings (OTCMKTS:JPPHY), Tencent Holdings (OTCMKTS:TCEHY) and Walmart (NYSE:WMT).
In theory, the various synergies should bolster Rakuten’s primary e-commerce business. As well, a partnership with Tencent could lead to opening channels for Japanese merchants in China. However, The Wall Street Journal doesn’t believe Rakuten is an Amazon killer because Rakuten’s move into the mobile industry could become a liability.
I think the WSJ makes a fair point. However, I’m still going to put RKUNY stock on this list of potential Amazon-beating stocks to buy because of its possible upside pathway. Mainly, I believe Asian companies stand a better chance of dominating Asian markets because of the nuances in eastern culture and customs.
Fast Retailing (FRCOY)
Like JD.com, Fast Retailing may belong on this list of stocks to buy for the next Amazon but you don’t want to get onboard FRCOY stock just yet. Fast Retailing shares have already tumbled well below its 50-DMA. As I write this, it’s about to hit and possibly fall below its 200-DMA, which again is a bad sign.
And based on Fibonacci retracement analysis and technical indicators, I believe FRCOY stock is at risk to correct to between $55 to $60. But at that range, it might make sense to consider a position.
Mainly, I believe Japan-based Fast Retailing offers an attractive long-term investment on global demographic trends. First, the U.S. is diversifying a lot quicker than experts anticipated, which bodes well for Fast Retailing’s Uniqlo apparel brand.
Second, tourism dollars from Asia are growing like wildfire, while the share from many other regions is shrinking. And frankly, Asian consumers love products that cater to them, which should boost FRCOY stock.
The RealReal (REAL)
Similar to the caveats I made for the other stocks to buy, I wouldn’t engage RealReal until shares have dropped to around the $15 to $16 level. Yes, I recognize that’s a hefty drop from where REAL stock stands. But I don’t like the rotation out of risk that I’m seeing in the broader markets. Here, patience is king.
But should REAL stock get to this zone, I might be tempted to pull the trigger. Billed as the leader in authenticated luxury consignment, I look at RealReal as Pawn Stars meets Amazon. For consumers, the platform represents an opportunity to buy premium goods in a secondhand market, thereby saving money. On the other hand, for sellers, it’s a great way to get cash.
Unlike other retail plays, RealReal has a treasure hunter element to it, which may keep customers coming back for more. Indeed, a better analogy may be a digital (and therefore contactless) garage sale.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.