I have long believed that consumers, who have skimped on buying goods and splurged on travel for over a year, would start to reverse those trends in the second half of 2023. Recently there were two signs that my prediction is coming true. Specifically, Intel (NASDAQ:INTC) reported that the sales of PCs were starting to rebound, while Amazon’s (NASDAQ:AMZN) e-commerce business grew meaningfully last quarter. And if consumers’ appetite for goods is indeed starting to perk up, e-commerce firms’ financial results should rebound significantly going forward. Of course, that’s because e-commerce companies primarily sell physical products. Further, the top and bottom lines of e-commerce firms should get big lifts from the proliferation of artificial intelligence. To exploit the rejuvenation of e-commerce, here are three great e-commerce stocks to buy.
Chewy (CHWY)
Chewy (NYSE:CHWY), the e-commerce website which sells products for pets, appears poised to perform very well going forward.
On July 21, Goldman Sachs raised its rating on CHWY stock to “buy” from “neutral,” citing what it sees as the positive risk to reward ratio of CHWY stock. The bank thinks that the e-commerce company will be able to increase its sales at least 10% annually between 2023 and 2027, driven partially by its entrance into overseas markets and ad sales.
And by selling its own products, offering more healthcare products and improving its supply chains, Chewy can increase its margins going forward, Goldman contended. The bank placed a $50 price target on the name.
Also boding well for the outlook of CHWY and solidifying its status as one of the best e-commerce stocks to buy is the fact that Point72, the hedge fund owned by multi-billionaire Steve Cohen, reported on July 21 that it had obtained a 1.7% stake in the pet products retailer.
DoorDash (DASH)
The U.S. food delivery market is increasingly looking like a duopoly between DoorDash (NASDAQ:DASH) and Uber (NYSE:UBER). And, based on some metrics DASH has become very profitable.
Moreover, there’s no question that DASH is growing very rapidly and is likely to continue doing so for the foreseeable future.
Last quarter, Door Dash’s EBITDA, excluding certain items, came in at $279 million, up from $103 million during the same period a year earlier. And it generated free cash flow of $311 million, bringing its free cash flow over the 12 months that ended in June to $653 million.
On the growth side, its revenue soared 30% year-over-year (YOY) in Q2 2023 to $1.6 billion, while its total orders climbed 23% YOY to $426 million.
DASH is changing hands at a forward price-sales ratio of about 3.5 times, which is not very demanding given its rapid growth and high free cash flow.
Amazon.com (AMZN)
Amazon’s (NASDAQ:AMZN) net product sales climbed 5% last quarter versus the same period a year earlier, indicating that its e-commerce business is starting to recover.
Also encouragingly, the AMZN’s business-to-business e-commerce unit, Amazon Business, “is one of our fastest growing offerings, with a $35 billion annualized gross sales run rate and serving more than 6 million customers,” the company reported.
Additionally, AMZN noted in their quarterly results that it “now offers U.S. Prime members free Same-Day or One-Day Delivery on tens of millions of the most popular items.” Given the latter data point, I expect the company’s share gains from brick-and-mortar retailers to accelerate in the medium term and the long-term.
Credit Suisse recently named AMZN as one of its three “Top of the Crop” stocks.
On the date of publication, Larry Ramer held a long position in INTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
