Shopify (NYSE:SHOP) says its 2024 mobile commerce sales are expected to be $2.5 trillion in 2024, nearly 14% higher than in 2023. That’s excellent news for it and other e-commerce growth stocks.
Investors got an indication this past November that e-commerce sales remained very healthy. On Black Friday, while in-store U.S. retail sales grew by 1.1% year-over-year (YoY), online sales were up 8.5% compared to the same time in 2022.
Two things helped online sales this past year’s holiday shopping season: mobile e-commerce and buy now, pay later (BNPL). Approximately 54% of online sales on Black Friday were from mobile devices, up more than 10% from a year earlier. Meanwhile, BNPL orders for the week of Nov. 18 were up 72% over the same week in 2022.
These are two areas where investors should focus their attention when it comes to finding e-commerce growth stocks to buy.
Here are my three choices.
Shopify (SHOP)
If I were to start a new e-commerce business, there is no question I would do so using Shopify’s platform. Although it’s got plenty of larger clients these days, it got its start with small online businesses, and that remains a big part of its growth.
Despite being up nearly 69% over the past year, SHOP stock is down significantly from its all-time high in November 2021. There’s plenty of room left on the Shopify growth train.
In 2023, the company exited the logistics business, selling the money-loser to Flexport, a logistics startup. On Jan. 19, it announced it would invest $260 million in the company, getting uncapped convertible notes that can be converted into equity. It already owns 13% of the company and has a seat on the board.
Shopify continues to make equity and debt investments where it makes sense for the business. However, there is no question that last year was a major reset for the Canadian company, as it opted to double down on e-commerce.
It was a very smart move.
MSC Industrial Direct (MSM)
MSC Industrial Direct (NYSE:MSM) is the name on this list that’s not your traditional e-commerce stock recommendation.
The Melville, New York company is a leading North American distributor of metalworking and maintenance, repair and operations (MRO) products and services. It offers more than 2.4 million products to its industrial clients, with about 500,000 available with next-day delivery.
MSC reported its Q1 2024 results on Jan. 9. They were down. However, these results were in a challenging business environment.
“Though sales fell short of our expectations, I am encouraged by our strong start in gross margin performance, which stems from the operating improvements we have implemented over the last few quarters,” stated CFO Kristin Actis-Grande in its press release.
Of the $954 million in first quarter revenue, 63% were from e-commerce sales, 140 basis points higher than a year earlier. During the quarter, its e-commerce sales partly offset the decline in offline revenues.
This is a stock for long-term income investors. It currently yields 3.4%. Buy more whenever it falls below $75 or so.
MercadoLibre (MELI)
MercadoLibre (NASDAQ:MELI) stock has gotten off to a fast start in 2024. It’s up 14% year-to-date, about 4x the performance of the S&P 500. I’ve been a fan of the Latin American e-commerce and payment company for many years.
The first time I recommended the growth stock was in May 2017. I’ve been a fan ever since. Coincidentally, Shopify was also on my list of 10 growth stocks. It’s done even better over the past 80 months, up 856%, 311 percentage points higher than MELI.
Back then, it reported Q1 2017 sales of $274 million with $63.3 million in operating income. In Q1 2023, its revenues and operating income were $3.0 billion and $340 million, respectively. Its operating margin might be lower than it was, but it’s all good when you generate more than 10x the sales.
During the third quarter, Brazil, Mexico and Argentina experienced significant growth relative to Q2 2023. Brazil’s GMV (gross merchandise value) increased by 28%, excluding currency. Meanwhile, Mexico and Argentina’s GMV growth was 34% and 147% higher, respectively, although the latter was driven by inflation.
Analysts like MELI stock.
Of the 21 covering it, 17 rate it Overweight or Buy, with a target price of $1,885, 6% higher than where it’s currently trading.
On the date of publication, Will Ashworth did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
