3 Undervalued E-Commerce Stocks to Buy for 100% Returns by 2025


  • These are the undervalued e-commerce stocks to buy for 100% returns before the end of 2025
  • Coupang (CPNG): Positive business metrics with healthy growth in active users and ARPU mark CPNG stock for growth.
  • JD.com (JD): Deeply undervalued while delivering robust free cash flows provides this e-commerce stock with needed flexibility.
  • Sea Limited (SE): SE stock is focused on moving towards profitability and increasing market share in the Southeast Asian region.
e-commerce stocks - 3 Undervalued E-Commerce Stocks to Buy for 100% Returns by 2025

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E-commerce stocks were the hottest names to buy during the pandemic era. Consumers shifted their buying habits to online shopping and the business was booming. However, the post-pandemic period grounded most e-commerce stocks. Valuations adjusted downwards in sync with relatively moderate growth expectations. Even now, the e-commerce sector seems to be largely ignored.

However, I believe that after a meaningful correction, e-commerce stocks are attractive today. Further, the growth outlook for the industry remains positive and there will be value creators in the coming years. To put it into perspective, the global e-commerce market size is expected to increase to $47.7 trillion by 2030. Analysts anticipate it to swell at a compounded annual growth rate of 12.22% by the end of the decade.

Therefore, as some of the best e-commerce stocks trade at attractive valuations, now is a good time to accumulate and hold with patience. This column discusses three e-commerce stocks that are likely to double within the next 24 months.

Coupang (CPNG)

The Coupang (CPNG stock) campus in Silicon Valley, California.
Source: Michael Vi / Shutterstock.com

Coupang (NYSE:CPNG) has traded sideways for the last 12 months. This seems like a strong consolidation before a big breakout on the upside. My view is underscored by encouraging financial and business metrics despite the lack of stock movement.

Operationally, Coupang reported 14% year-on-year growth in active users to 20 million as of the third quarter of 2023. It’s encouraging to note that net revenue per active customer also increased by 7% to $303. This was the third consecutive quarter of revenue and active customer growth acceleration. If this trend continues, I expect EBITDA margin expansion over the next few years.

Additionally, Coupang reported free cash flow (FCF) of $1.9 billion for the last 12 months. As FCF swells, the company will have greater financial flexibility for domestic and international expansion. The company already has a presence in international markets, particularly in Asia, including in Taiwan, Singapore, China and India.

JD.com (JD)

JD.com (JD) logo displayed at the entrance to the company's Silicon Valley office.
Source: Sundry Photography / Shutterstock.com

China faces certain macroeconomic headwinds and geopolitical tensions that have also impacted economic growth. Yet Chinese stocks possess attractive valuations. Quality names will likely surge higher in the next 12 to 24 months.

JD.com (NASDAQ:JD) is among the best e-commerce stocks to buy at current levels. JD stock trades at a forward price-to-earnings ratio of 8 and offers a dividend yield of 2.67%.

When looking at valuations, the company’s cash flow potential holds the key. In the past year, JD.com has reported operating and free cash flow of 58.8 billion renminbi (about $8.2 billion at current exchange rates) and 39.4 billion renminbi, respectively. Besides potential growth in dividends, JD.com has high financial flexibility to invest in emerging businesses.

As an example, for Q3 2023, JD Logistics reported 16% year-on-year growth in revenue to 41.7 billion renminbi. With several investments in other new businesses, JD.com is positioned for long-term value creation.

Sea Limited (SE)

Person holding cellphone with logo of Singaporean technology conglomerate Sea Ltd on screen in front of business webpage Focus on phone display. SE stock
Source: Wirestock Creators / Shutterstock

After a massive correction from all-time highs above $250 per share, Sea Limited (NYSE:SE) stock has stabilized in the last few quarters. SE stock has trended higher by 14% in the last six months. I believe that the rally is likely to continue from deeply oversold levels.

One of the reasons for the big plunge in Sea Limited’s shares was the continued cash burn in the e-commerce business. While cash burn has continued, there has been a significant improvement year over year. As the e-commerce business moves towards being break-even on an EBITDA basis in the coming quarters, SE stock is likely to trend higher.

Another point is that Sea Limited reported cash and equivalents of $7.9 billion as of Q3 2023. The company aims to utilize the cash buffer to invest in increasing its market share. With the Southeast Asian markets being attractive, there is ample scope for revenue growth through 2030.

On the date of publication, Faisal Humayun 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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

Article printed from InvestorPlace Media, https://investorplace.com/2024/02/3-undervalued-e-commerce-stocks-to-buy-for-100-returns-by-2025/.

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