3 Best Ecommerce Stocks to Buy in July
E-commerce stocks have had a tough 2022, with names that have dominated the market in recent years like Etsy (NASDAQ: ETSY) and Shopify (NYSE: SHOP) drops of 70% or more from their 52-week highs. More broadly, the Global e-commerce ETF X (NASDAQ: EBIZ)which owns many of the biggest names in the space, has fallen nearly 50% in the past year.
But don’t let that obscure the fact that e-commerce is still a great place with plenty of room for growth in the future – Morgan Stanley recently predicted that e-commerce will grow from a $3.3 trillion industry today to a $5.4 trillion industry by 2026. With this multi-year perspective in mind, what are some of the best e-commerce stocks to buy right now?
1. Revolution group
One of the main reasons many e-commerce stocks fell in the first half of 2022 is that many were trading at nosebleed multiples or had no profits at all, at a time when market appetite market for these types of stocks has shrunk due to rising inflation and rising interest rates. One of the major e-commerce stocks that does not have this problem is revolution group (RVLV 2.92%)which is not only profitable, but also trades at a reasonable valuation of 19x forward earnings.
Revolve Group is an online retailer that sells clothing, accessories and luxury goods, primarily to millennials and Generation Z. The company uses algorithms and data analytics to analyze social media and uses its proprietary technology to predict emerging trends and manage inventory. Revolve makes extensive use of partnerships with social media influencers and offers collections curated by them. This data-driven approach appears to be working for Revolve – in an area where many retailers end up having to cut large amounts of merchandise to get them off the shelves, Revolve stands out in that 87% of its sales were full price in 2021 As such, the company boasts impressive gross margins of 55%.
In the first quarter of 2022, Revolve grew net sales by 58% year over year while growing adjusted EBITDA by 35%. The company is also increasing its number of active customers, total number of orders, and average order value, indicating that Revolve is making progress on all fronts and is a compelling e-commerce stock to buy now and hold into the future.
The name come on daddy (GDDY 1.80%) may not immediately appear to you as “e-commerce” in the same way as Etsy or Amazon (NASDAQ: AMZN) done because consumers do not go to the GoDaddy website to purchase products. Instead, it’s a pick and shovel game about the growth of e-commerce and online entrepreneurship. While GoDaddy is best known for web hosting and domain registration, the company has increasingly diversified and expanded its services to become an integral part of the e-commerce landscape since CEO Aman Bhutani took the helm. .
The company’s expansion into segments such as billing and payments not only brings GoDaddy into lucrative markets, but also brings a lot of synergy as they are complementary to its hosting business. For an entrepreneur or e-commerce brand already hosting their website on GoDaddy, it makes perfect sense to integrate their payment and billing solutions as well. This move towards a global solution appears to be off to a good start, with annualized GMV (gross merchandise volume) increasing 20% year-over-year to $24 billion and revenue and EBITDA increasing 11 % and 18% year over year, respectively, in the last quarter.
The company is also aggressively returning capital to shareholders through share buybacks. In February, the company authorized a new $3 billion share buyback plan, part of a multi-year plan to build shareholder value.
GoDaddy is evolving into a one-stop-shop for e-commerce and online business while focusing on shareholder value, making it a premier e-commerce stock to buy and hold for the long term.
Last but not least, let’s take a look at MercadoLibre (MELI 2.42%) as our third e-commerce stock to buy in July. Over the past 10 years, this perennial growth machine has provided investors with an 860% return. Keep in mind that this phenomenal return takes into account the 46% decline since the start of the year in 2022; otherwise it would be even higher. The good news for potential shareholders or investors who regret missing out on MercadoLibre’s rise over the past decade is that after that decline, shares are now trading at a price they haven’t been from the depths. of the COVID-19 pandemic more than two years ago.
While the stock price has fallen, MercadoLibre’s underlying business is actually performing better than ever. The massive market sell-off masked the fact that the Argentinian company grew its revenue a phenomenal 63% year-over-year. What makes this growth even more impressive is that it’s not like MercadoLibre is coming off a low base or growing slowly in the first quarter of 2021 – the company grew revenue by nearly 160% year over year. on the other during this trimester.
Although MercadoLibre does not seem cheap based on the price/earnings ratio, it is important to note that the company has just become profitable and is still investing in infrastructure to accelerate its operations and offers even more. On a price-to-sales basis, MercadoLibre trades at less than five times sales, which isn’t bad for a growing business like this.
Looking ahead, shares of some major e-commerce companies have fallen sharply this year. But many of these companies, such as MercadoLibre, Revolve Group and GoDaddy, are firing on all cylinders and looking better than ever in terms of the underlying business, and valuations look reasonable. E-commerce will continue to be a major secular growth trend in the future, and owning e-commerce stocks like these three should help shareholders grow their portfolios for years to come.