The global e-commerce industry will approach $4 trillion in revenue this year, according to Statista. That suggests there's a lot of opportunity to go around. Moreover, Statista estimates that e-commerce revenue will continue growing at a greater than 11% compound annual rate for the next several years, putting a lot of incremental revenue up for grabs as well.
Clearly, e-commerce is something for investors to pay attention to. And I believe Amazon (AMZN 1.49%), eBay (EBAY 1.09%), and MercadoLibre (MELI 0.87%) are three of the safest and best e-commerce investment opportunities for the coming decade. Let's find out a bit more about these three e-commerce stocks.
1. Amazon
Amazon is an e-commerce giant that needs no introduction. But there's a specific reason I like this business for the next decade: I don't believe any pure e-commerce player can catch up to Amazon's infrastructure within the next 10 years.
As of the end of 2022, Amazon owned or leased over 661 million square feet of fulfillment centers, data centers, office space, physical stores, and more. Just for perspective on the scale of this physical property presence, Walmart had 5,342 stores (including Sam's Clubs) at the end of 2022. And these stores added up to 783 million square feet (this excludes Walmart's warehouses, offices, etc.).
The point is, Amazon has a massive competitive advantage in the e-commerce space because of its size -- it can carry more merchandise and get it out faster than anyone else. And the company is continually getting bigger. Consider that it spent over $60 billion in both 2022 and 2021 on property and equipment.
Amazon has a huge head start already. And with it spending at this level, I don't believe another e-commerce company will catch it within the next decade.
With its e-commerce foundation secure, Amazon is building out many more lucrative revenue streams. For example, the company generated $11.6 billion in advertising revenue in the fourth quarter of 2022 alone, up 23% year over year. That makes Amazon's ad business bigger than many stand-alone companies. And then, of course, there's Amazon Web Services (AWS), which accounted for all of the company's operating income in 2022. And while growth has slowed for AWS, Amazon continues to invest aggressively for the next leg of its growth.
To summarize, Amazon's e-commerce business is rock solid. And its strength provides the company with the luxury to experiment and grow new revenue streams.
2. eBay
eBay was founded around the same time as Amazon but it hasn't enjoyed nearly the same level of growth. That said, the company has still processed over $76 billion in trailing-12-month gross merchandise volume, which is nothing to sneeze at.
Merchandise volume isn't the same as revenue for eBay because its marketplace processes transactions from third parties. From the gross sales volume, eBay takes a cut, which is its revenue. And since it didn't have to directly carry, manufacture, or store any merchandise itself, this revenue is high margin. In the third quarter of 2022, its most recent quarter, its operating margin was 24% -- few companies are this profitable.
eBay primarily generates revenue when these third-party sellers sell used items on its platform. The challenge to a business like this long term is counterfeit merchandise, especially on high-dollar brand names. That's why eBay is investing heavily into its authentication services. This includes its February acquisition of authentication-software company 3PM Shield.
By focusing on counteracting things that could damage its platform's reputation, including counterfeit items, eBay is taking steps to remain relevant for the coming decade. And if it can stay relevant enough, it can keep its cash flows flowing.
If it keeps generating comparable cash flows, then eBay can be a winning investment. The company is returning capital to shareholders in spades, both paying a growing dividend and reducing its share count aggressively, as the chart below shows.
EBAY Average Diluted Shares Outstanding (Quarterly) data by YCharts
3. MercadoLibre
For years, MercadoLibre has benefited from two trends in Latin America. First, the proliferation of smartphone adoption has enabled financial technology (fintech) solutions, fast-tracking financial services for a large, unbanked population. Second, this digital-money revolution is catalyzing the adoption of e-commerce.
MercadoLibre's financial results speak for themselves. In 2021, the company's full-year revenue jumped 78% year over year. And through the first three quarters of 2022, its revenue is up another 53% from the comparable period of 2021.
Not to be overlooked is MercadoLibre's bottom-line improvements. In the third quarter of 2022, it had operating income of $296 million -- a quarterly record and up 85% year over year.
For the record, MercadoLibre is reaching new heights during a time when some key competitors are slipping. For example, Sea Limited halted its e-commerce operations in Argentina and reduced its activity in Chile and Mexico back in September, according to Bloomberg. And Brazil's largest e-commerce player, Americanas S.A., is currently working through a multibillion-dollar accounting scandal that could slow it down, allowing MercadoLibre to take market share.
Seeing MercadoLibre profitably grow at a time other players are slipping strengthens my confidence in its ability to deliver market-beating returns over the coming decade. And while I like Amazon stock and eBay stock today, MercadoLibre is the stock that I believe has the highest upside of the three.
