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Forget Amazon: Here Are 3 E-Commerce Stocks to Watch

By Chris Neiger - Jul 24, 2019 at 6:46AM

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Investors looking for alternative e-commerce stocks should consider Shopify, PayPal, and Etsy.

E-commerce is poised to grow into a massive $4.8 trillion market by 2021, up from $2.8 trillion in 2018, and Amazon.com ( AMZN -1.53% ) has done a fantastic job of leading this fast-growing industry. About 38% of all online sales in the U.S. happen on the company's website, and Amazon boasts more than 100 million Prime members domestically.

But Amazon's dominance doesn't mean that other companies aren't benefiting from the rise of e-commerce. If you want to invest in e-commerce, but aren't interested in Amazon's stock right now, then take a look at what Shopify ( SHOP -2.89% ), PayPal ( PYPL -1.25% ) and Etsy ( ETSY -2.45% ) are doing in this fast-growing market.

Woman holding a credit card and smartphone

Image source: Getty Images.

Shopify

Shopify's platform offers services to businesses of all sizes to sell their products and services online. For example, a small-business owner may set up an online store through Shopify to sell jewelry, while a Fortune 500 company may use the Shopify Plus service to manage worldwide sales campaigns.

Shopify has built itself into a formidable e-commerce business with more than 800,000 merchants, and its first-quarter results show just how well Shopify's business model is paying off. Total sales jumped 50% in the first quarter, driven by revenue growth from the company's two segments, subscription solutions (up 40%) and merchant solutions (up 58%).

What's impressive about Shopify is how the company is continually looking for innovative ways to grow its business -- the most recent example being Shopify's pledge to invest $1 billion to build a new fulfillment service. The company wants to help its merchants deliver their products to customers faster and cheaper, and its fulfillment service could make it happen.

PayPal

Why is PayPal, the online payment company, in a list with e-commerce stocks? Because it has one of the leading payment platforms in the U.S., and as e-commerce sales grow, so will PayPal's business. One indication that PayPal is already benefiting from the rise of e-commerce comes from its first-quarter growth in total payment volume (TPV) -- the amount of money spent through the company's payment platforms. TPV increased by 22% year over year to $161 billion.

And if you think PayPal's opportunities are restricted to just sales on websites, think again. The company also owns Venmo, a popular person-to-person payment app, which is quickly becoming a key part of PayPal's business. Payments made through Venmo accounted for $21 billion of PayPal's TPV in the first quarter, an increase of 73% year over year. PayPal is expanding Venmo so it can be used to easily make payments in stores as well, opening up even more opportunities for the company to grow.

PayPal is betting that consumers and online shoppers will increasingly look to its technology solutions to buy goods and services, and it's creating the platforms to make that a reality. It's so bullish on digital payments that PayPal CEO Dan Schulman says this payment segment represents a $100 trillion total addressable market for his company.

Etsy

If you're looking for a solid e-commerce play that knows a thing or two about serving in niche markets, consider Etsy. The company has built its business by being the go-to platform for people who make and sell unique handcrafted goods.

And just in case you think it doesn't stand a chance in the Amazon era, consider that Etsy's gross merchandise sales grew by nearly 19% in the most recent quarter and are expected to increase up to 21% for the full year 2019. Management also expects revenue to jump as much as 32% this year, compared to 2018 sales. The company's stellar sales growth -- sales increased 40% in the first quarter -- has helped keep investors bullish on Etsy's stock, which is up 54% over the past 12 months.

Etsy's not done growing, either. The company saw the number of active sellers increase by 13% in the most recent quarter, and the number of active buyers popped 18% year over year. If you've sat on the sidelines of this e-commerce stock as it's grown, now may be the time to reconsider your hesitation.

Final thoughts

Each of these companies is already benefiting from the rise of e-commerce, and each continues to position itself for future growth. Remember that just as with any other stocks, there will be ups and downs in these companies' share prices. But over the long term, Shopify, PayPal, and Etsy have a lot of potential to remain key players in the maturing e-commerce market.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$3,507.07 (-1.53%) $-54.50
Etsy, Inc. Stock Quote
Etsy, Inc.
ETSY
$274.58 (-2.45%) $-6.90
Shopify Inc. Stock Quote
Shopify Inc.
SHOP
$1,521.79 (-2.89%) $-45.23
PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
PYPL
$184.89 (-1.25%) $-2.35

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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