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The 3 Best E-Commerce Stocks Not Named Amazon

By Leo Sun – Updated May 18, 2020 at 7:51PM

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Though Amazon may dominate the e-commerce landscape, these smaller players still deserve your attention.

Amazon is the most well-known e-commerce stock in the world. Its stock has surged nearly 1,800% over the past decade as it disrupted brick-and-mortar retailers and locked over 150 million members into its Prime ecosystem, and it could still have plenty of room to run as the retail apocalypse wipes out more companies.

Amazon is still a great long-term investment, but investors should also recognize other high-growth companies in the e-commerce sector. Here are three such stocks that should be on your radar.

Three tiny parcels on a laptop keyboard.

Image source: Getty Images.

Etsy

Etsy (ETSY -1.05%) carved out a defensible niche against Amazon with its focus on handmade goods. Amazon attempted to challenge Etsy with its Handmade marketplace in 2015 but failed to curb the underdog's growth.

Etsy revenue and net income rose 36% and 24%, respectively, last year. The top line still grew 35% annually in the first quarter of 2020, despite struggling with a significant slowdown in sales in March as the COVID-19 crisis shut down businesses.

Management expects revenue to rise 70% to 90% year over year in the second quarter. That temporary boost mainly comes from Reverb, the online instruments marketplace it acquired last year, since it became a primary retail channel for the industry as other stores closed down.

Etsy didn't provide any full-year guidance and warned the "extreme shifts in demand" in the first half of 2020 made it tough to gauge its future growth. However, the company's ability to keep growing in Amazon's shadow by selling unique, handmade items could boost the stock -- which already rallied over 300% in the past five years -- to fresh highs. The stock isn't cheap at 60 times forward earnings estimates, but its resilience, moat, and robust growth rates justify that premium.

Baozun

Baozun (BZUN -3.65%) is often called the "Shopify of China." The e-commerce services company helps companies digitize their businesses for Chinese shoppers with digital storefronts, fulfillment services, IT services, marketing campaigns, and other tools.

A woman buys products on a smartphone app.

Image source: Getty Images.

But unlike Shopify, which mainly serves small- to medium-sized businesses, Baozun mostly helps large multinational companies (like Starbucks) set up shop in China. Alibaba and JD.com, the two largest e-commerce companies in the country, also integrate Baozun's services into their online marketplaces.

Baozun's first-mover advantage and diverse customer base make it a great way to profit from the growth of China's e-commerce market without betting on a single company. eMarketer estimates that market will still grow from $2.4 trillion to $4.1 trillion between 2020 and 2023 as more customers shop online.

Revenue grew 35% last year to $1.05 billion, but it only expects 9% to 13% growth in the first quarter due to COVID-19 headwinds. However, that slowdown should be temporary, and demand for its services could surge again after the pandemic passes. If that happens, the stock's forward P/E of 22 looks cheap relative to its future growth potential.

Vipshop

Vipshop (VIPS -2.96%) is a distant underdog in China's e-commerce market, but it maintains a defensible niche with its flash-sale marketplace. Tencent and its e-commerce partner JD bought large stakes in Vipshop in late 2017, then integrated its marketplace into WeChat and JD Mall.

That big investment delivered a steady stream of new shoppers to Vipshop and kept its marketplace relevant even as new discount players like Pinduoduo entered the market. Its revenue and adjusted net profit rose 10% and 84% last year, respectively, as its number of annual active customers grew 14% to 69 million.

Vipshop expects its revenue to decline 15% to 20% annually during the first quarter, which bears the full brunt of COVID-19, but the situation appears to be improving as businesses reopen across China. A sluggish economic recovery in the region also benefits Vipshop as cash-strapped shoppers flock to its marketplace for steep discounts.

Vipshop stock has shed over a third of its value in the past five years as investors fret over its slowing growth and competition from Alibaba. However, Tencent and JD will keep this marketplace relevant, and shares are a bargain at just 14 times forward earnings.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun owns shares of Amazon, JD.com, and Tencent Holdings. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Amazon, Baozun, Etsy, JD.com, Shopify, Starbucks, and Tencent Holdings and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Vipshop Holdings Limited Stock Quote
Vipshop Holdings Limited
VIPS
$9.18 (-2.96%) $0.28
Etsy, Inc. Stock Quote
Etsy, Inc.
ETSY
$96.47 (-1.05%) $-1.02
Baozun Stock Quote
Baozun
BZUN
$6.33 (-3.65%) $0.24
Starbucks Corporation Stock Quote
Starbucks Corporation
SBUX
$84.17 (-0.63%) $0.53
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$113.78 (-3.01%) $-3.53
Tencent Holdings Limited Stock Quote
Tencent Holdings Limited
TCEHY
$34.87 (-2.33%) $0.83
Alibaba Group Holding Limited Stock Quote
Alibaba Group Holding Limited
BABA
$78.80 (-2.37%) $-1.91
JD.com, Inc. Stock Quote
JD.com, Inc.
JD
$52.31 (-2.17%) $-1.16
Shopify Inc. Stock Quote
Shopify Inc.
SHOP
$28.76 (0.67%) $0.19
Pinduoduo Stock Quote
Pinduoduo
PDD
$60.05 (-5.37%) $-3.41

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

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