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.
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Etsy
Etsy (ETSY +0.60%) 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 12.10%) 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.
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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 +0.03%) 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.
