Many e-commerce businesses have seen tailwinds this year as conditions created by the novel coronavirus pandemic resulted in stores closing and spending migrating to digital channels. With many brick-and-mortar businesses beginning to reopen in conjunction with coronavirus restrictions being eased, June could provide valuable data about what the future of retail looks like.
Investors interested in e-commerce stocks should keep an eye on Shopify (SHOP 0.14%), Baozun (BZUN 1.28%), and Adobe Systems (ADBE -0.27%) this month.
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1. Shopify
Shopify provides software that allows businesses to easily create and manage online-retail websites, and it's one of the e-commerce space's hottest stocks. Shares are crushing the market in 2020, climbing roughly 89.5% year to date after rallying 187% in 2019.
Shopify has posted torrid growth as it's brought more large companies on board its platform and become solidified as the category-leading e-commerce services provider for small-and-medium-size enterprises. The company saw heightened merchant-customer additions and shopper engagement as the novel coronavirus began disrupting brick-and-mortar retail operations in mid-March.
Shopify stock hit a lifetime high in May, but shares have actually pulled back over the last couple of weeks despite the S&P 500 index climbing roughly 8% across the same stretch. The e-commerce company's valuation is currently down roughly 13% from the lifetime high it hit in May. With brick-and-mortar retail businesses beginning to reopen in the U.S. and other territories, Shopify's coronavirus-related momentum could be tested in June.
Despite the potential for near-term volatility, the company's long-term growth outlook remains promising. E-commerce will only become more important for businesses, and pullback on the stock could present an entry point for long-term investors.
2. Baozun
Baozun is sometimes referred to as "the Shopify of China" because it also provides website-creation tools and other e-commerce services. However, most of Baozun's customers are large companies, and its core business hinges on providing services for Western brands aiming to expand their presence in China's fast-growing e-commerce market.
The stock is up roughly 4% year to date following Baozun's first-quarter earnings beat and encouraging Q2 guidance it published on June 2. Even with shares now in positive territory across 2020's trading, they're still down roughly 48% from their lifetime high two years ago due to slowing growth and tensions between the U.S. and China.
Baozun is seeing business pick back up as the Chinese economy recovers from coronavirus-related conditions, but the country's increasingly fraught relationship with the U.S. could create obstacles to a sustained stock rebound. Phase one of the trade deal reached at the end of last year could be in jeopardy, and investors have had to contend with the possibility of Chinese stocks being delisted from U.S. exchanges thanks to legislation currently making its way through Congress.
The U.S. Senate unanimously approved a bill on May 20 that would require Chinese companies to be delisted if they fail to meet new regulatory standards. The Holding Foreign Companies Accountable Act would require foreign companies trading on U.S. exchanges to show that they are not owned or controlled by a foreign government, and it has put pressure on the valuations of Chinese tech companies.
The House of Representatives could vote on the bill in the near future, and the bipartisan support the legislation received in the Senate suggests it has a good chance of passing. Baozun's leadership position in China's online-retail industry gives the business a long runway for growth, but political factors could play a big role in shaping the stock's trajectory.
3. Adobe Systems
Adobe is best known for multimedia software applications including Photoshop, AfterEffects, and InDesign, but growth for its online-retail services platform is actually an important part of its growth strategy. The company purchased e-commerce services platform Magento for $1.68 billion in May 2018 and then bought business-to-business digital marketing specialist Marketo in a $4.75 billion deal just four months later. The acquisitions allowed Adobe to rapidly build positions in retail, marketing, and analytics services and attract enterprises to its cloud-based commerce platform.
The company is scheduled to report second-quarter earnings after the market closes on June 11. When Adobe published first-quarter results in March, it guided for revenue of roughly $3.18 billion in the current quarter -- suggesting year-over-year growth of roughly 15.9%.
The company anticipated that its digital experience segment (which houses Magento and Marketo) would see revenue climb approximately 12% year over year in the second quarter, but tailwinds for digital business in recent months could push performance above that target. In addition to shedding light on progress for Adobe's own e-commerce ventures, the upcoming quarterly report might be paired with new data about the broader online-retail space courtesy of the company's analytics platform.
