The e-commerce market was growing long before the pandemic shut everything down last year, but lockdowns and social distancing accelerated the online shopping trend. With several vaccines now available in the U.S. and restrictions being loosened, some investors are wondering whether e-commerce stocks are still a good bet.
The good news is that the e-commerce market still has a lot of room to grow, and the recent sell-off in the tech sector has left many e-commerce stocks looking like great deals. Here's why investors should consider snatching up shares of Shopify (SHOP -7.02%), Amazon (AMZN 0.25%), and PayPal Holdings (PYPL -0.91%) right now.
Shopify: It's a good time to shop for this stock
Shopify helped lots of businesses launch and expand their online shops when many retail stores began shutting down last year, and that fueled a phenomenal year for the company.
In the fourth quarter (reported on Feb. 17), Shopify's sales jumped 94% and the company's earnings popped 267%. That growth was sparked by rising subscription sales, up 53% year over year, and merchant solutions revenue, up 117% from the year-ago quarter.
People are spending more money than ever on Shopify's platform, as gross merchandise volume (GMV) exceeded $41 billion and reached $120 billion for 2020. That's up 96% from 2019.
Despite these impressive numbers, Shopify's stock is down about 5% over the past three months. The slide has occurred as some investors have exited the tech sector in search of other areas of growth, as the U.S. economy begins to open back up.
But investors should zoom out and look at the bigger e-commerce picture. Online sales accounted for just 16% of all retail sales in the U.S. at the end of 2020, leaving substantial room for more growth in the coming years.
And with many people now accustomed to buying things online, particularly after this past year, it's likely that the e-commerce market will accelerate even faster than it was before COVID-19.
With Shopify's stock taking a slight hit over the past few months, it's a great time to buy shares of this fast-growing tech stock.
Amazon: The leader of e-commerce
Of course, no list of top e-commerce stocks is complete without Amazon. But some investors may overlook the company simply because it's the obvious choice -- that could be a huge mistake.
Amazon is the undisputed leader in the U.S. e-commerce market, with about 50% e-commerce market share in the country (based on gross merchandise volume). That's a heck of a competitive edge over rising e-commerce competition, and it's one of the reasons why Amazon will keep winning for years to come.
But Amazon isn't just resting on its laurels -- the company is one of the most innovative as well. Amazon has incorporated artificial intelligence into its buying platform. It leads the cloud computing market with Amazon Web Services, and created Alexa, one of the most popular digital assistants.
This ingenuity is what drives Amazon, and it's what has helped the company continue expanding its e-commerce dominance. Consider that in the most recent quarter, Amazon's sales rose 44% to $125.6 billion and diluted earnings skyrocketed 117% to $14.09.
Amazon drastically expanded its workforce last year, hiring more than 420,000 employees in just the first 10 months of 2020. Think about that just for a moment. Amazon's business was able to thrive during a massive, unforeseen global event and was creating jobs while many other companies were eliminating them.
Just as with Shopify, Amazon's stock has slid over the past three months, tumbling about 3%. But Amazon's e-commerce business is in better shape than ever and the company's innovative culture continues to thrive. This means that investors looking for a great e-commerce stock -- that's slightly on sale -- should buy up Amazon right now.
PayPal Holdings: A payment processor for the digital world
PayPal may seem like an unconventional suggestion for top e-commerce stocks, but as online sales have risen, so have PayPal's financials.
The company is well-known for making online payments easy and safe, and as e-commerce expanded last year, PayPal's sales soared. Revenue jumped 22% for the full-year 2020 and non-GAAP earnings increased 31%.
But that doesn't paint the entire picture. The company also added 71 million net new active accounts throughout the year, bringing the total to an impressive 377 million at the end of 2020. Additionally, the company grew its total payment volume -- the amount of money spent on its platform -- by 31% to $936 billion.
What makes PayPal a compelling investment opportunity -- besides this growth -- is the fact that it continues to improve its online payment platform. PayPal now offers users the ability to buy items now and pay for them over four installments through the company's "Pay in 4" service. Additionally, PayPal offers an easy one-touch payment service for buying items online and at merchants, which speeds up the checkout process.
Finally, PayPal has also expanded into the cryptocurrency space, allowing its users to buy and sell cryptocurrencies like Bitcoin in its app. Starting this year, PayPal users can also use their PayPal accounts to spend their cryptocurrencies at merchant stores.
PayPal was one of the first companies to see the value in allowing users to pay merchants online, and since its inception, the company has continued to expand its e-commerce payment services -- making this stock a top pick.