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3 Top E-Commerce Stocks to Buy Right Now

By Rich Duprey – Sep 3, 2021 at 9:27AM

Key Points

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There's no letup in online shopping's potential.

Online retail had a surprisingly difficult month in August as consumers got out of the house and went shopping in local stores instead. As a result, e-commerce stocks posted strong second-quarter results, but their guidance for the next reporting period was muted.

Amazon (AMZN -1.44%), for example, enjoyed revenue growth of 27% in the period compared to a year ago, but that was down from about 44% in the first quarter, and it forecast third-quarter growth would be around 13% at the midpoint of management's guidance range. 

If mighty Amazon is seeing its growth slow, what hope do other internet retailers have? 

Actually, e-commerce growth estimates remain robust for the current year and beyond, and the three internet retailers below should capitalize handsomely on the opportunity.

Person doing yoga with dog sitting nearby.

Image source: Getty Images.

Chewy

Last year's lockdowns caused many consumers to acquire new pets, with veterinarians reporting a 50% increase in new pet visits between March and August last year, according to the American Veterinary Medical Association. The American Pet Products Association says consumers bought $103.6 billion worth of food, goods, and services for their pets in 2020, a 6.7% increase, with 47% of pet owners spending more online last year than they had previously. 

That bodes well for online pet supplies retailer Chewy (CHWY 1.28%), which sold more than $7 billion worth of goods last year, up 47% from 2019 and more than double 2018's total. 

With 20 million active customers, almost 6 million gained last year alone, Chewy will undoubtedly keep most of those even as the ability to shop in a physical store returns. It notes online penetration rates in food and supplies have grown from 7% in 2015 to 30% in 2020 and are expected to reach 53% by 2025.

Chewy's stock has bounced off the lows it hit earlier this year but remains 26% below the highs it hit in February. With a long runway of opportunity, Chewy is just waiting to be unleashed. 

Two people with credit card and laptop.

Image source: Getty Images.

Etsy

Etsy (ETSY 0.79%) has also battled higher from its lows as it struggles against enormous pandemic-era gains. The COVID-19 outbreak had consumers racing to their keyboards to search for face mask availability. This online platform for handmade goods, vintage items, and craft supplies was the go-to destination. Reprising that starring role won't be easy, but Etsy is trying to make it look like it will be.

The online marketplace added almost 12 million new and reactivated buyers last quarter. The year-over-year growth rate was lower than in 2020, but the 8 million new buyers it added in the period was double the number it added in 2019.

Arguably more important was the number of so-called habitual buyers, or those consumers with six or more purchase days on the site, surged 115% in the quarter, also nearly double the pre-pandemic rate. Consumers who found Etsy are now using the site more often.

Wall Street is looking for Etsy to expand earnings at a compound rate of 53% annually for the next five years, suggesting the internet retailer's stock still has enormous growth potential.

Shopper with credit card smiling at colorful shopping bags.

Image source: Getty Images.

JD.com

After China's latest crackdown on tech companies, investors were rightly nervous about e-commerce giant JD.com (JD 5.00%), particularly after the intense scrutiny Alibaba Group Holding underwent. 

Yet JD.com has a different business model than its rival, actually more like eBay than Amazon, because it's a platform for third-party sellers rather than selling stuff itself. So while Beijing could go after it as regulators have with other tech stocks, JD.com believes the areas the government is targeting, such as user privacy, don't apply to the company. JD.com already has stringent protocols in place, after all. It could also benefit from the price controls regulators are contemplating, as this regulatory framework may protect JD.com's prices from being undercut by the competition.

After it reported robust second-quarter results, the market seems to have had a change of heart and is running JD.com's stock higher. Shares are up 10% over the past month and 30% above the lows they registered just days ago.

That's still OK for investors as Wall Street sees 30% or more potential upside in its shares. It was admittedly trading higher in the winter, but even analysts got cold feet and lowered their price targets on the stock after the crackdown. It's difficult to recommend Chinese stocks at the moment, but as JD.com continues to exhibit strength, we may very well see them hike their outlooks once more. This internet retailer could easily pick up where it left off.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Amazon, Etsy, and JD.com. The Motley Fool recommends Chewy, Inc. and eBay and recommends the following options: long January 2022 $1,920 calls on Amazon, short January 2022 $1,940 calls on Amazon, and short October 2021 $70 calls on eBay. The Motley Fool has a disclosure policy.

Stocks Mentioned

Etsy Stock Quote
Etsy
ETSY
$140.49 (0.79%) $1.10
Amazon.com Stock Quote
Amazon.com
AMZN
$94.13 (-1.44%) $-1.37
eBay Stock Quote
eBay
EBAY
$45.20 (0.09%) $0.04
JD.com Stock Quote
JD.com
JD
$58.64 (5.00%) $2.79
Alibaba Group Stock Quote
Alibaba Group
BABA
$90.06 (4.79%) $4.12
Chewy Stock Quote
Chewy
CHWY
$44.92 (1.28%) $0.57

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

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