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3 Top E-Commerce Stocks to Buy Right Now

By Jamal Carnette, CFA – Sep 11, 2021 at 6:15AM

Key Points

  • E-commerce as a percentage of retail sales is slated to grow 10.5% percentage points in the U.S. by 2025, and other countries will experience even faster adoption.
  • The third company on this list is down 55% from all-time highs.

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Reopening trade aside, e-commerce has a long runway for growth.

E-commerce stocks are suffering from a perception problem. Coming out of the pandemic, some investors believe e-commerce will suffer as more shoppers clamor for the in-store experience. While this might be true in the short term, e-commerce is well-positioned for long-term growth.

Even in the United States, where e-commerce feels nearly ubiquitous, eMarketer reports that only 13% of total retail sales occur on the internet -- and that figure is expected to grow to 23.5% by 2025. Against that backdrop, adding an e-commerce stock to your portfolio makes perfect sense. Here are three e-commerce growth stocks to buy now.

Mature person shops online while at home and holds a credit card in their hand.

Image source: Getty Images

Amazon's e-commerce is only one reason to own the stock

You can't discuss e-commerce without mentioning Amazon (AMZN -3.03%), as the company essentially created e-commerce in the United States. Amazon took advantage of less-than-forward-thinking retail CEOs that conceded the space for decades, giving Amazon a long runway to perfect its product.

Those days are now over. Amazon finds itself facing significant competition on a host of fronts in e-commerce. Earlier investments by Walmart and Target in their digital channels are paying off in a major way. The friction for new entrants has also been lessened on account of Shopify's plug-and-play e-commerce subscription platform.

But Amazon is not worried. eMarketer notes the company's market share will be 41.4% of all online sales this year. Even if Amazon experiences market share erosion, the long-term growth trajectory, as traditional retail shifts to e-commerce, will boost Amazon's top line for years to come.

Amazon stock recently sold off on account of slowing growth, following the turbo-charged growth rates posted during the height of the pandemic. While Amazon's e-commerce business could be in for tough year-over-year comparables, in-the-know investors are paying close attention to the growth rates Amazon's posting in higher-margin segments like Amazon Web Services, third-party seller services, and its "other" segment, mostly advertising. Versus top-line growth of 27%, revenue attributable to these segments increased 37%, 38%, and 87%, respectively. E-commerce is only one reason to own Amazon stock.  

Buying Mercado Libre today could be like buying Amazon 10 years ago

Many know Mercado Libre (MELI -2.13%) as the "Amazon of Latin America," due to the fact the company is the largest e-commerce provider in the region, with a presence in 18 countries. The company is well situated to benefit from a region that has nearly twice the population of the U.S. and has one of the fastest-growing internet penetrations in the world.

The easy-to-understand investment thesis is to picture buying Amazon a decade ago. The shift from brick-and-mortar is in its early stages in Latin America, and Mercado Libre is well-situated to benefit from e-commerce growth, as evidenced by its monster second quarter.

The company beat analyst expectations on the top line by reporting $1.7 billion, 102% higher on a constant currency basis than last year. On the bottom line, the company posted earnings per share (EPS) of $1.37, trouncing analyst expectations by 637%.

Like Amazon, Mercado Libre also has a non-e-commerce growth driver in the form of its Mercado Pago fintech payment product. Initially conceived to support transactions on its website, the service has now migrated to "off-platform" uses like at brick-and-mortar retailers. In the second quarter, Mercado Pago total payment volume increased 72% over the prior year while off-platform usage nearly doubled.

Mercado Libre could be like buying Amazon and fintech payment company PayPal a decade ago. Shares of the company are up 1,000% over the last five years, but the long-term story is just getting started.

Down 55%, Coupang's recent stumbles are an opportunity

Over the last few years, investing in e-commerce companies has been nearly a can't-lose investment. Companies like Amazon, Sea Limited, Mercado Libre, and Alibaba have been winners. Even laggard Jumia Technologies, hampered by a business transition, has seen shares explode 130% in the last year.

Unfortunately, there's been one notable underperformer: South Korea's Coupang (CPNG 0.50%). Shares are currently below their $35 IPO price and down 55% from the IPO intraday high of $69, briefly providing the company with a $100 billion market cap. Since then, shares have been battered by increased criticism of working conditions, most notably due to a deadly fire at its warehouse in June.

The long-term story remains intact: South Korea is among one of the most densely populated countries, which contributes to easy delivery. The company boasts that 70% of all South Koreans live less than 10 minutes from a delivery center. Second, at 98%, the country has higher internet penetration rates than the U.S., along with high levels of disposable income.

Coupang's history as a public company might be disappointing to date, but if it continues posting year-over-year growth, like the 71% year-over-year rate it recorded in the second quarter, shares could be considered a true opportunity for long-term investors.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jamal Carnette, CFA owns shares of Amazon, Coupang, Inc., and MercadoLibre. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Amazon, Coupang, Inc., Jumia Technologies AG-ADR, MercadoLibre, PayPal Holdings, Sea Limited, and Shopify. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, long January 2023 $1,140 calls on Shopify, short January 2022 $1,940 calls on Amazon, and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

Stocks Mentioned

MercadoLibre Stock Quote
MercadoLibre
MELI
$863.09 (-2.13%) $-18.81
Amazon.com Stock Quote
Amazon.com
AMZN
$88.25 (-3.03%) $-2.76
Coupang, Inc. Stock Quote
Coupang, Inc.
CPNG
$18.00 (0.50%) $0.09

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

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