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2 Top E-Commerce Stocks to Buy for the Long Haul

By Jamie Louko – Nov 22, 2021 at 9:36AM

Key Points

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These two companies have each been dominant in their niche.

E-commerce is undoubtedly an aspect of our world that will continue growing in importance over the next decade. Globally, there were $4.3 trillion of e-commerce sales in 2020, and for investors, there are numerous ways to play in this large market. 

Here's why holding Coupang (CPNG 1.98%) and Global-E (GLBE -1.98%) could provide you with strong, market-beating returns for the long haul.

Person shopping online looking at his phone.

Image source: Getty Images.

Coupang: The Amazon of South Korea

While Coupang may be known as the Amazon of South Korea, it might actually be better. This international stock puts Amazon's two-day delivery to shame, offering guaranteed one-day delivery for every customer, 365 days a year. If you order before midnight, you'll enjoy "Dawn Delivery" with groceries delivered to you before 7 a.m.

How can Coupang do this? There are a few reasons, the first being that Coupang owns its own delivery fleet and employs over 15,000 full-time drivers. Second, the company is located in South Korea with the majority of its sales coming from urban areas -- 70% of customers live within seven miles of a Coupang distribution center, making it easy for the company to offer the fastest deliveries in the world.

While there are competitors in the region, Coupang is the clear industry leader with a market share of just under 16% as of 2021. This dominance has led to impressive growth and financial resilience. In its third quarter, Coupang reported revenue of $4.6 billion -- up 48% year over year -- and its active customer base grew over 20% for the 15th consecutive quarter.

The major downside for this company is that despite its size, it's still losing money. Its third-quarter net loss increased 87% to $324 million, outpacing revenue growth, even as gross margin expanded 130 basis points to 16.2%. The deepening loss is partly due to increased costs from labor shortages and the COVID-19 pandemic. As the global economy returns to normal, the company should once again make progress toward profitability, but this process will require patience from investors.

On the bright side, that $324 million loss in the third quarter represented just 7% of revenue. As a market leader with seemingly impenetrable competitive advantages, you would think Coupang sports an expensive price tag, but it trades at just 2.2 times sales. This is much lower than other leading e-commerce companies like Amazon and MercadoLibe, which trade at 4.1 times and 11.1 times sales, respectively. That attractive valuation means this stock is hard to pass up.

Global-E: Breaking down borders

If Coupang ever wanted to offer its services to the rest of the world, it could go to Global-E for help. Global-E is making international e-commerce frictionless by curating a business's e-commerce platform for international buyers. Its service enables customers to see the text on a company's platform in their own language and also helps with pricing and shipping options. With this offering, Global-E is breaking down country borders when it comes to e-commerce and making it easier than ever for businesses to grow internationally.

The company supports 25 different languages in 100 countries with over 150 different payment methods, despite having just $352 million in gross merchandise value (GMV) in the third quarter. The company expects the global e-commerce market will reach $736 billion by 2023, which means Global-E has ample opportunity to grow. If the company tripled its full-year 2021 GMV guidance of $1.4 billion by 2023, the company would still claim only 0.6% of the e-commerce market. 

While Global-E might be attacking a huge market, it does not come without competition. There are a handful of private competitors that do what Global-E does, and that doesn't count the fact many large enterprises handle their e-commerce operation in-house. However, Global-E has integrations with important companies like Shopify and PayPal that make it the go-to option for many small businesses.

Such a massive opportunity does, however, come at a cost. The stock trades at a lofty 37 times sales, which is high for any company. Global-E is not for the faint of heart, and if you decide to take a stake in the company, it will have to be a position you're willing to hold for the next decade or longer.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jamie Louko owns shares of Amazon, MercadoLibre, PayPal Holdings, and Shopify. The Motley Fool owns shares of and recommends Amazon, Coupang, Inc., MercadoLibre, PayPal Holdings, 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.

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