Many e-commerce companies experienced big growth spurts during the pandemic as brick-and-mortar stores closed down. That acceleration coincided with a surging interest in growth stocks from retail investors, many of whom invested their stimulus checks in the market.
Those two tailwinds propelled many e-commerce stocks to all-time highs last year. But over the past six months, most of those stocks plummeted as investors fretted over their challenging year-over-year comparisons in a post-lockdown world. The broader retreat from pricier tech stocks -- which was largely driven by inflation, rising interest rates, and other macroeconomic headwinds -- exacerbated that painful sell-off.
Image source: Getty Images.
Yet that massive pullback has also created some promising buying opportunities for patient investors. I believe MercadoLibre (MELI 0.28%), Etsy (ETSY +3.28%), and Coupang (CPNG +0.13%) were all unfairly crushed during the recent sell-off, and that all three e-commerce stocks could still generate fortunes over the long run. Let's find out a bit more about these three e-commerce stocks.
1. MercadoLibre
MercadoLibre is the largest e-commerce company in Latin America. It operates across 18 countries, but it generates most of its revenue from Brazil, Mexico, and its home country Argentina.
It also processes payments with its Mercado Pago platform, which continues to grow alongside its newer credit-based payment services, online insurance policies, investment tools, and cryptocurrency services across its fintech ecosystem.
NASDAQ: MELI
Key Data Points
MercadoLibre's revenue rose 73% to $3.97 billion in 2020, then grew another 78% to $7.07 billion in 2021.
In the first quarter of 2022, its revenue increased 63% year over year to $2.25 billion. On a trailing two-year basis, which smooths out its pandemic-induced growth spurt, its total gross merchandise volume (GMV) still grew at an impressive compound annual growth rate (CAGR) of 73%.
Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also turned positive in 2020 and nearly tripled to $645 million in 2021. It also turned profitable on a generally accepted accounting principles (GAAP) basis in 2021.
Analysts expect MercadoLibre's revenue to rise 39% this year, and for its earnings per share (EPS) to nearly quadruple -- even as it ramps up its investments in its managed logistics network and fintech ecosystem. That rosy outlook indicates the stock is still a bargain at five times this year's sales.
2. Etsy
Etsy carved out a high-growth niche by helping artisans sell their customized and handmade goods online. Amazon (AMZN 0.41%) has repeatedly tried to crush Etsy with its own Handmade marketplace for nearly seven years, but the resilient underdog continued to expand.
NYSE: ETSY
Key Data Points
Etsy's revenue surged 111% to $1.73 billion in 2020, its gross merchandise sales (GMS) soared 107% (partly driven by handmade mask sales), and its adjusted EBITDA nearly tripled. But in 2021, its revenue only rose 35% to $2.33 billion while its GMS and adjusted EBITDA both grew by about 32%.
That slowdown persisted in the first quarter of 2022 when its revenue rose just 5% to $579 million, its GMS grew by less than 4%, and its adjusted EBITDA declined 14%. That EBITDA decline was partly due to the lower margins of its three newly acquired businesses: the musical instruments marketplace Reverb, the U.K. fashion resale marketplace Depop, and the Brazilian artisan website Elo7.
Analysts expect its revenue to rise just 12% this year as its EPS declines 17%. That slowdown spooked a lot of investors and Etsy's stock crumbled.
However, I believe Etsy still has plenty of room to grow after the post-pandemic comparisons normalize, and its stock looks reasonably valued at 24 times forward earnings and four times this year's sales. If you believe Etsy can remain synonymous with handmade goods and continue to grow in Amazon's shadow, then it's a great time to buy the stock.
3. Coupang
Coupang, South Korea's largest e-commerce company, currently trades nearly 70% below its IPO price. Its stock crumbled as investors fretted over its slowing growth, competitive headwinds, and steep losses. SoftBank, one of the company's top backers, also significantly reduced its massive stake.
NYSE: CPNG
Key Data Points
Coupang's revenue soared 93% in 2020 and grew 54% to $18.4 billion in 2021. Its total number of active customers increased 21% year over year to 17.9 million in the fourth quarter, which marked its 16th straight quarter of more than 20% year-over-year growth.
However, its adjusted EBITDA loss widened from $82 million in 2020 to $285 million in 2021 as it expanded its Prime-like "Rocket WOW" subscription service with more food deliveries, streaming videos, exclusive discounts, accelerated delivery options, and additional perks. It expects to offset those costs by expanding its third-party marketplace and opening up its first-party logistics network to external merchants, but scaling up those margin-boosting businesses will take a lot of time.
Analysts expect Coupang's revenue to rise 25% this year and for its net loss to slightly narrow as it scales up its business.
That outlook might seem dim, but Coupang's stock trades at less than one time this year's sales. This certainly isn't a dead business yet: Coupang's stock could still recover quickly as its growth stabilizes and it reins in its spending. This stock could remain very volatile, but it could also be a deep value play for daring long-term investors.
