Concerns about global inflation, rising borrowing costs, and economic impacts from the war in Ukraine have been overwhelming the stock market all year. Year to date, the S&P 500 has tumbled 23%, and the Nasdaq Composite has slipped 32%, as investors have cast aside high-growth technology companies and instead relied on safer assets like bonds and value stocks.
E-commerce businesses have felt the chaos. After enjoying a major boost during the pandemic, online shopping platforms have seen demand tempered of late. But with the global e-commerce market set to surpass $7.5 trillion by 2030, up from $3.9 trillion today, investors can be confident that ongoing headwinds are temporary.
Here are two emerging-market e-commerce stocks that investors shouldn't hesitate to pounce on today.
Image source: Getty Images.
1. MercadoLibre
After its stock rocketed nearly 300% from April 2020 through January 2021, the Latin America-based MercadoLibre (MELI 0.47%) has seen it crumble 53% since the start of the year. In addition to its growing e-commerce platform, the company offers consumers a variety of value-added services. Mercado Pago is a digital payments platform, Mercado Envios is a logistics solution focused on shipping and fulfillment, and Mercado Crédito enables business and consumer lending.
NASDAQ: MELI
Key Data Points
The company delivered a solid first-quarter report to begin 2022. Total revenue surged 62% year over year to $2.2 billion, topping Wall Street forecasts, and diluted earnings per share hit $1.30, a notable improvement from its $0.68 loss a year ago. The company's operating margin retreated 42 basis points year over year to 6.2%.
In its online marketplace, gross merchandise volume (GMV) expanded 32% year over year to $7.7 billion, and items sold climbed 20% to 266.7 million. Mercado Pago's total payment volume surged 81% to $25.3 billion, with off-marketplace payment volume (which includes processed payments for third-party businesses) ascending 139% to $17.3 billion. Its logistics network managed 91% of its marketplace shipping volume in the first quarter, up 10.5 percentage points from a year ago, and the company's credit portfolio increased 319% to $2.4 billion.
MercadoLibre's diversified business makes it a very attractive investment for those interested in the rapidly developing Latin American economy. And with the stock's 3.9 price-to-sales multiple the lowest it has been in five years, there is an excellent window of opportunity to buy shares today.
2. Jumia Technologies
Jumia Technologies (JMIA 4.99%) reached over $60 a share in February 2021, but the narrative has changed for the "Amazon of Africa" since then. Over the past year, the stock has plummeted 79%, and is now about $6. Yet, contrary to what its stock price movement may suggest, the African e-commerce company has exhibited marked improvement in recent quarters.
NYSE: JMIA
Key Data Points
In its first quarter of 2022, the company generated sales of $47.6 million, translating to 44% growth year over year, and its GMV climbed 27% to $252.7 million. Total active customers and orders also enjoyed nice growth in the quarter, expanding 29% and 40% year over year, respectively.
Due to aggressive spending on marketing and technology, the company is operating at a major loss for now, making it a much riskier investment than MercadoLibre. In the first quarter, Jumia suffered an adjusted loss of $55.3 million in its earnings before interest, taxes, depreciation, and amortization (EBITDA), much steeper than a year before.
On the bright side, management appeared confident during the earnings call that the company is past its peak quarterly adjusted EBITDA losses and should start reporting reduced losses in 2023. And similar to MercadoLibre, Jumia operates a fintech wing via its mobile payments platform, JumiaPay, and continues to build out its logistics as a service.
Although it's a dicey investment at the moment, the company has unlimited potential to tap into Africa's 1.2 billion consumers. Plus, the stock carries a price-to-sales multiple of only 3, its lowest level since the company went public in 2019.
