E-commerce stocks have been among the hardest-hit in 2022. A reversion to in-person shopping, a rapid rise in interest rates, and a decline in discretionary purchasing power have amounted to a "perfect storm" for these stocks in their first post-pandemic year. 

Still, the long-term trend of more and more purchases moving online is here to stay. Given big sell-offs this year in these three e-commerce leaders, now might be the time to be greedy when others are fearful and scoop up these high-quality growth stocks while they're down.

Amazon

There haven't been may years in which Amazon (AMZN 0.83%) has seen its stock decline 42%, but they've usually been followed by strong outperformance.

Of course, Amazon is more than just an e-commerce company. In fact, the main reason to own Amazon stock may be its Amazon Web Services Cloud division, which continues to grow and innovate at a fast clip.

Still, the underperformance of the stock this year is mostly attributable to the swing from pandemic profits to 2022 losses in the e-commerce segment. Amazon overbuilt its e-commerce infrastructure during the pandemic, when demand surged well above the company's capacity. Then as demand slowed, Amazon had too many warehouses and staff for the muted demand seen this year.

Still, it's not as if Amazon's troubles are unfixable. "We knew we might be overbuilding," CEO Andy Jassy said in a recent interview. Now, all Amazon has to do is cut some of its excess infrastructure and labor, and grow into its expanded footprint.

That now appears to be happening; recently, the New York Times reported Amazon was going to lay off as many as 10,000 workers, while some reports have recently pointed to 20,000 or more. Jassy hasn't specified a number, but the cost-cutting is happening and will continue into next year.

Meanwhile, Amazon just disclosed it had its highest-grossing Thanksgiving weekend ever this year. So, there could be signs that Amazon's costs and demand are getting into better balance. Through 2023, I would expect the numbers to begin to look a lot better than the down year of 2022. Down 42%, that could pave the way for nice gains for this top stock in 2023 and beyond.

Sea Limited

If you think Amazon's 42% 2022 decline is shocking, it has nothing on Southeast Asia's Sea Limited (SE 5.21%) and its 74% decline year to date.

Sea Limited was actually down even more until it reported better-than-feared third-quarter revenue and profits in November, after which the stock soared 40%.

Still, that bullish move may just be a sign of things to come. During the pandemic, Sea's business took off, with booming revenue growth catapulting Sea's Shopee e-commerce platform to leadership in this exciting, high-growth region of the world.

The only problem? That high growth also took tons of investment, with Sea losing over $2 billion on its bottom line for the full year 2021.

This year, revenue has slowed for Sea's Shopee e-commerce platform, while Sea's profitable gaming business has actually declined due to the maturing of its hit game Free Fire and the post-pandemic hangover. With increasing interest rates, those billions in losses have become untenable for investors.

The good news is that Sea's management "gets it," and has pivoted hard to focus on profitability, with tangible results coming through in last quarter's numbers. Founder, chairman, and CEO Forrest Li said in the third-quarter release, "[W]e have entirely shifted our mindset and focus from growth to achieving self-sufficiency and profitability as soon as possible, without relying on any external funding."

Of note, Shopee reported 32.4% growth last quarter, which is quite respectable in this environment given the difficult comparisons. But perhaps more important, profitability was up, with management reporting a positive contribution margin for Shopee in the core Southeast Asian markets, as it had promised earlier in the year. Contribution margin is equivalent to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), before the allocation of headquarters costs.

While the high-growth Shopee and SeaMoney divisions are still unprofitable overall, both showed significant improvement on their bottom lines. Shopee's Asian markets recorded adjusted EBITDA losses with HQ costs included of $217 million, but that was a 31.4% improvement quarter over quarter. In Brazil, a newer market, Shopee's loss per order improved 27.4% quarter over quarter.

Meanwhile, Sea's digital financial services segment, SeaMoney, grew 147.2%, and its adjusted EBITDA loss of $67.7 million improved by 39.3% relative to the prior quarter.

All in all, Sea is continuing to grow at a more modest pace than it had been, but importantly, it's maintaining good growth and leadership in its markets, while backing up its promises to improve its bottom line. At just 2.8 times sales, Sea looks like a compelling buy at these levels for the long term.

Farfetch

Luxury e-commerce platform Farfetch (FTCH 3.80%) stock plunged 35% on its recent analyst day, which is likely not what management had in mind. Investors may have initially been spooked by management's 2025 EBITDA margin guidance, which came in at just 10%, up from flat last year and negative 3% to negative 5% this year.

Still, I think this was a gross overreaction by short-term investors and an opportunity for long-term investors.

First, some might have confused that 2025 guidance with a "mature" Farfetch profit margin, which it is not. In fact, later on in the presentation, Chief Financial Officer Elliot Jordan reiterated the company's long-term EBITDA margin goal is 30% -- a figure that wasn't in that morning's original press release.

Basically, Farfetch doesn't believe it will be close to done growing and scaling its platform by 2025, but investors are growing impatient for profits these days as interest rates have risen. The company announced a slew of big-name deals and partnerships during 2022, which may also have increased investor hopes for a big revenue inflection next year.

But while management did guide for 20% to 22% growth next year -- not too shabby in a recessionary environment -- the full impact of newly signed deals won't be felt for a few years. For instance, Farfetch signed a massive deal with Reebok this year within its New Guards segment to develop the luxury portion of the Reebok brand. While that revenue will begin hitting Farfetch's books next year, it will also take up-front investment from Farfetch, and Jordan still expects the growth of that partnership to be in the "scale-up" phase in 2025, and therefore lower margin.

Other recent deals with Neiman Marcus and Salvatore Ferragamo won't begin delivering revenue until sometime next year, and the recent blockbuster deal with Yoox Net-a-Porter likely won't be approved until mid-2023, so the revenue and profitability from that potential acquisition will only begin to flow through in 2024 and 2025.

Yet while these new deals will take time and big upfront investments, these long and deep integrations, while time-consuming, only cement Farfetch's moat as the go-to online platform for luxury goods.

Meanwhile, Farfetch's opportunity remains vast. According to a study by Bain & Co. in collaboration with Fondazione Altagamma, the luxury goods market should continue to grow from $366 billion this year to $441 billion by 2025 and $601 billion by 2030, with online sales growing to about 25% of the market by then. Farfetch's gross merchandise value (GMV) is only around $4 billion this year and projected to reach $10 billion by 2025, so there is lots of room for it to grow beyond that. This is especially true as the company agreed to acquire its only large competitive threat in Yoox Net-a-Porter this past summer.