E-commerce has hit a rough patch over the last year as a surge in the industry during the early stages of the coronavirus pandemic has given way to a slowdown.
Shoppers have shifted their spending back to stores and services like travel and restaurants, and e-commerce companies have also faced difficult comparisons with the sales boom in 2020 and 2021.
However, that's no reason to give up on the sector. Over the long run, e-commerce should continue to take market share from brick-and-mortar stores as delivery gets even faster and ordering gets more convenient. For example, it's easy to envision how AI chatbot technology could transform voice-ordering on devices like Amazon's Alexa.
On that note, here are three e-commerce stocks worth buying now.
Image source: Getty Images.
1. MercadoLibre
If you're looking for an e-commerce stock that has bucked the trend in the sector, MercadoLibre (MELI -0.45%) is a great choice. The Latin American e-commerce champ has continued to deliver strong results in its core markets and has gained market share, helped by challenges at rivals like Americanas and Sea Limited.
Additionally, Mercado Pago, its digital payments network which also offers point-of-sale machines to brick-and-mortar retailers, businesses like its logistics service, Mercado Envios, and its lending business, Mercado Credito, have combined to create a formidable network of competitive advantages.
The numbers speak for themselves. In the fourth quarter, revenue jumped 56.5% on a currency-neutral basis to $3 billion thanks to 80% currency-neutral growth in total payment volume to $36 billion and a 34.7% jump in currency-neutral gross merchandise volume (GMV) to $9.6 billion.
Profitability continues to ramp up as well, driven by the growth of businesses like advertising, which takes advantage of the company's ability to drive traffic to third-party sellers on its marketplace. Operating margin has surged in recent quarters, reaching 11.6% in Q4, or an operating income of $349 million.
MercadoLibre appears to have a long growth path ahead of it as the middle class expands in Latin America, it penetrates markets outside of its core in Brazil, Mexico, and Argentina, and its profitability improves as its economic moat widens.
2. Global-e Online
Global-e Online (GLBE -2.15%) might not be a household name in e-commerce, but it's one of the fastest-growing companies in the sector.
Global-e isn't an online retailer, but instead a tech company that helps large e-commerce platforms like Shopify (SHOP -2.37%) facilitate cross-border transactions.
The company makes it easy for cross-border sellers to set up a localized webpage and interface, localized checkout that includes familiar payment methods and platforms, and also global logistics, as well as analytics and data that help improve marketing and strategy decisions.
In 2022, Global-e saw full-year GMV jump 69% to $2.45 billion, and revenue jump 67% to $409 billion, driven by a balanced mix of services revenue and fulfillment revenue.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 50% to $48.7 million, though the company is still significantly unprofitable on a generally accepted accounting principles (GAAP) basis with a loss for the year of $195.4 million.
However, the company's service business should scale up well, and it is in the process of testing white-label selling for some Shopify sellers, allowing Global-e to handle the end-to-end process.
As cross-border e-commerce continues to grow, Global-e Online should be a major beneficiary.
3. Shopify
Finally, Shopify continues to look like a good buy at the current price, down roughly 75% from its peak in 2021.
The company continues to be the clear leader in e-commerce software, serving more than a million merchants, including Fortune 500 companies like Kraft Heinz.
While Shopify has seen its sales growth slow due to the headwinds in the industry, the company still looks poised to be the platform of choice for new e-commerce sellers, and it will benefit when e-commerce growth accelerates again once the economy starts to recover.
There's also little evidence so far that Buy with Prime has taken significant market share from Shopify even though Amazon expanded to all eligible e-commerce sellers in the U.S. at the end of January.
Meanwhile, Shopify continues to deliver solid growth in a challenging market with revenue jumping 26% in the fourth quarter, or 28% on a constant currency basis.
The company is still in investment mode, buying Deliverr last year to help improve its fulfillment solutions, but its software-as-a-service model has the ability to generate significant profits at scale, and with gross merchandise volume reaching $197 billion, there's plenty of commerce for the company to monetize.
