E-commerce is back to its old ways. After declining for most of the past two years, the niche is now growing as a percentage of the total retail pie. That rate has more or less steadily increased over the past 20 years and currently sits at 15.4%, compared to below 6% in mid-2013.
It's true that this isn't 1999 (and you can't buy Amazon for below $1 per share), but there is much more room for e-commerce to expand in the decades to come. And investors can still enjoy excellent returns with exposure to this niche as spending tilts toward convenient digital shopping. Let's look at three e-commerce stocks that appear especially attractive right now.
1. Nike
Wall Street is highly focused on the weak short-term outlook in the footwear industry today. Prices and profit margins are under pressure in 2023 as customer traffic has slowed. But there's a more enduring shift toward digital sales that could supercharge Nike's (NKE 0.19%) earnings growth for many years.
The shoe retailer is increasingly selling its products directly to consumers rather than through wholesale partners like Foot Locker. Not only are these sales far more profitable for Nike, but they also allow the company to maintain a closer connection to its fans.
Nike is not struggling right now, either. The company has reduced its inventory to a level that's paving the way for rising profit margins starting in the second half of 2023. Revenue overall rose 5% year over year in the most recent quarter, but it's the 18% year-over-year spike in direct-to-consumer sales that should have investors feeling especially optimistic about the long term.
2. Shopify
Shopify's (SHOP 1.11%) platform handles roughly 10% of all e-commerce transactions in the U.S. today, and shareholders have a great shot at profiting as this figure expands in the coming years. Revenue was up a blazing 31% year over year in the most recent quarter thanks to rising volume, a growing merchant list, and higher subscription fees.
Shopify is showing encouraging results on the financial side of the business. Cash-flow trends are spiking, and profit margins should soon follow that lead.
SHOP free cash flow data by YCharts.
There's no telling where Shopify's profitability will ultimately settle, yet strong sales growth plus the company exiting the logistics business point to outsize improvement in the coming quarters. Investors should keep this promising stock on their watch lists (if not in their portfolios) as this rebound gathers momentum.
3. Chewy
The sell-off in Chewy (CHWY 2.99%) stock is getting ridiculous. Sure, the pet supply specialist is facing some tough selling conditions today. Management reduced its outlook in the chain's most recent earnings update as shoppers became more cautious over the summer months. Chewy lost active customers in 2022 and could shed another 1% this year. But does that really justify an over 50% slump in the stock price in 2023?
The business is still thrilling its shoppers, after all. Sales were up a solid 14% year over year in the second quarter, executives said in late August. The gross profit margin expanded thanks to higher prices, and the proportion of customers committed to its subscription-like service hit a record 76%. Chewy is profitable and generating positive cash flow, too.
The wider outlook is bright as the company embarks on its international expansion and pushes into new niches like pet health and insurance. These moves won't protect investors from rocky results over the next quarter or two, but they are likely to support outsize e-commerce growth for Chewy over many years.
