Alibaba Group (BABA -0.88%) and Etsy (ETSY 3.20%) are two of the more beaten-down e-commerce stocks right now. The Chinese e-commerce stock has struggled with a weak economy and restrictions imposed by a government crackdown, while Etsy has seen its growth stagnate following a boom during the pandemic.

However, a new bull market could change market sentiment, lifting both of these unloved stocks in a stronger economy. But which is the better buy of the two? Two Motley Fool contributors offer their takes on which will do better in the coming bull market.

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Alibaba is cheap and has big growth potential

Keith Noonan: The last couple of years were generally quite brutal for Chinese tech stocks. In addition to concerns that the country's government will make moves to exercise greater control over influential tech players, lingering pandemic-related challenges dampened investors' enthusiasm, and sluggish macroeconomic recovery derailed some formerly promising growth stories. Rising geopolitical tensions between China and the U.S. also increased bearish sentiment surrounding the latter company's tech sector.

Due to the slew of macro challenges and some uneven business performance, Chinese e-commerce and cloud-computing giant Alibaba saw its stock struggle. The company's share price is down 18% year to date, and it trades 77% off of its high.

Despite the macroeconomic headwinds and big sell-offs for the stock, Alibaba's recent growth has been encouraging. Revenue increased roughly 9% year over year to reach approximately $30.8 billion in the third quarter, and non-GAAP (adjusted) earnings per American depositary share rose 21% to hit $2.14.

BABA PE Ratio (Forward) Chart

BABA PE Ratio (Forward) data by YCharts

Trading at just 8 times this year's expected earnings, Alibaba stock looks cheaply valued and could see its valuation rebound far above current levels. I think there's a good chance that China's e-commerce industry and the overall economy will eventually return to posting stronger growth, and Alibaba's strong industry positioning, opportunities in artificial intelligence, and deeply discounted valuation suggest the stock has the potential to be a big winner.

Of course, Etsy is also solidly profitable and trades at reasonable earnings multiples, but I think there's a greater risk that the smaller company is stagnating.

The specialty e-commerce player's gross merchandise sales actually fell 1.4% across this year's first three quarters, and the company's revenue growth was supported by increasing the commission taken for transactions conducted through its service. That's not inherently worrying, but continuing to increase the take rate could threaten engagement on the platform -- and there already seems to be some softness on that front.

While investing in Chinese companies comes with additional risks that investors need to consider, I think Alibaba's current valuation leaves the door open for patient investors to see explosive returns.

Etsy's rebound could be starting

Jeremy Bowman: There's no question that Etsy struggled of late, and management fully acknowledged that it's disappointed with its recent results. The company took a $1 billion write-down a year ago on its acquisitions of Depop and Elo7, putting a major dent in the company's "House of Brands" strategy. It was also a clear indication that it overpaid for both of those companies when it acquired them during the pandemic. Etsy later sold Elo7 over the summer for significantly less than it paid for it.

Recent results were also unimpressive as gross merchandise sales (GMS) were essentially flat over the last several quarters, but there is one key sign that things could be turning around for the online marketplace of handmade and vintage goods.

In the third quarter, the company saw flat gross merchandise sales growth, but its user base is starting to grow. It reported 19% growth year over year in active sellers, reaching 8.8 million, and 3.4% growth in active buyers to 97.3 million. While that growth in active buyers might seem weak, that includes the sale of Elo7.

Sellers and buyers are starting to return, it appears, after a long lull and a post-pandemic decline, which should lead to a gradual rebound in sales and potentially a nice bump during the key holiday quarter.

The other reason Etsy should start to recover is that consumer discretionary spending should soon normalize following a shift away from goods to services in the economic reopening. An expected decline in interest rates is likely to help boost consumer spending on sites like Etsy as well. The stock has also bounced off of recent lows, climbing more than 40% since its third-quarter earnings report, seemingly in anticipation of a recovery and broader market trends.

Finally, Etsy stock is cheap with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of around 15 based on its guidance for the year. Even on a generally accepted accounting principles (GAAP) basis, the stock is only trading at price-to-earnings ratio of around 30. In other words, if Etsy's top-line growth can spring back to life, the stock has a lot of upside potential in the next bull market.