Amazon (AMZN 0.78%) has been a top growth stock to own for years. Its massive e-commerce business has helped send its valuation to around $2 trillion today, making it among the largest companies in the world.
And so you might be surprised to learn that over the past five years, it has not been the best e-commerce stock to own. It's not even in the top three. Three e-commerce stocks that have been better buys than Amazon are PDD Holdings (PDD 1.78%), Shopify (SHOP +0.15%), and MercadoLibre (MELI +1.38%).
1. PDD Holdings
You may not be familiar with PDD Holdings, but you're likely to know Temu. PDD Holdings owns Temu and the e-commerce site's rising popularity in recent years is one of the reasons PDD Holdings has been doing so well. As one of the most popular e-commerce apps in the U.S., Temu is even driving away shoppers from dollar stores. With cheap products, free delivery, and the ability to do returns on most items within 90 days, it has become an ideal option for frugal shoppers looking to save money.
NASDAQ: PDD
Key Data Points
PDD Holdings released its latest quarterly numbers last month, and they were impressive. Revenue for the last three months of 2023 totaled $12.5 billion and grew at a rate of 123% year over year. Its net income of $3.3 billion increased by 146% from the same period a year ago.
With such incredible growth, it's easy to see why PDD Holdings has been one of the hottest Chinese stocks to own. In five years, the stock rose 440%, while Amazon's gains during that time frame are a more modest 102%.
At 21 times its trailing earnings, PDD Holdings still makes for a reasonably priced growth stock to own right now.
2. Shopify
Canadian-based e-commerce company Shopify has also been a growth machine over the years. It helps people sell products and services online, and it makes creating an online shop easy, even for people with limited technical skills. The ease in helping people sell not just locally but internationally has enabled merchants to grow their sales significant through Shopify's platform.
NASDAQ: SHOP
Key Data Points
From just $2.9 billion in sales in 2020 to $7.1 billion this past year, the company's performance has been impressive. The one drawback that has investors hesitant about the business is that Shopify's bottom line isn't all that great. In the past two years, it has incurred an operating loss. Much like with other tech businesses, Shopify overestimated pandemic-fueled growth trends, and has now had to retreat and cut costs to improve its earnings.
The company did report an operating profit in its two most recent quarters, but the stock could perform even better if management can improve the bottom line.
In five years, Shopify's stock surged 280%. Given its limited profits, the stock's valuation could look extreme -- it trades at more than 750 times its trailing earnings. But if you're willing to be patient with the business as it continues to right-size operations and improve its bottom line, this can be another excellent stock to hold for the long term.
3. MercadoLibre
Often referred to as the "Amazon of Latin America," MercadoLibre is another promising e-commerce stock that has generated impressive returns. Focused on the Latin American markets, the company is in 18 countries, including Argentina, Brazil, and Mexico. It also has more than 100 million unique active users.
NASDAQ: MELI
Key Data Points
Like Amazon, the company also has a subscription service, Meli+, which is similar to Amazon Prime. Through Meli+, users can get free shipping and access to video and music streaming services.
MercadoLibre is coming off a great year in 2023, with net revenue rising by 37% to $14.5 billion. Net income of $987 million also doubled from the $482 million that the company reported a year earlier.
In five years, the stock has climbed 196%, as it too has been an Amazon-beating investment during that time frame. But at 77 times earnings, MercadoLibre's valuation may be a bit high. If, however, you're willing to buy and hold, the stock may still be a tenable investment, given the opportunities in Latin America, and it's a great way to diversify your portfolio.
