E-commerce stocks have been Wall Street favorites for many years thanks to their ability to outgrow brick-and-mortar retailing peers. Yet with the digital sales channel still only accounting for about 10% of the wider retailing industry, there’s a long runway for growth.
With that bright outlook in mind, we asked Motley Fool contributors for a few e-commerce specialists that look like attractive stock buys recently. Read on to find out why Stitch Fix(NASDAQ:SFIX), Zillow (NASDAQ:Z) (NASDAQ:ZG), and Alibaba (NYSE:BABA) made that list.
Stitch Fix(NASDAQ:SFIX) is at number 1 in this situation. But the e-commerce disruptor is making huge strides at solving those core challenges right now. Its last earnings report showed a healthy jump in its active user base and in average spending per order. Better yet, the company’s consumer satisfaction metric, best reflected in its repeat business trends, has improved in each of the last four quarters.
Looking ahead, CEO Katrina Lake and her team are hoping to build brand awareness through a cross-channel marketing campaign. They’re also ramping up their men’s and kids’ offerings and pushing into key international markets like the U.K. Each of these initiatives carries the risk that Stitch Fix will fail to meet management’s targets in these competitive industry niches.
Investors seeking a promising e-commerce stock might be happy accepting those risks, giving the huge returns Stitch Fix would generate if its subscription-shopping model endures.
Simplifying online homebuying
Steve Symington (Zillow Group):The real estate world isn’t exactly the first e-commerce category to come to mind for many investors. But Zillow Group has made its name by disrupting the real estate status quo already with its leading group of online brands, which not only includes its namesake site and apps but also Trulia, New York City sites StreetEasy and Naked Apartments, apartment and rental search site HotPads, and RealEstate.com.
Shepherding that ramp up will be Zillow co-founder Rich Barton, who enjoys outstanding rapport with the investor community and returned to the helm as CEO four months ago. At the time, Zillow teased that within the next three to five years, it’s target is to purchase 5,000 homes per month, which would result in annualized section revenue of $20B. For perspective, last quarter, Zillow bought 898 houses and sold 414, generating just under $129M in revenue in the process.
That stated, Zillow stock has rallied nicely on the heels of last month’s stronger-than-predictable quarterly report. But it still trades about 35% below its 52-week high, and I think investors who buy recently could enjoy outsized gains for years to come as Zillow’s story continues to unfold.
China’s e-commerce and cloud leader
Leo Sun (Alibaba): Alibaba, the largest e-commerce player in China, lost nearly 20% of its value over the past 12 months on concerns about the trade war and an economic slowdown in China. However, the tech giant — which owns the largest e-commerce and cloud platforms in China — continues to generate incredible growth.
Its total revenue rose 51% annually last year. Gross merchandise volume on its two core marketplaces, Tmall and Taobao, rose 31% and 19%, respectively. Yearly active consumers on its marketplaces grew 18%, to 654M, as mobile monthly active users for its marketplaces grew 17%, to 721M. On the bottom line, it grew adjusted net income by 12%.
Unlike Amazon, which uses its higher-margin cloud business to support its lower-margin marketplace business, Alibaba uses a higher-margin marketplace business — which mainly facilitates consumer-to-consumer and business-to-business transactions — to support its lower-margin cloud and digital-media initiatives. It’s also expanding into other markets, like Southeast Asia, Russia, and Europe.
Those investments expand its ecosystem and widen its moat against Baidu, Tencent, and other aggressive rivals in China’s crowded tech market. Alibaba expects its revenue to top 500B RMB ($72.8B) this year — which would represent at least 33% growth from 2018.
Alibaba didn’t provide any earnings guidance, but analysts anticipate 22% growth — which is a solid growth rate for a stock that trades at 19 times forward earnings. Therefore, any good news about the trade war and China could bring investors running back to this “best-in-breed” e-commerce leader.
Jennifer Medina- Technology
I am Jennifer Medina and I give “Nasdaqclick.com” the best and deepest insights into the latest happenings in the Innovation and technology segment. My journey started as an independent financial consultant for more than 13 years in the city and my craving to see the world has taken me to nations around the globe and given me the chance to report for a portion of the best news associations. Lately, I have started to use my envelopment and experience in healthcare financial news to become a full-time editor.
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