The year 2020 has been a game-changing year for many e-commerce stocks. That’s because, for many consumers, the coronavirus pandemic quickly turned e-commerce from a convenience into a necessity. Many consumers have ramped up their online shopping for the first time this year. With Thanksgiving and Black Friday sales just around the corner, investors are looking for the best e-commerce stocks to buy in anticipation of strong sales this holiday season.
Sure, consumers and business owners, today are familiar with household names like Amazon (AMZN Stock Report) and Shopify (SHOP Stock Report) respectively. These companies have made the most of the current situation. People are staying at home to avoid catching the insidious virus. Since retail locations and shopping malls are operating in a minimal capacity amid the surging coronavirus infections, you can expect consumers to make most of their purchases online this holiday season. Therefore, these top e-commerce stocks are weathering the worst of this pandemic very well indeed. With all that in mind, are these the best e-commerce stocks to buy ahead of the Black Friday sales?
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The African e-commerce and digital-payments company, Jumia Technologies (JMIA Stock Report) saw its company’s stock price soared 21% during Monday’s intraday trading. The company’s stock price soared more than 100% just this month and has at least tripled year-to-date. Since then, JMIA stock has been on many investors’ watchlist. The surge in stock price appears to be heavily influenced by the bullish outlook by Steve Weiss, the Chief Investment Officer of Short Hills Capital Partners.
If you have been following the stock market closely, you likely know the name Citron Research. The independent firm is well-known for its blunt and abrasive commentary about stocks. While Citron has criticised Jumia in May 2019, questioning its operations and unproven business model, things have changed today. There are a couple of reasons that led to the change of tack. You see, Jumia saw improvement in its profit margins with a reduction in advertising expenses and a transition to fast-moving consumer goods.
Citron believes that “either these young Nigerians will be the first people on earth to not accept e-commerce or the stock is going to $100.” You can’t deny they have a point there. After all, e-commerce has been sweeping the world in the past decade or two. Jumia operates in 11 African countries with a total population of over 600 million. With just over 6 million active users, you can see why the company has a tremendous growth runway ahead. If you believe in Citron’s target, there could be an upside of over 200%. Considering all that, is JMIA stock the best bet for access to the frontier markets?Best E-Commerce Stocks To Buy [Or Avoid]: Farfetch Limited
Luxury e-marketplace Farfetch Limited (FTCH Stock Report) is one e-commerce stock worth taking a closer look at. As sales of exclusive designer items are making their way to the internet, the company is emerging as the leading pioneer in this niche of e-commerce. It’s easy to forget that Farfetch was facing a cash crunch earlier this year. The company has since gotten over that challenge. It performed superbly in the third quarter, in which revenue jumped 71% from a year ago.
The company clearly didn’t have a great start like other e-commerce stocks earlier this year. The thing is, consumers have been depending on e-commerce companies to get the essentials and other non-luxury items online. But the pandemic has dragged on longer than we have expected. It seems the traditionally conservative upscale shopping is not immune to e-commerce, after all. And Farfetch is benefiting from it.
Sure, the company has yet to be profitable. Yet, the third-quarter gross profit margin rose to 47.8%, an increase from 45.1% last year. As of the end of September, Farfetch had $757 million in cash, comfortably exceeding its $469 million in debt. What’s more, the company entered into a deal earlier this month which will see Alibaba Group (BABA Stock Report) and Swiss group Richemont investing $300 million each in Farfetch, and $250 million each in a China joint venture with Farfetch. With such growth opportunities ahead, would FTCH stock be worthy of your attention right now?Best E-Commerce Stocks To Buy [Or Avoid]: Sea Limited
Lastly, Sea Limited (SE Stock Report) is a leading regional consumer internet company founded in Singapore. While it doesn’t have the global presence of Amazon or Alibaba, it is definitely one of the best e-commerce stocks in the stock market today. The stock has risen more than 350% this year alone. According to economists, we are likely to see Southeast Asian countries occupying a larger piece of the global economic pie in the coming decade. As such, Sea might be a good proxy to take advantage of this growth in the region.
“We continued to see robust user growth and deepening of user engagement on each of our platforms during the quarter,” CEO Forrest Li said on the conference call with analysts. “We believe the accelerating shift to digitalization in our global markets is a sustaining trend.”
Admittedly, third-quarter earnings were slightly below analysts’ expectations. Yet, you can’t discard the fact that the e-commerce company continues to make progress with its expansion into digital financial services. With mobile wallet payment volumes topping $2.1 billion during the quarter, SE stock will benefit from the other secular trend which is fintech. The integration of its mobile wallet with the Shopee e-commerce platform has managed to boost usage. In addition, the company raised its full-year guidance. It now sees e-commerce revenue of over $2.3 billion for 2020, up from the previous guidance of $1.7 billion to $1.8 billion. Similarly, digital entertainment could bring in $3.1 billion, exceeding the previous estimate of $1.9 billion to $2 billion. Could the higher guidance be a sign of bigger things to come? Will SE stock continue its momentum for the years ahead?