E-commerce stocks have had a relatively easy time growing this year despite the recent economic pressures that have put many consumers on the back foot. Part of this is the sheer diversity of products and price points made available by online stores since there’s no physical location to maintain and sell from. Instead, e-commerce companies enjoy broader margins thanks to low-cost business models that follow a pattern of warehousing goods and shipping them directly to customers.
Then there’s the aspect of consumer habits changing in favor of companies that offer a wide selection of good deals. That’s because the U.S. economy is significantly driven by consumption, and Americans are notorious consumers, even when their wallets are hit by inflation and rising housing costs. As such, the companies that tap into these consumptive habits will likely see their stocks grow even in the face of a potential economic slowdown.
PDD Holdings (PDD)
Earlier this year, I warned investors about PDD Holdings (NASDAQ:PDD) and its business practices of using import tax loopholes to offer exceptionally cheap products through its e-commerce platform, Temu. Since then, no major developments have led investors to believe the U.S. government will address PDD’s methods.
As a result, PDD’s stock has seen relatively stable performance throughout the year, with the last week helping it recover from a general downtrend. With a month to go until its next earnings report, PDD could be at a decent price point for buying. Moreover, with Temu continuing to remain central to many Americans’ low-cost online shopping experience, there’s a good chance its next earnings report will continue to impress.
One final development to watch before buying is the current situation between Temu and sellers on the platform protesting its disciplinary fines. On one hand, Temu claims these fines, which for one seller totaled $110,000, result from after-sale complaints. On the other hand, these could lead to a constraint on sellers on the platform, which could impact product diversity on the site, enabling it to keep prices low.
Etsy (ETSY)
Amid a company-wide, soul-searching journey, Etsy (NASDAQ:ETSY) has seen nearly 33% of its share value evaporate over the past year. As a result, it’s now trading within a dollar of its 52-week low. Yet, with the determination of its leadership to bring the company back to its artisanal roots, there’s hope for the stock in the quarters to come.
That’s because Etsy has always been unique among e-commerce stocks. Its original business model focused on small production quantities from self-employed sellers who produced the goods themselves. This initially helped Etsy carve out a niche in the e-commerce sector that intended to offer buyers a more personalized shopping experience while keeping prices fair and relative to seller quality.
Now, its CEO, Josh Silverman, claims the company is back on track to recapture its goal of keeping commerce human with sweeping policy changes that took effect in mid-July. Time will tell if these policy shifts revamp the stock, but at a price-to-earnings ratio of nearly 25x and a slight revenue bump of 3.01% year-over-year in its second quarter of 2024, Etsy stock could be a solid buying option.
Amazon (AMZN)
No discussion of e-commerce stocks is complete without mentioning Amazon (NASDAQ:AMZN). The American e-commerce giant has again managed to dominate North America with $90 billion in net sales for the second quarter (Q2) of 2024. This led to an operating income increase of 91% year-over-year, suggesting the company is doing exceptionally well at capturing consumer spending at a time when consumers are more financially constrained than ever.
Moreover, looking specifically at its net product and service sales for Q2, the company sold $61 billion worth of goods and $86 billion worth of services for a total of $147.9 billion for the quarter. More impressive, however, is that Amazon managed to keep its operating expenses around these sales at $133.3 billion, putting net income at $14.6 billion for the quarter.
That’s a serious commitment to sales margins that will likely keep investors bullish on the stock as the company grows its e-commerce presence worldwide.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
