E-commerce has risen due to conditions created by the coronavirus pandemic, and top players in the space have yielded striking returns. However, investors should know that the online retail revolution is just beginning.
To that end, we have put together a panel of Motley Fool contributors and called on every member to buy a leading e-commerce stock in 2021. Read on to see why they think Amazon (NASDAQ: AMZN), Etsy (NASDAQ: ETSY), en MercadoLibre (NASDAQ: MELI) is ready to crush the market.
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An online retail giant prepared for more profits
Keith Noonan (Amazon): Naming Amazon as a top e-commerce stock does not earn points for originality. Investors who bought the stock at virtually any point in exchange-traded history enjoyed market-weakening returns. This is still a great time to buy Amazon shares.
Amazon currently controls about half of the US e-commerce market for business-to-consumer. The online retail giant has also shown that it is better to innovate than any other company out there.
In addition to the industry-leading e-commerce service, Amazon is leading the market for cloud computing. The company is also building a fast-growing position in an industry that parallels online retail: digital advertising. Recent research by Cowen estimates that the company’s platform will account for about 13% of global advertising sales, excluding the Chinese market.
There is considerable overlap in the technology and data needed to propel e-commerce, cloud computing and digital advertising businesses forward, and this makes Amazon stronger as a whole. The company can also be considered an early leader in potentially revolutionary trends, including artificial intelligence, robotics and autonomous vehicles.
Amazon is one of the best companies in the world, and it is a penchant for innovation in the market. The company’s huge size means it’s going to be harder to deliver relative growth compared to smaller players in the space, but Amazon is a trusted industry leader providing attractive risk-reward dynamics for growth investors.
The online craft fair
Joe Tenebruso (Etsy): If you ever need a personalized, handmade gift, chances are you will end up on Etsy.com. Buyers flocked to the e-commerce market during the pandemic to find goods they could not find elsewhere – a trend that is likely to accelerate in the coming years.
Etsy is excellent at connecting producers with consumers. The number of active sellers on its platform increased by 42% year-on-year to almost 3.7 million in the third quarter, while the number of buyers increased by 55% to 69.6 million. Etsy earns a small fee from each transaction. Collectively, fees increased to $ 341.6 million in the third quarter, a year-on-year increase of 141%. Etsy also offers a range of services to sellers, generating $ 109.9 million, which is 95% higher than the previous year.
Face masks were another major growth industry for Etsy during the COVID-19 crisis. This is a segment in which sales are likely to decline. But while many people have joined Etsy’s mask market in recent years, they are likely to stay for the ever-growing range of handmade goods. Gross merchandise sales (GMS), excluding masks on the Etsy market, rose 93% to $ 2.2 billion in the third quarter.
Despite this turbulent growth, Etsy has just scratched the surface of its long-term expansion potential. The company expects its online market opportunity to grow to $ 437 billion by 2023. With so much more growth, investors buying Etsy shares today should be well rewarded.
This leader forms powerful trends
Jamal Carnette (MercadoLibre): MercadoLibre is often referred to as ‘the Amazon of Latin America’, but even the high name can underestimate its true potential. Shares have been on fire over the past year, rising 160% higher as the pandemic has shifted many purchases online, but the long-term growth story is starting now.
Although it seems ubiquitous, the United States is still in the early stages of e-commerce with 15% of retail sales with 90% internet penetration. Compare that to two of MercadoLibre’s largest countries – Brazil and Mexico – with internet penetration of 70% and 65% respectively. Profitable from increased internet penetration leading to further adoption of e-commerce, MercadoLibre continues to grow unique, active users in a rapid manner, reporting a 92% increase in the third quarter.
However, true, unknown investors are more excited about Mercado Pago’s digital payment platform. It was initially intended to support payments on MercadoLibre’s website, and has expanded to off-platform transactions, such as grocery stores, and as a person-to-person transfer mechanism. Mercado Pago continues to grow rapidly, with total payment volumes growing at 161% on a currency-neutral basis and rising from outside the platform to 197% in the third quarter.
It’s not often that you find businesses with two highly scalable businesses, but that’s what MercadoLibre has with its e-commerce market and digital payment solutions. In addition, with MercadoLibre, you have ten decades of growth, as Internet penetration will boost e-commerce, increasing the number of subbank and non-banking services, the demand for digital payment solutions. Maybe it’s time to call MercadoLibre the ‘Amazon’ and PayPal of Latin America. ‘