The pandemic has turned online shopping from a convenience to a necessity, so is it time to start investing in e-commerce?
The online retail space is a competitive one with Amazon, Shopify, Sea Limited, and Mercado Libre as top e-commerce retailers in their own region. Since the onset of the lockdown, e-commerce companies are upending traditional brick and mortar retailers as more people shop online exclusively.
Whether the industry still has growth potential when physical stores re-open or when a vaccine is discovered, is the question investors are asking.
Amazon stock fell to a low of $1,626 in March of this year as coronavirus worries rocked the stock market. However, the lockdown has increased demand for every Amazon business, with its e-commerce, cloud computing, and video streaming services performing very well.
Amazon Web Services (AWS) is a very profitable part of the business and is a huge component of the e-commerce giant’s business portfolio. AWS brought in a staggering $10 billion in revenue in the first quarter of 2020, providing storage, networking, remote computing, email, mobile development, servers, and security. AWS can help small businesses with setting themselves up with the cloud, the cloud computing platform cost can also be modified to target bigger existing companies by offering low-migration services so companies infrastructure can be seamlessly moved over.
For its Amazon Prime Day, the online retailers focused on telling the public how it helped small independent merchants. The retail giant stated that this year was a record-breaking year for small and medium-sized businesses using Amazon, with sales surpassing $3.5 billion.
Along with its core e-commerce operations, it also has cloud services, groceries, prescription drugs, advertising sales, Alexa personal assistant, streaming services, and much more. The company’s ability to move into different industries shows its strong leadership, making this a safer e-commerce stock to invest in.
Shopify (SHOP) stock has rallied 219% over the last year, pushing it towards its current market capitalization of $127 billion. The company which provides businesses with an efficient platform to sell their goods has benefited greatly from merchants moving their stores online during the pandemic. In Q2 of 2020, Shopify’s revenue grew to $714 million. The company has made some important deals this year, one of which was with Facebook to help businesses create branded Facebook shops. Walmart also partnered with Shopify to expand the retail giants’ online marketplace. These partnerships will help Shopify grow, even if it experiences a dip in users when the pandemic is over.
Sea Limited is an internet platform provider. Its intricate platform consists of e-commerce, financial services, and digital entertainment. This company is experiencing huge growth and was even named as our Stock of the Month for October. The pandemic drove an irreversible switch to e-commerce sales, but also to online lifestyles which may never come back from. The lockdown resulted in millions of people looking for digital entertainment especially and Sea Limited believes that this trend is likely to stick even after the pandemic is over. Sea Limited is a hot stock at the moment, soaring over 300% this year. E-commerce makes up $510 million of its $1.2 billion in revenue from the last quarter, with the other $716 million coming from its digital entertainment sector. Its online entertainment business, Garena, saw double the amount of users in the first Q1 of 2020.
Mercado Libre is a fast-growing online retail and digital payments company based in Latin America that has a $66 billion market cap.
The pandemic also accelerated growth for Mercado Libre, which has a similar business model to Amazon and eBay. The e-commerce company has proved its ability to adapt its business model to unique market issues, which in Latin America include excessive regulation and infrastructure problems. The innovative idea of launching Mercado Pago for those who did not have a way to pay for goods electronically as countries in Latin America are primarily cash-based societies. Confronting difficult challenges as a dominant e-commerce company in Latin America offers this company the opportunity for future growth into different industries, its latest acquisition of a digital product developer Lagash proves its innovative aspirations.
So, will you be buying e-commerce stock?
Last month, the U.S Census Bureau declared that e-commerce sales are up by 45% in the second quarter of 2020. This year online sales made up 22% of all retail sales in the U.S, up from 2019’s rate of 16%. The strength in the e-commerce sector right now is evident; Amazon, Shopify, Mercado Libre, and Sea Limited have proven that they can expand and offer different services beyond just retail, making them a great choice for investors.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.