The e-commerce industry is experiencing rapid growth, driven by the surge in online shopping, mobile commerce expansion, and emerging markets in developing countries. Moreover, trends such as social commerce and AI-driven personalization are enhancing customer engagement and online retail sales, presenting promising investment opportunities.
To capitalize on this online retail boom, investors might consider buying strong e-commerce stocks such as eBay Inc. (EBAY), Amazon.com, Inc. (AMZN), and Dingdong (Cayman) Limited (DDL) now.
E-commerce in 2024 shows promise with advancements like Generative AI and zero-click search, which enhance the user experience. Personalized advertising and retail media networks are gaining momentum, while the rise of second-hand marketplaces, high-quality products, and seamless payment options further boost the sector's appeal. Hence, investing now can help capitalize on these transformative trends.
While overall retail sales growth has slowed slightly, sectors like clothing, accessories, and health products are thriving. Despite high interest rates and economic caution, rising online sales are driving growth. U.S. e-commerce revenue is projected to increase significantly by $657.8 billion, or 53.79%, from 2024 to 2029. Moreover, China's online sales of physical goods also rose by 14% in July.
Notably, U.S. online retail sales are set to hit $1.2 trillion this year, marking a $108 billion (9.8%) increase from last year. Furthermore, the rise of high-speed internet has transformed global e-commerce, with innovations such as chatbots, headless commerce, AR shopping, and blockchain technology driving significant growth in the sector.
Considering these conducive trends, let’s examine the fundamentals of the three above-mentioned Internet stocks, starting with the third choice.
Stock #3: eBay Inc. (EBAY)
EBAY operates marketplace platforms that connect buyers and sellers in the United States and internationally. The company's marketplace platforms include eBay.com and the eBay suite of mobile apps. They enable users to list, buy, and sell various products.
On July 10, 2024, EBAY announced a new revenue-based financing product, Business Cash Advance, in partnership with Liberis. This service provides eligible U.S. eBay sellers with up to $1 million in working capital within 24 hours, featuring flexible payments and a seamless online application process.
On June 13, 2024, EBAY announced the addition of Venmo as a payment option for U.S. buyers, aiming to enhance flexibility and appeal to younger, mobile-first consumers. This integration allows users to pay with their Venmo balance or linked financial accounts during checkout on ebay.com.
In terms of the trailing-12-month EBIT margin, EBAY’s 21.45% is 174.1% higher than the 7.83% industry average. Its 4.35% trailing-12-month Capex / Sales is 45% higher than the 3% industry average. Similarly, the stock’s 18.41% trailing-12-month levered FCF margin is 231.3% higher than the 5.56% industry average.
During the fiscal second quarter that ended June 30, 2024, EBAY’s net revenues increased 1.3% year-over-year to $2.57 billion. Its gross profit rose marginally year-over-year to $1.84 billion. Also, its non-GAAP net income from continuing operations stood at $602 million and 1.18 per share, up 8.5% and 14.6% over the prior-year quarter, respectively.
Analysts expect EBAY’s EPS for the quarter ending September 30, 2024, to increase 14.5% year-over-year to $1.18. Its revenue for the same quarter is expected to grow 1.7% year-over-year to $2.54 billion. It surpassed the Street EPS and revenue estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 37.4% to close the last trading session at $55.83.
EBAY’s POWR Ratings reflect its strong fundamentals. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
EBAY has an A grade for Quality and a B for Momentum. It is ranked #16 out of 52 stocks in the B-rated Internet industry. Beyond what we have stated above, we also have given EBAY grades for Growth, Value, Stability, and Sentiment. Get all the EBAY’s ratings here.
Stock #2: Amazon.com, Inc. (AMZN)
AMZN sells consumer products and subscriptions through online and physical stores in North America and internationally. It operates through three segments: North America, International, and Amazon Web Services (AWS). The company's products offered through its stores include merchandise and content purchased for resale and products provided by third-party sellers.
On July 11, 2024, AMZN’s AWS and Workday announced an expanded partnership to develop generative AI capabilities, enhance custom application development, and accelerate joint go-to-market efforts. This collaboration aims to boost productivity, improve decision-making, and drive cloud transformation for organizations.
On July 25, 2024, AMZN and GE HealthCare announced a strategic collaboration to develop generative AI models aimed at enhancing medical diagnostics and patient care. GE HealthCare will use AWS’s cloud and AI services to accelerate healthcare innovation and improve clinical workflows.
In terms of the trailing-12-month net income margin, AMZN’s 7.35% is 63.2% higher than the 4.50% industry average. Likewise, its 9.86% trailing-12-month Capex / Sales is 229% higher than the 3% industry average. Moreover, the stock’s 1.17x trailing-12-month asset turnover ratio is 18% higher than the 0.99x industry average.
AMZN’s total net sales during the fiscal second quarter that ended June 30, 2024, increased 10.1% year-over-year to $147.98 billion. The company’s operating income grew 91% from the year-ago value to $14.67 billion. In addition, the company’s net income and EPS came in at $13.49 billion and $1.26, up 99.8% and 93.8% over the prior-year quarter, respectively.
Street expects AMZN’s EPS and revenue for the quarter ending September 30, 2024, to increase 20.5% and 9.9% year-over-year to $1.13 and $157.27 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 29% to close the last trading session at $177.59.
It’s no surprise that AMZN has an overall rating of B, which translates to a Buy in our proprietary rating system.
AMZN has a B grade for Momentum, Sentiment, and Quality. Within the same industry, it is ranked #12. To see AMZN’s ratings for Growth, Value, and Stability, click here.
Stock #1: Dingdong (Cayman) Limited (DDL)
Headquartered in Shanghai, China, DDL operates as an e-commerce company. The company offers fresh groceries, including vegetables, meat and eggs, fruits, and seafood; prepared food; and other food products such as baked goods, dairy, seasonings, beverages, instant food, oil, and snacks.
In terms of its trailing-12-month Return on Common Equity, DDL’s 14.73% is 38% higher than the 10.67% industry average. Also, the stock’s 2.87x trailing-12-month asset turnover ratio is 239.7% higher than the 0.85x industry average.
In the fiscal second quarter, which ended June 30, 2024, DDL’s total revenues increased 15.7% year-over-year to RMB5.60 billion ($782.78 million). Its non-GAAP income from operations stood at RMB89.60 million ($12.52 million), compared to a non-GAAP loss from operations of RMB5.42 million ($757.62 thousand).
Moreover, its non-GAAP net income attributable to ordinary shareholders and non-GAAP net income per Class A and Class B ordinary share came in at RMB100.84 million ($14.10 million) and RMB0.31, up considerably each over the prior-year quarter, respectively.
For the quarter ending September 30, 2024, DDL’s revenue is expected to increase 21.5% year-over-year to $862.10 million. Its EPS for fiscal 2024 is expected to rise 896.4% year-over-year to $0.15. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past six months, DDL’s stock has gained 67.8% to close the last trading session at $2.03.
DDL’s bright prospects are reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value. DDL is ranked #2 in the Internet industry. To access the additional grades of DDL for Momentum, Stability, Sentiment, and Quality, click here.
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AMZN shares were trading at $177.39 per share on Friday afternoon, down $0.20 (-0.11%). Year-to-date, AMZN has gained 16.75%, versus a 17.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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