Rising reliance on online platforms among consumers has fueled demand for efficient internet services and has propelled the e-commerce industry’s outlook. In addition, the holiday season shopping surge is likely to create numerous opportunities for the industry players.
Given the industry’s rosy growth prospects, investors could consider buying fundamentally sound tech stocks Shopify Inc. (SHOP), MercadoLibre, Inc. (MELI), and Carvana Co. (CVNA) for substantial returns before the end of the year.
Rising internet penetration and easy access to facilities online have changed the market's landscape, creating a major buzz around e-commerce. Customers are increasingly preferring online shopping platforms over traditional in-store purchases. Thanks to this trend, today, from essential items like food and medicines to car purchases are available on a mobile tap.
Amid the holiday season, e-commerce sales are expected to skyrocket. Further, factors like trending social media trends, convenience, wider alternatives, and competitive pricing are reinforcing a positive outlook for the e-commerce market. FTI consulting projects U.S. online retail sales to total $1.20 trillion in 2024, indicating an increase of $108 billion, or 9.8%, from the prior year.
Also, U.S. e-commerce market share is expected to grow to 22.7% by the year-end, compared to 21.6% at the end of 2023. In the forthcoming years, the e-commerce market is poised to see significant growth. The e-commerce market is estimated to reach $18.81 trillion by 2029, growing at a CAGR of 15.8%, driven by increasing smartphone users, reduced costs, and changing consumer behavior.
Moreover, to enhance the online shopping experience and improve overall customer experience, industry leaders are enthusiastically adopting Artificial Intelligence (AI) in the e-commerce market. The AI in the e-commerce market is projected to grow to $14.07 billion by 2028 at a CAGR of 14.9%.
Given the industry’s robust outlook, investing in fundamentally strong e-commerce stocks SHOP, MELI, and CVNA could be wise before the year’s end.
Let’s discuss the fundamentals of these stocks in detail:
Shopify Inc. (SHOP)
Headquartered in Ottawa, Canada, SHOP is a commerce company that provides a commerce platform and services internationally. The company's platform allows merchants to display, manage, market, and sell its products through various sales channels.
On December 3, SHOP announced that its merchants achieved record sales of $11.50 billion during the Black Friday-Cyber Monday (BFCM) weekend, reflecting a 24% increase from the last year. It also experienced strong sales momentum leading up to the weekend.
In the third quarter that ended September 30, 2024, SHOP’s revenues increased 26.1% year-over-year to $2.16 billion. Its gross profit grew 24.1% year-over-year to $1.12 billion. The company's operating income of $283 million reflects a 132% increase year-over-year.
Furthermore, the company’s net income amounted to $828 million, indicating growth of 15.3% from the prior-year quarter.
Street expects SHOP’s revenue to increase 27.3% year-over-year to $2.73 billion for the fourth quarter ending December 2024. The company’s EPS is expected to grow 26.1% year-over-year to $0.43 for the same period. Moreover, SHOP topped the consensus revenue estimates in all four trailing quarters, which is remarkable.
SHOP’s stock gained 70.7% over the past six months and 42.2% over the past year to close the last trading session at $109.70.
SHOP’s bright outlook is reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Sentiment and a B for Momentum. SHOP is ranked #16 out of 24 stocks in the B-rated Internet - Services industry.
Click here to access additional SHOP ratings for Stability, Growth, Value, and Quality.
MercadoLibre, Inc. (MELI)
Based in Montevideo, Uruguay, MELI operates online commerce platforms in the United States. It operates the Mercado Libre Marketplace and Mercado Pago FinTech platform. It also offers Mercado Fondo, Mercado Credito, and Mercado Envios logistics solutions.
In terms of the trailing-12-month EBIT margin, MELI’s 11.43% is 42% higher than the 8.05% industry average. Its 7.77% trailing-12-month net income margin is 82.4% higher than the 4.26% industry average. Further, the stock’s trailing-12-month gross profit margin of 52.46% is 39.5% higher than the industry average of 37.60%.
For the third quarter that ended September 30, 2024, MELI’s net revenues and financial income grew 35.3% year-over-year to $5.31 billion. Its gross profit increased 16.4% from the year-ago value to $2.44 billion. Also, the company’s net income and EPS came in at $397 million and $7.83, indicating growth of 10.6% and 9.4% over the prior year’s quarter, respectively.
Analysts expect MELI’s EPS for the first quarter (ending March 2025) to increase 9.7% year-over-year to $7.44, and its revenue for the same quarter is expected to grow 26.9% year-over-year to $5.50 billion. Also, the company topped the consensus revenue estimates in all of the trailing four quarters, which is impressive.
Shares of MELI have gained 9.1% over the past six months and 6% over the past year to close the last trading session at $1716.38.
MELI’s POWR Ratings reflect its promising prospects. The stock has a B grade for Quality and Momentum. MELI is ranked #35 out of 50 stocks in the A-rated Internet industry.
To access additional MELI ratings for Growth, Stability, Value, and Sentiment, click here.
Carvana Co. (CVNA)
CVNA operates an e-commerce platform for buying and selling used cars. Its platform allows customers to research and identify a vehicle, inspect it using the company's 360-degree vehicle imaging technology, obtain financing and warranty coverage, purchase vehicles, and schedule delivery or pick-up from their desktop or mobile devices.
On November 13, CVNA expanded its same-day vehicle delivery services to the greater Las Vegas, Nevada area. Select Las Vegas area residents can now take delivery of a vehicle purchased on the same day they place an order on Carvana.com. The quick services offer convenience to the local customers and will favor CVNA’s operations.
For the fiscal 2024 third quarter that ended September 30, 2024, CVNA’s total revenues increased 31.8% year-over-year to $3.65 billion. The company’s operating income grew 602.1% from the year-ago value to $337 million. Its net income came in at $148 million for the quarter. In addition, CVNA’s adjusted EBITDA was $429 million, up 189.9% year-over-year.
Analysts expect CVNA’s revenue and EPS for the first quarter (ending March 2025) to increase 19.3% and 114.8% year-over-year to $3.65 billion and $0.49, respectively. Moreover, the company has surpassed the consensus EPS estimate in each of the trailing four quarters.
CVNA’s shares have surged 110.3% over the past six months and 318.5% over the past year to close the last trading session at $233.02.
CVNA’s sound fundamentals are reflected in its POWR Ratings. The stock has an A grade for Growth. Within the A-rated Internet industry, CVNA is ranked #43 of 50 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see CVNA’s ratings for Quality, Sentiment, Value, Stability, and Momentum here.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
SHOP shares were trading at $107.61 per share on Thursday afternoon, down $2.09 (-1.91%). Year-to-date, SHOP has gained 38.14%, versus a 25.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 E-Commerce Stocks to Watch This Holiday Season StockNews.com
