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Top 3 e-commerce stocks you can buy right now
The world rushed to make e-commerce a bigger part of total retail sales before the pandemic, and now it is growing at an inevitable pace.
Global retail sales fell 2.8% in 2020 to $23.6 trillion as consumers change their online shopping habits, according to eMarketer. E-commerce sales grew more than 25% last year to $4.2 trillion, or about 18% of total retail sales.
With economies reopening to allow the traditional world to begin growing again in 2021 (eMarketer expects retail sales to reach $25 trillion globally this year), e-commerce has continued to grow at a slower double-digit pace.
Global online sales are expected to reach $7 trillion by 2025 and are set to account for one-fifth of completed retail sales. There are a number of e-commerce companies that will make up the majority of these sales and should be accounted for in any investor's portfolio.
- E-commerce sales grew over 25% last year to $4.2 trillion, or about 18% of total retail sales, with global online sales expected to reach $7 trillion by 2025.
- Investing in e-commerce stocks can be a good decision because it offers high growth potential, diversification, lower overhead costs, scalability, and access to global markets.
- Before investing in any e-commerce stock, investors should research the company's financials, management, and competitive advantages, as well as understand the risks involved.
The contents of this article are for educational purposes only. They are not intended to be a source of professional financial advice. You will find experts on financial planning, financial management, and real estate here. More on disclaimers here.
The global e-commerce industry is the market of buying and selling goods and services online. It is a rapidly growing industry that has transformed the way people shop and do business around the world.
E-commerce enables businesses to reach customers beyond their geographic location, and allows consumers to purchase products and services from any online retailer from anywhere in the world.
The industry is dominated by major players like Amazon, Alibaba, and eBay, but there are also many smaller e-commerce platforms and marketplaces catering to specific niches and industries.
The industry has expanded beyond the traditional internet retail industry and now includes sectors like travel, education, and healthcare.
One of the biggest drivers of e-commerce growth is the increase in mobile internet usage and the proliferation of smartphones. Consumers now have the ability to shop at the online marketplace anywhere and anytime, and retailers are responding by optimizing their websites and apps for mobile devices.
Another factor driving the growth of e-commerce is the increase in cross-border trade. As a result of online advertising, many consumers are now comfortable buying products from other countries, and retailers are responding by expanding their reach and establishing partnerships with logistics companies to ensure speedy and reliable delivery.
However, the industry also faces challenges, including concerns around privacy and security, as well as the impact of e-commerce on traditional brick-and-mortar retailers. Nonetheless, the e-commerce industry is projected to continue to grow in the coming years, and it will continue to shape the way people shop and do business around the world.
Is it good to invest in e-commerce?
Today, investing in e-commerce stocks is a great investment option since the industry continues to grow and it is projected to reach 22% of total global sales in 2023.
Moreover, from Baby boomers and Gen Xs to Millenials and Gen Zs, more people across the globe are gaining greater purchasing power as well as preference for online shopping. As a result, investments in e-commerce promise to deliver higher returns.
However, this doesn't eliminate the possibility of e-commerce stocks losing value as this is true of all investments.
Why should you invest in e-commerce?
There are several reasons why investing in e-commerce can be a good decision:
1. High growth potential
E-commerce is a rapidly growing industry, with more and more people shopping online every year. This growth is driven by factors such as increased internet penetration, rising consumer confidence in online shopping, and the convenience of online shopping.
Many e-commerce stocks provide investors with a way to diversify their portfolio beyond traditional investments such as stocks and bonds. It also offers exposure to a wide range of industries and sectors, including retail, technology, logistics, and more.
3. Lower overhead costs
E-commerce businesses often have lower overhead costs compared to traditional brick-and-mortar stores. This is because they don't need to pay for things like rent, utilities, and staffing for physical locations.
E-commerce businesses have the potential to scale quickly and efficiently, as they can reach a much larger audience than traditional brick-and-mortar stores. This scalability can lead to increased profits and a higher return on investment.
5. Access to global markets
E-commerce allows businesses to reach customers all around the world, providing access to new markets and revenue streams. This can help diversify revenue sources and reduce reliance on any one market.
How to invest in e-commerce stocks
Investing in e-commerce stocks is similar to investing in any other stock. Here are some steps to consider:
1. Do your research
Before investing in any e-commerce stock, it's essential to research the company's financials, management team, market share, and growth prospects. You can also look at industry trends and analyst reports to get a better understanding of the e-commerce industry.
2. Choose a brokerage account
To buy and sell e-commerce stocks, you'll need a brokerage account. There are many online brokers available, such as TD Ameritrade, E-Trade, and Robinhood, that offer commission-free trading.
3. Select your stocks
Once you have a brokerage account, you can start selecting e-commerce stocks to invest in. Some popular e-commerce stocks include Amazon, Alibaba, eBay, and Shopify.
4. Place your order
After selecting the e-commerce stocks, you want to invest in, place an order through your brokerage account. You can choose to buy a set number of shares or invest a specific amount of money.
5. Monitor your investments
It's important to monitor your e-commerce investments regularly to stay up-to-date on any market changes or news related to the companies you've invested in. This can help you make informed decisions about buying, selling, or holding your e-commerce stocks.
What are the three biggest e-commerce stocks?
As of May 2023, the three e-commerce stocks that are the biggest by market capitalization include:
- Amazon (AMZN)
- Alibaba (BABA)
- Shopify (SHOP)
There are many more well-performing e-commerce stocks including JD.com and Global e, but these three are considered the best e-commerce stocks to buy at the moment.
Amazon has become the dominant force in e-commerce, boasting over 200 million Prime members globally and holding significant market share of nearly 40% in the sector in the US.
The company's closest competitor, Walmart, holds just a 7.2% market share, followed by eBay at 4.3% and Apple at 3.8%. In fact, Amazon's market share is larger than the combined share of its nine closest competitors, contributing over half of the growth in U.S. e-commerce sales.
Amazon has invested heavily in its logistics business, resulting in an unmatched goods delivery system. The company's reliable two-day, one-day, and even hourly delivery has cultivated a loyal customer base.
Although its North American e-commerce sales rose just 11% to $76.9 billion in the most recent quarter, this modest growth is attributed to temporary macroeconomic conditions.
With e-commerce sales only making up 14.6% of all retail sales in the U.S., Amazon still has ample room for growth as the market expands in the coming years. Furthermore, Amazon Web Services (AWS), with a 32% share of global cloud infrastructure spending, serves as the backbone for thousands of U.S. businesses and remains the company's most profitable segment.
As the company's price-to-sales ratio is at its lowest in nearly eight years, investors should consider purchasing Amazon stock at a relative discount.
Amazon's Chinese partner is Alibaba, the largest Chinese e-commerce store, and because the Chinese market is larger than the United States, its sales volume is also larger.
While Amazon Prime Day sales are expected to reach a record $11.2 billion worldwide over two shopping days, Alibaba recorded $84.5 billion in merchandise volume (total merchandise volume) during its two-day Prime Day shopping trip.
Despite Beijing's ongoing crackdown on tech companies, which has cut its sales this year, Alibaba continues to grow, despite its recent earnings report being seen as relatively weak.
It recently announced a turnaround plan to drive sales growth that includes adding more VIP members (who tend to spend more than non-members), targeting older shoppers, while using artificial intelligence and automation to increase advertising effectiveness.
With its stock up 55% from its peak a year ago, Alibaba is a particularly attractive e-commerce stock to buy right now.
Shopify is a leading e-commerce platform that enables businesses of all sizes to sell their products and services online. Despite a challenging economic environment, the company has seen impressive growth and delivered strong financial results.
In the most recent quarter, Shopify reported sales of $1.5 billion, a 25% increase over the same period last year and ahead of analysts' consensus estimates. Earnings of $0.01 per share also beat Wall Street's estimate of a loss of $0.04 per share.
Despite these positive results, Shopify has made some significant adjustments, including the sale of its logistics business and a workforce reduction of 20%, in order to focus more on its core e-commerce business.
Nevertheless, the company's share price has risen 70% over the past year, reflecting its strong performance in a challenging market.
Bay Street Capital Holdings
Bay Street Capital Holdings is a Palo Alto-based financial planning, wealth management, and investment advisory firm that prioritizes managing total risk and volatility over maximizing returns.
Its founder, William Huston, is among Investopedia's Top 100 Financial Advisors for 2021 and only two of nineteen California firms recognized as Black-owned.
Bay Street supports diverse and emerging fund managers and entrepreneurs and was a finalist in the Asset Manager for Corporate Social Responsibility (CSR) category out of over 900 firms across the US in 2021.