The 3 Hottest E-Commerce Stocks to Watch in 2024
The global e-commerce industry has gone through a challenging period with growth adjustments in a post-pandemic world. As the need for social distancing declined, so did the growth in online shopping. However, there is no doubt that global e-commerce adoption is in an uptrend. With post-pandemic growth already being discounted, it’s a good time to buy e-commerce stocks for 2024.
Talking about numbers, the global e-commerce market is expected at $6.3 trillion for 2023. In this year, 22.1% of total retail sales will happen online. Emerging markets like India and Indonesia are likely to among the fastest growing.
Overall, there are some big opportunities in the e-commerce industry globally. Furthermore, there are several players that are moving towards healthy free cash flows. This will have a positive impact on valuations.
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Let’s discuss three of the best e-commerce stocks to buy for 2024.
Coupang (CPNG)
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Coupang (NYSE:CPNG) stock is definitely among the hottest e-commerce stocks for 2024. It’s worth noting that in the last 12 months, CPNG stock has remained sideways. After trading in a broad consolidation range, a breakout on the upside seems likely. Of course, the bullish view is backed by a positive business outlook.
For Q3 2023, Coupang reported active customers of 20 million. On a year-on-year basis, the number of active customers increased by 14%. However, the company’s “single-digit share of the total retail market” is an indication of the impending growth potential. At the same time, Coupang is exploring other Asian and southeast Asian markets for growth acceleration.
Another big positive is that Coupang reported free cash flow of $1.9 billion for the trailing 12 months. The company ended Q3 with a total cash buffer of $4.9 billion. With high financial flexibility, Coupang is positioned to make aggressive growth investments.
Sea Limited (SE)
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From all-time highs above $350 in October 2021, Sea Limited (NYSE:SE) stock has plummeted to current levels of $38. One reason is growth adjustments in a post-pandemic world for the e-commerce sector. Furthermore, Sea Limited was facing significant cash burn.
However, after the big correction, SE stock looks attractive and poised for a reversal rally. It’s important to mention that Sea Limited is among the big players in the southeast Asian markets. The region has immense growth potential and the company is positioned to benefit. In 2022, e-commerce transactions in southeast Asia surged to almost $100 billion.
Coming to the financials, Sea Limited reported positive adjusted EBITDA of $35 million for Q3 2023. For the same period prior year, the company had reported an adjusted EBITDA loss of $358 million.
Focus on operational efficiency has translated into improved margin metrics. As the e-commerce segment EBITDA losses narrow, I expect SE stock to trend higher. It’s worth noting that as of Q3 2023, Sea Limited reported cash and equivalents of $7.9 billion. With a strong cash buffer, the company is positioned to make aggressive investments in a high-growth market.
Shopify (SHOP)
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The trend for Shopify (NYSE:SHOP) stock has been bullish with an upside of 95% in the last 12 months. With strong quarterly numbers, I believe that SHOP stock will continue to trend higher this year.
For Q3 2023, Shopify reported revenue growth of 25% on a year-on-year basis to $1.7 billion. An important point to note is that with more merchants joining the platform, subscription revenue increased by 29% to $486 million. Subscription plan pricing changes also positively impacted growth.
It’s also important to note that Shopify is being used in 175 countries. The addressable market is big with rising e-commerce adoption globally. This will translate into sustained revenue growth and as subscription (recurring) revenue swells, I expect EBITDA margin improvement.
For the first nine months of 2023, Shopify reported operating cash flow of $496 million. This already implies an OCF potential of $660 million. In the next few years, OCF will be more than $1 billion and Shopify business is therefore a cash flow machine.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
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