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Don’t Miss the Boom: 3 E-Commerce Stocks Set to Explode Higher

South Korea
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Online retail has grown tremendously over the past decade at the expense of brick-and-mortar retail. With the prolonged lockdowns during the pandemic, this secular shift accelerated. Consumers are now increasingly aware of online retail’s convenience and lower costs. Since this secular theme is just starting, e-commerce stocks will be major beneficiaries for decades.

According to Insider Intelligence, global retail e-commerce sales will grow by 10.4% and 9.6% in 2023 and 2024, respectively. In terms of retail value, they expect e-commerce sales to exceed $8 trillion by 2026 from $5.7 trillion in 2022.

China leads in e-commerce sales, and the U.S. and U.K. follow in second and third place, respectively. Also, emerging markets such as Latin America are experiencing higher growth rates in online retail. In 2022, e-commerce sales in the region increased 22.4% to $104 billion.

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The value proposition in terms of convenience, breadth of selection and lower prices means that e-commerce stocks will continue to grow revenue. Here are some e-commerce stocks to buy.

Amazon (AMZN) An image on the Amazon logo on a phone, held in front of a stock chart to represent Amazon stock

Source: Daniel Fung / Shutterstock

Since starting as an online bookseller in 1995, Amazon (NASDAQ:AMZN) has grown by leaps and bounds. Today, it’s the second largest e-commerce retailer worldwide with a leading share in markets such as the U.S., U.K., Germany, Japan and India.

The e-commerce giant has leveraged the Amazon flywheel to colossal effect. By relentlessly focusing on having the lowest cost structure, it can provide lower prices for consumers. Being the cheapest store enhances customer experience, driving more traffic to Amazon online stores. Then, higher traffic attracts more third-party sellers, strengthening the breadth and quality of selection.

Today, Amazon Prime boasts over 200 million estimated members. Subscribers benefit from one- or two-day shipping, 10% discounts and other services such as Prime Video and Music. Amazon is one of the e-commerce stocks to buy as these benefits continue to enhance customer loyalty and drive increased shopping frequency.

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Indeed, Amazon’s focus on the customer has supported an impressive revenue growth record. Net sales from online stores doubled from $91.4 billion in 2016 to $220 billion in 2022.

Overall, Amazon’s value proposition from Amazon Prime and the breadth of selection will drive growth. Moreover, its other businesses will benefit from its e-commerce business. For instance, its advertising segment has grown massively since it began reporting the numbers in fiscal year 2020. Revenues in 2020 were $19.7 billion and have almost doubled in just two years to $37.7 billion in 2022.

With the company moving from a national to a regional fulfillment network, the company will achieve significant cost savings. Furthermore, it will deliver customer orders more quickly, driving satisfaction. Amazon is an e-commerce leader that will explode higher.

Mercado Libre (MELI) MercadoLibre (MELI) homepage on a smartphone

Source: rafapress / Shutterstock.com

While Amazon dominates North America and Europe, Mercado Libre (NASDAQ:MELI) is the e-commerce leader in Latin America. The company will strengthen its position after competitor Americana’s bankruptcy in January.

As mentioned earlier, Latin American e-commerce sales growth is accelerating. With Mercado Libre operating in several countries, including Brazil, Argentina, Mexico, Chile and Colombia, the company will deliver explosive growth. It’s one of the best e-commerce stocks to buy to participate in online retail growth in South America.

The company is consolidating and growing its market share. According to Statista, it represented 21.6% of e-commerce sales in Latin America in 2022. This advantage will persist due to its wide assortment of diverse sellers and the fastest delivery rates in the region.

The company has made significant investments that will drive additional market share growth. For instance, investments in its logistics network, Mercado Envios. Now, over 90% of all orders are handled through its network.

Also, the company is ramping up monetization of its ads business. In the second quarter, revenues in the segment increased 70% year-over-year (YoY). Management believes it’s a higher-margin business that can earn sustainable EBIT margins in the high 70s to low 80s.

With a consistent long-term focus on customers and merchants, Mercado Libre will be a top e-commerce stock to buy. A 57% revenue increase in the latest quarter showed the growth story remains intact. Moreover, the lower online commerce penetration in Latin America will provide further growth opportunities.

Coupang (CPNG) A close-up shot of a Coupang (CPNG) delivery vehicle.

Source: Ki young / Shutterstock.com

E-commerce adoption rates in Southeast Asia have been higher than in other regions. Several e-commerce stocks serve the area. Coupang (NYSE:CPNG) is one to consider due to its dominant position in the South Korean market.

South Korea has one of the highest population densities, with a large population living in large cities like Seoul. Thus, the country is highly suited for e-commerce. Coupang has been the leading e-commerce business and has numerous growth opportunities.

Notably, revenues are accelerating, making Coupang one of the best e-commerce stocks to buy. In Q2 FY2023, they grew 16% YoY. Besides, the company has a considerable growth opportunity since it only holds a single-digit market share of total retail and grocery in the Korean market.

In terms of customer growth, active customers accelerated from 1% YoY in Q4 FY2022 to 5% in Q1 to 10% in the second quarter. Additionally, Bom Kim, the CEO, highlighted the increasing spending levels. “Additionally, all of our customer cohorts, even our oldest, continue to increase their spend and the number of categories they are purchasing on Coupang.”

On the profits front, the e-commerce player is showing significant improvements. While the company is making unmatched investments in infrastructure and technology, it’s not at the expense of profitability. It reported a net income of $145.1 million, a material improvement from a loss of $75 million in the previous year. Free cash flow also rebounded from -$195 million to $449.8 million.

The company reached a significant milestone, delivering over $1 billion in free cash flow over the trailing 12 months. It is seeing momentum through growth initiatives, such as entering categories like fashion and beauty. Besides, it is set for explosive growth as it expands in Taiwan.

On the date of publication, Charles Munyi 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.

Charles Munyi has extensive writing experience in various industries, including personal finance, insurance, technology, wealth management and stock investing. He has written for a wide variety of financial websites including Benzinga, The Balance and Investopedia.

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