3 E-commerce actions that benefit from consumer habits

E-commerce stocks have seen relatively mild growth this year despite recent economic pressures that have put many consumers on the back burner. Part of this is the sheer diversity of products and price points made available by online stores, since there is no physical location to maintain and sell from. In contrast, e-commerce companies enjoy wider margins due to low-cost business models that follow a warehousing and direct-to-customer model.

Then there is the aspect of changing consumer habits in favor of companies offering a wide range of good deals. That’s because the U.S. economy is driven significantly by consumption, and Americans are notorious spenders, even when their wallets are hit by inflation and rising housing costs. As such, companies that tap into these spending habits will likely see their stocks rise even in the face of a potential economic slowdown.

PDD Holdings (PDD)

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Earlier this year, we warned investors about PDD Holdings (NASDAQ:PDD) and its business practices of using import tax loopholes to offer exceptionally cheap products through its e-commerce platform, Temu. Since then, no major developments have led investors to believe that the US government will address PDD methods.

As a result, PDD stock has seen a relatively steady performance throughout the year, with the past week helping it bounce back from a general downtrend. With a month until the next earnings report, PDD could be at a decent price to buy. Plus, with Temu continuing to remain central to many Americans’ low-cost online shopping experience, there’s a good chance its next earnings report will continue to impress.

One last development to watch before you buy is the current situation between Temu and sellers on the platform who are protesting his disciplinary fines. On the one hand, Temu claims that these fines, which for one seller totaled $110,000, stem from post-sale complaints. On the other hand, they could lead to a constraint on sellers on the platform, which could affect the diversity of products on the site, allowing it to keep prices low.

Etsy (ETSY)

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In the midst of a company-wide soul-searching journey, Etsy (NASDAQ:ETSY) has seen nearly 33% of its stock value evaporate over the past year. As a result, it is now trading at a dollar off its 52-week low. However, with its management determined to return the company to its artisanal roots, there is hope for the stock in the quarters ahead.

That’s because Etsy has always been unique among e-commerce stocks. Its initial business model focused on small quantities of production from independent sellers who produced the goods themselves. This initially helped Etsy carve out a niche in the e-commerce sector, which intended to offer buyers a more personalized shopping experience while keeping prices fair and relative to seller quality.

Now its CEO, Josh Silverman, says the company is back on track to recapture its goal of maintaining humane trade, with sweeping policy changes that went into effect in mid-July. Time will tell if these policy changes revive the stock, but at a price-to-earnings ratio of nearly 25 times and slight revenue growth of 3.01% year-over-year in the second quarter of 2024, Etsy stock could be a solid purchase. option.

Amazon (AMZN)

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No discussion of e-commerce stocks is complete without a mention Amazon (NASDAQ:AMZN). The US e-commerce giant managed to dominate North America again with $90 billion in net sales for the second quarter (Q2) of 2024. This led to a 91% year-over-year increase in operating income per year, suggesting the company is doing exceptionally well in capturing consumer spending at a time when consumers are more financially constrained than ever.

Furthermore, looking specifically at its net sales of products and services for Q2, the company sold $61 billion worth of goods and $86 billion worth of services, for a total of $147.9 billion for the respective quarter. More impressively, however, Amazon managed to keep its operating expenses around those sales at $133.3 billion, pushing net profit to $14.6 billion for the quarter.

That’s a serious commitment to sales margins that will likely keep investors bullish on the stock as the company grows its global e-commerce presence.

At the time of publication, Viktor Zarev did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com Publishing Guide.

At the time of publication, the responsible editor had (either directly or indirectly) no position in the securities mentioned in this article.