3 e-commerce stocks poised for a comeback after last week’s market crash

On the morning of August 5, unwinding of the yen trade accelerated, leading to an increase in the expected volatility index. Investors were selling and asking questions later. Even the best e-commerce stocks have suffered from this carnage. This retreat has created an opportunity to buy into one of the most enduring themes of our time.

The thesis for e-commerce stocks is simple. There has been a gradual shift from physical shopping to online shopping. After all, who doesn’t love shopping from the comfort of their home and getting items delivered the same day!

These e-commerce stocks are winning against brick-and-mortar stores and their online peers. They have the scale to deliver value through lower prices and faster delivery times. However, with a significant portion of shopping taking place in brick-and-mortar stores, there is a massive opportunity ahead. The recent pullback of these e-commerce stocks provides the perfect entry point to participate in this secular shift.

Amazon (AMZN)

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Amazon (NASDAQ:AMZN) is one of the best e-commerce stocks you can buy. In the past three weeks, it has dropped from $200, down more than 15%. Now, it offers an attractive risk-reward opportunity going forward. The long-term drivers of its performance are still in place.

Over the years, Amazon has amassed more than 200 million Amazon Prime subscribers worldwide thanks to its obsessive focus on customers. By offering a combination of low prices and fast delivery times, it has continued to grow its loyal customer base. This has allowed the company to achieve a massive operational footprint. True to its ethos, the company has returned the cost savings from its economies of scale to customers through lower prices, faster delivery times and value-added services such as entertainment.

Today, Amazon dominates the e-commerce market in North America and Europe. For example, in the US, it accounts for 40% of retail e-commerce sales. In addition, the company sees more opportunities for growth in the future. For example, bundling several services on Amazon Prime to attract and retain more customers and using artificial intelligence to improve its recommendation engine.

With these tailwinds, Amazon should be higher. However, after the recent pullback, it is trading at one of its lowest valuations on record. The stock is a bargain at a forward non-GAAP price-to-earnings of 35, compared to a 5-year historical average of 181.

MercadoLibre (MELI)

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MercadoLibre (NASDAQ:MELIA) is the most dominant e-commerce retailer in Latin America. The fact that it managed to relegate Amazon to second place in key markets like Brazil and Mexico shows its strength. Additionally, as online shopping penetration in its markets lags in North America and Europe, the stock has significant upside.

Indeed, the South American giant was one of the e-commerce stocks that delivered solid results in Q2. Net income rose 42% year-over-year to $5.1 billion in the quarter. This impressive performance was supported by strong growth in key markets. Net revenues in Brazil and Mexico increased by 51% and 66%, respectively.

The online retailer showed impressive operating figures, highlighting its preferred online market position in Latin and Central America. For the quarter, unique active shoppers were 57 million, compared to 48 million in Q2 2023, and items sold reached 416 million from 325 million. Due to the increase in users and items sold, gross merchandise volume increased from $10.5 billion to $12.6 billion.

MELI shares are on solid footing and could rise once the market recovers from the recent crisis. At a forward price to sales of 4.6 and a forward P/E of 58, it is undervalued relative to its impressive growth rate.

Coupang (CPNG)

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Nicknamed the Amazon of South Korea, Coupang (NYSE:CPNG) is one of the best e-commerce stocks. It is the dominant player in the South Korean market, a geography with excellent e-commerce unit economics due to its high population density. It is also expanding into other Asian markets such as Taiwan.

Recent gains have demonstrated why this retailer is one of the top e-commerce stocks to buy. On a constant currency basis, revenue was up 30% over last year. Even after the exclusion Farfetchachieved a respectable growth of 23%. In addition, active customers in the trade increased by 12% compared to last year.

In terms of long-term growth, management sees a massive opportunity in the fragmented $560 billion e-commerce space. They expect tremendous growth in its third-party marketplace as more marketplace sellers join it. Moreover, the company continues to make more investments to improve the market and growth of Fulfillment and Logistics by Coupang (FLC).

On the profitability front, management expects to continue expanding margins by expanding margin-efficient offerings and optimizing the supply chain. In Q2, for example, gross margins improved 310 basis points year over year to 29.3%. Due to these improvements and margin increases, gross profit increased 41% year-over-year to $2.1 billion.

Given the growth and improving profitability, CPNG stock is a buy. The company continues its international expansion and develops its business in the third-party market.

At the time of publication, Charles Munyi 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 the InvestorPlace.com Publishing Guidelines.

At the time of publication, the responsible editor had (neither directly nor
indirectly) any positions in the securities mentioned in this article.