Company / Analytics

Analytics, 05 August 2022

E-commerce stocks to consider for your portfolio

2022 has been a terrible year for equity markets. Most stocks except energy stocks, staples, and healthcare stocks, have trended badly for the better part of this year. E-commerce stocks haven’t been spared by the downtrend.

Factors ranging from the global fear of a recession to impossible comparison to prior pandemic times, when the conditions were excellent for e-commerce companies, make the e-commerce space look even gloomier. A trend in consumer demand shifting back to brick-and-mortar stores and services like travel and restaurants is also weighing on this usually reliable growth sector.

E-commerce giants like Amazon and Etsy reported weaker-than-expected results for the second fiscal quarter, and their stocks have declined.

However, the sector is poised to recover in due time. Once conditions begin to show stability, it is widely believed that many e-commerce stocks will be proven to have been undervalued during the downdraft.

In this article, we look at e-commerce stocks that are likely to do well in the coming months and years.

Paypal

Paypal recently announce its Q2 earnings earlier in the week on Tuesday, consequently sending the e-commerce stock on an uptrend the following day. On Wednesday, the stock closed with 9% gains. In comparison, the tech-heavy Nasdaq rose 2.6% on what was a good day for tech stocks.

In PayPal’s earnings report, the company fared well compared to most of its peers in the same period. For example, the adjusted operating profit margins came in higher than Wall Street had been expecting at 19.1%, helping PayPal to beat earnings for the quarter. Sales also grew a staggering 9% to $6.8 billion, exceeding expectations by analysts. Even more impressive, cash flow year-over-year grew a whopping 22%. Concurrent with its earnings release, PayPal announced plans to spend $15 billion buying back its own stock.

However, for the fiscal third quarter of 2022, PayPal’s own forecast is mixed, with Management forecasting revenue in Q3 to come in below analyst predictions at $6.8 billion again. Adjusted earnings are also set to miss Wall Street’s forecast by about $0.02 at $0.95 per share. The company expects to make up the difference by the end of the year at about $3.92 per share for the year, which would be ahead of analysts’ forecast of $3.85.

In terms of revenue, however, PayPal expects to come in at about $27.8 billion this year, a bit below Wall Street’s hoped-for $28.2 billion.

The PayPal stock stands in good light from analysts’ view, holding a moderate buy rating, and a price target of $119.29, indicating a 23% upside from the current share price of $96.62.

CarParts.com

CarParts is yet another e-commerce company whose second-quarter earnings came in as better-than-expected. The US-based company sells auto parts, as the name suggests, but online. The company’s growth was majorly boosted by the demand for e-commerce services during the pandemic.

In the earnings report, CarParts posted 12% top-line growth in its latest quarter to $176.2 million in sales. Its GAAP profit per share of $0.07 also easily beat expectations of a loss of $0.04.

This growth outperformed the general e-commerce sector and suggests further expected growth and increased competition to their brick-and-mortar competitors. The company’s methods of operation allow shipping to 99% of the U.S. within two days and 55% of the country in one day, thanks to its seven distribution centers across the US.

Another brilliant strategy by the company is beefing up its inventory, with CEO David Meniane estimating the company was carrying $40 million in extra inventory, effectively absorbing any supply chain disruptions.

CarParts.com’s most promising long-term growth may be its new do-it-for-me (DIFM) business, where customers can connect with a mechanic through the CarParts.com website, order the part from CarParts.com, and bring it in for the mechanic to do the job.

CarParts stock still holds a huge upside potential, as the company still holds a price-to-sales ratio of less than 1, and profitability improves. Once stock markets and e-commerce headwinds fade, the stock is expected to gain momentum on the upside.

Farfetch, Ltd

FarFetch is an online luxury fashion goods retailer based in Portugal. The company also operates in other major global city centers which are London, New York, LA, Tokyo, and Shanghai. The company’s online platform operates by connecting creators, curators, and consumers of luxury fashion items, from jewelry to high-end shoes to accessories to clothing for men and women.

The company’s shares have been massively battered for the year. Standing at a staggering 75% down so far in 2022, the reason the company still stands on the positive side of analysts is the relatively bright spot amidst 2022’s difficulties, with analysts and investors applauding a better-than-expected loss. In the company’s last earning report, revenues hit $514.8 million, whiffing on the forecast by 9% although gaining 6% year-over-year. EPS, while at an adjusted loss of 24 cents, was better than the 27-cent loss expected. The company’s gross merchandise value (GMV) showed modest growth, up 2.5% to $809.5 million. The company’s digital platform margin of 32.7% represented another relatively positive aspect, as it stayed roughly in line with recent quarters, despite the market headwinds.

Farfetch stock also holds a huge upside potential, as the company convinced Wall Street into a “Strong Buy” consensus rating. With a price target of $17.42, a 108% upside from the current share price of $8.36 is expected in the coming year.

Choose one or several trading platforms and achieve your goals with Investors Europe

Investors Europe (Mauritius) Limited is authorised and regulated by the FSC Mauritius, license C112011088. Registered address: 3rd Floor Ebene House, Hotel Avenue,33 Cybercity, Ebene 72201, Republic of Mauritius. Registered Number: 113933.

Any information contained on this website is provided to you for informational purposes only and should not be regarded as an offer or solicitation of an offer to buy or sell any investments or related services that may be referenced here. Investing in certain instruments, including stocks, options, futures, foreign currencies, and bonds involve a high level of risk. Trading on margin comes with substantial risk as well. You must be aware of these risks before opening an account to trade. The income you may get from online investing may go down as well as up.