Amazon stock is plunging but was recently named one analyst’s “top pick” for 2022.
Meta Platforms is making moves in e-commerce, and its stock is incredibly cheap.
Sea Limited could be a multibagger from these beaten-down levels.
E-commerce stocks were all the rage during the pandemic, but now they are among the most out-of-favor stocks in the whole market. That’s spells opportunity.
Certainly, many e-commerce stocks have reported soft fourth-quarter earnings, as the receding pandemic caused people to flock back to brick-and-mortar stores. Yet e-commerce is going to take up more and more retail spending over time. And if you think about it, higher oil prices could actually spur consumers to order more through e-commerce channels rather than driving to a store.
In that light, here are three top e-commerce names that are screaming buys for investors focused on the long term. Amazon
The Nasdaq fell 3.6% on Monday, and Amazon.com ( NASDAQ:AMZN ) fell an even greater 5.6%. Yet even on that terrible day, JPMorgan Chase analyst Doug Anmuth named Amazon as his “Top Internet Idea” for 2022.
Why is that? Amazon’s stock has been battered recently by slowing e-commerce sales and rising costs, resulting from well-known supply chain problems and labor shortages. However, Anmuth sees both those pressures receding in 2022, saying, “AMZN has caught up on fulfillment capacity after doubling its network since the pandemic began, and we expect AMZN to reap the benefits of its [roughly] 2.5 year investment cycle in 2022.”
Anmuth also said e-commerce should continue to grow as a percentage of overall U.S. retail in the years ahead — perhaps even doubling from 20% or so today to 40% in the future. Remember, vaccines were widely distributed through the first half of 2021, and Amazon’s e-commerce growth slowed in the second half of the year. So the company will have much easier comparisons in the second half of 2022. In addition, Amazon has gone on a torrid hiring spree over the past two years, but it will probably slow those investments in capacity and personnel this year.
When you combine that favorable e-commerce setup with an increase in the price of Amazon Prime and torrid growth in Amazon Web Services, Amazon’s profits should inflect upward as we go through the year. With the stock down more than 21% of its all-time high and management repurchasing shares for the first time in 10 years , now would be a great time for investors to initiate or add to an Amazon position. Meta Platforms
Is Meta Platforms ( NASDAQ:FB ) an e-commerce stock? I’d argue yes. A large portion of its ad revenue comes from small businesses and merchants who take advantage of Meta’s targeted advertising capabilities and vast reach. In fact, management mentioned on the recent call with analysts that recent underwhelming results were a result of moderation in e-commerce activities. That, combined with IDFA changes to the iOS operating system, which hurt Meta’s targeting capabilities, is largely why the company gave underwhelming guidance and why the stock is down now more than 50% from all-time highs.
But Facebook is also rolling out more innovative e-commerce tools for small merchants to sell directly through Facebook and Instagram. In May of 2020, the company introduced Shops, which help small businesses set up a quick and easy online store across its platforms, and through which customers can ask questions and communicate through messaging or WhatsApp. COO Sheryl Sandberg noted increased engagement with new features such as Live Shopping, in which small businesses can promote products through a live Instagram event, not unlike a “Home Shopping Network” type of experience on Instagram. And Meta just purchased Kustomer, a customer relationship management software startup that helps businesses communicate with customers through a variety of online channels, including WhatsApp and Instagram. So Meta is clearly looking to integrate its social platforms more and more with e-commerce. Image source: Getty Images. The stock’s sell-off seems far overdone, and it’s incredibly cheap at just 13.6 times trailing earnings. Keep in mind, that low P/E multiple may actually be overstated, since Facebook is spending multiple billions on its Metaverse venture with no immediate payoff, and the company also had an extra $48 billion in cash at the end of last quarter — nearly 10% of its market cap . When you take out the cash and add back Metaverse losses, the core business is trading even cheaper than that.
It’s rare to get a chance to buy a business like Meta at this […]