- A wave of e-commerce companies have entered the market, strengthened by the COVID-19 pandemic.
- Investing in e-commerce stocks can be riskier.
- The right companies have the potential to provide significant returns.
- 5 stocks we like better than Target
The COVID-19 pandemic has shown the world that e-commerce stocks are here to stay — even as in-person shopping returns to pre-pandemic levels. The e-commerce market has taken a significant market share, with every major individual retailer now offering some form of online shopping experience. Investing in retail stocks and e-commerce giants (and the tech companies that make the online buying infrastructure possible) can help traders prepare for the future of online sales.
Learning how to buy e commerce stocks starts by analyzing the industry before narrowing your search to major industry players. Read on to learn more about how to invest in e commerce stocks and some of the pros and cons of this sphere.
Understanding the Global E-Commerce Industry
E-commerce (short for "electronic commerce") refers to buying and selling goods and services online. While e-commerce has been a major portion of the economy well before the COVID-19 pandemic, lockdown laws exacerbated consumer preferences toward online spending.
The global e-commerce market has been multiplying in recent years and should continue to grow in the coming years. According to Statista, the U.S. e-commerce market was valued at $856 billion in 2020 and is projected to reach $1.1 trillion by 2024.
The U.S. is one of many countries with a thriving e-commerce industry. China is the current largest estimated market for e-commerce, with a predicted annual revenue of $1.5 trillion. China overtook the United States as the largest e-commerce retail market in the world in 2021. Other major players in the global e-commerce market include Japan, South Korea and the United Kingdom.
What to Look for in E-Commerce Stocks
Knowing what to look for in an e-commerce stock is crucial to making smart investments. Consider the following stock characteristics before deciding which assets to add to your portfolio.
The e-commerce market is rapidly expanding and changing, making it important for investors to keep up with shifting consumer preferences. Look for companies with a strong track record of revenue growth or with unique consumer experience models in place that can help drive growth.
Image: Monitoring media sentiment can help you estimate companies' growth potential by keeping up-to-date with changing consumer preferences.
In addition to market competitiveness, considering a company's financial sustainability before investing is important. Look at financial health signifiers like debt levels and profit margins to be sure that your investment will be on a solid long-term hold.
10 Best E-Commerce Stocks to Buy Now
Now that you understand the basics of e-commerce stocks, it's time to explore some top market options. The following are ten of the best e-commerce stocks to buy right now.
Discussing the top e commerce stocks without mentioning Amazon.com NASDAQ: AMZN is impossible. Amazon is one of the world's most well-known and successful e-commerce companies. Since its founding in the mid-1990s, Amazon has become a massive online marketplace, offering various products and services, including electronics, clothing, groceries, streaming video and cloud computing. Today, Amazon is one of the largest names in e-commerce, with a total market capitalization of more than $1.1 trillion in April 2023.
In an expanding e-commerce market, it's now more important than ever for small business owners to offer online sales to remain competitive. Shopify Inc. NYSE: SHOP is a popular e-commerce platform allowing businesses to set up and operate online stores. Shopify's stock price has increased by more than 10 times since its initial offering, weathering the pandemic to end with a $62 billion market capitalization in April of 2023.
The Alibaba Group NYSE: BABA is one of the top names in Chinese e-commerce. Its core offering, Alibaba.com, is currently the 3rd largest e-commerce platform when measured by sales. Alibaba had a total market capitalization of $236 billion in April 2023.
In addition to its e-commerce business, Alibaba has invested heavily in new markets, such as cloud computing, digital media, and entertainment. For example, Alibaba Cloud, the company's cloud computing division, is one of the largest in the world and provides a range of services, including infrastructure, security and data analytics. This can make Alibaba a stronger e-commerce investment option for those interested in international, diverse exposure.
Wayfair Inc. NYSE: W is an online retailer that specializes in home goods, including furniture, decor and bedding. Its selection of furniture includes a range of price points, which makes it ideal for a range of consumers. It has also recently begun investing in new e-commerce technology, including artificial intelligence and augmented reality delivered via app. In April 2023, Wayfair had a total market capitalization of more than $4 billion.
Walmart NYSE: WMT is one of the world's largest retailers and has significantly invested in its e-commerce business in recent years. The company operates several online marketplaces, including Walmart.com and Jet.com, which connect customers with a wide range of products, including groceries, electronics and clothing. In April of 2023, Walmart had a total market capitalization of more than $400 billion and a dividend yield of 1.50%. This makes Walmart a viable e-commerce investment with consistent dividend announcements on MarketBeat.
eBay Inc. NASDAQ: EBAY is one of the pioneers of the e-commerce industry. It is best known for its online marketplace that allows individuals and businesses to buy and sell new and secondhand goods online. In April 2023, eBay had a total market capitalization of more than $23 billion, with a dividend yield of 2.32%.
While Baidu Inc. NASDAQ: BIDU is primarily known for its Chinese language search engine, it also operates an e-commerce platform called Baidu Mall. This site allows merchants to set up online storefronts and sell products directly to consumers, with Baidu taking a commission on transactions. Baidu also offers various other services, such as online advertising, cloud storage and AI technology. In April of 2023, Baidu had a total market capitalization of $43 billion.
JD.com NASDAQ: JD is a Chinese e-commerce company that operates a large online retail platform comparable to similar operations like Alibaba and Taobao. The company also offers a logistics network that allows for fast and reliable delivery to customers across mainland China, which makes the service popular for customers in rural areas. In April 2023, JD.com and its subsidiaries had a total market capitalization of $48 billion.
MercadoLibre NASDAQ: MELI is a Latin American e-commerce company that operates in 18 countries across the region, including Argentina, Brazil and Mexico. It offers a range of services, including user marketplaces and advertising services. In April 2023, MercadoLibre had a total market capitalization of more than $64 billion.
While you might not think of Meta Platforms NASDAQ: FB, formerly Facebook) as an e-commerce stock, the company has been improving its online shopping exposure. Facebook Marketplace is a platform that allows users to buy and sell goods within the Facebook app, while Instagram Shopping offers a similar experience for brands with verified accounts. In April of 2023, Meta Platforms had a total market capitalization of more than $550 billion, making it a great choice for large-cap investors looking for e-commerce exposure.
Pros and Cons of Investing in E-Commerce Stocks
Be sure to consider both the benefits and potential drawbacks of investing in e-commerce stocks before you buy, and never invest more than you can afford to lose in an individual company.
The COVID-19 pandemic has shown that consumers are becoming more accustomed to online shopping, increasing e-commerce companies' performances:
- Growth potential: E-commerce is a rapidly expanding industry with relatively low startup costs. Companies that are able to capture market share and expand their operations can potentially generate significant returns for investors with a comparatively lower initial investment.
- International exposure: Many e-commerce stocks operate internationally, providing international diversification to investors.
- Dividend potential: Select e-commerce stocks pay out a portion of profits back to investors through dividends, providing a potential long-term passive income stream.
Drawbacks of e-commerce stocks mostly relate to the volatile nature of this new and developing industry:
- High competition: E-commerce is a highly competitive industry, with many companies vying for limited market share. This can make it more difficult for individual companies to stand out and maintain profitable operations.
- Volatility: The e-commerce industry is constantly evolving, with new technologies and market entrants emerging on a regular basis. This can make individual stocks more volatile and thus less suitable for long-term holds.
Alternatives to Investing in E-Commerce Stocks
If individual e-commerce stocks aren't the right option, you have options. The following are two common alternatives to stock orders that help provide exposure to the future of e-commerce.
- E-commerce ETFs: E-commerce exchange-traded funds (ETFs) are "baskets" of stocks that trade together on the market as a single unit throughout the day. Investing in an e-commerce ETF provides a wider range of market exposure without selecting individual companies to invest in. Some popular e-commerce ETFs include the Amplify Online Retail ETF NYSE: IBUY and the Global X E-commerce ETF NASDAQ: EBIZ.
- Startup investing: Investing in e-commerce startups can be trickier than investing in established e-commerce companies, as startups are typically not publicly traded and are often only accessible to accredited investors or venture capital firms. However, there are a few ways that individual investors can potentially invest in e-commerce startups, including angel investing and crowdfunding platforms.
The Future of E-Commerce
While there are many e-commerce sites that show massive potential for investors, it's important to remember that individual stocks also carry management risk. If you're a newer investor, consider the individual stocks that make up major e-commerce ETFs before selecting individual stocks. With so many e-commerce competitors, analyzing top ETF holdings can provide investors with a simple route to pre-screened investment choices.
Now that you understand e-commerce and the major companies that make up the e-commerce industry, you're ready to compare stocks on MarketBeat. The following are some fast answers to new e-commerce investors' last-minute questions.
What is e-commerce stock?
An e-commerce stock is a share of ownership in a company that operates in the e-commerce industry. These companies sell goods and services online and generate revenue through online transactions. Investing in e-commerce stocks can provide exposure to the growth potential of the e-commerce industry and potentially generate returns for investors. The best e-commerce stocks may also invest in growing online spheres (for example, Amazon and online healthcare services).
How do you invest in e-commerce stocks?
To invest in e-commerce stocks, you can open a brokerage account with a reputable online broker, research different e-commerce companies, and select specific stocks based on your investment goals and risk tolerance. Diversifying your investments and monitoring your portfolio regularly is important to ensure it aligns with your investment strategy. Reviewing the most active stocks on MarketBeat in the e-commerce sector can help you explore today's top market options.
Can you invest in e-commerce?
Yes, it's possible to invest in e-commerce by buying shares of stock in publicly traded e-commerce companies. To invest in multiple e-commerce stocks at once, consider an ETF or other type of fund with online sale components.
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