3 Unstoppable E-Commerce Growth Stocks to Buy Now: MercadoLibre, Chewy, and Etsy
December 15, 2020 at 08:27 AM EST
MercadoLibre (MELI), Chewy (CHWY) and Etsy (ETSY) have established their positions in the e-commerce space through strategic expansions and brand loyalty. The pandemic driven e-commerce boom has helped these stocks witness significant growth in earnings and revenues this year. With the continued evolution of the digital retail landscape, these three stocks should keep gaining even in the post-pandemic world.
The e-commerce industry has been one of the biggest gainers in 2020. With the pandemic driven lockdown and social distancing norms forcing people to stay indoors, shopping from the comfort of one’s own home has gained immense popularity. Most e-commerce players have capitalized on this changing trend through heavy discounts, and the waiver of delivery charges.
With surging cases of the coronavirus grappling most countries, the e-commerce space is witnessing record growth in demand this holiday season. Many analysts speculate the e-commerce industry to witness a substantial pullback as the COVID-19 vaccines roll out. However, the current lifestyle patterns and increased screen time has induced people to get accustomed to online shopping.
Companies such as MercadoLibre, Inc. (MELI), Chewy, Inc. (CHWY) and Etsy, Inc. (ETSY), which have been able to capitalize on the pandemic-driven e-commerce wave by diversifying their omni-channel presence, witnessed significant growth in revenue and earnings. Based on their future growth potential, these three stocks still have plenty of upside left.
MercadoLibre, Inc. (MELI)
MercadoLibre is an e-commerce company primarily operating in Latin America. The company offers integrated ecommerce solutions for individuals and companies through three platforms - Mercado Libre, Mercado Pago, and Mercado Envíos.
Last month, MELI selected Amazon.com, Inc. (AMZN) as its primary cloud provider. This will enable MELI to enhance user experience and accelerate the launch of new products through Amazon Web Services (AWS). This recent move was carried out to expand its regional clientele base by providing a more secure and reliable performance.
MELI received approval from the Brazilian Central Bank earlier in November to expand its operations further in the credit market. This allows MELI to reduce its overhead expenses, while streamlining credit transactions.
MELI’s revenues increased 85% year-over-year to $1.12 billion in the third quarter that ended September 2020. Income from operations was $83.07 million, compared to a loss of $81.93 million during the third quarter of 2019. Net income before taxes was $52.67 million, up from a loss of $66.92 million during the third quarter of 2019. EPS was $0.28 up from a negative EPS of $2.96 during the third quarter of 2019.
Analysts expect MELI’s EPS to rise 118% to $0.20 for the current quarter ending December 2020. The company has an impressive earnings surprise history, as it beat the street EPS estimates in three out of the trailing four quarters. The consensus revenue estimate of $1.18 billion for the fourth quarter indicates a 75% rise year-over-year. MELI has gained 185% over the past year.
How does MELI stack up for the POWR Ratings?
A for Trade Grade
A Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating.
You can’t ask for better. It is currently ranked #4 out of 60 stocks in the Internet industry.
Chewy, Inc. (CHWY)
Chewy is an online seller of pet products and pet services. The products include pet food & treats, pet supplies, pet medications, and other pet-health products.
In late October, CHWY launched an Innovative Telehealth Service in order to enhance connectivity between the pet parents and licensed veterinarians. This will enable CHWY to expand its foothold nationwide.
CHWY expanded its pharmacy business in November. It plans to offer compounded medications that are customized to specific needs of the pets. This will help the company to attract a large volume of potential customers.
Dogness International Corporation (DOGZ), a manufacturer of pet products partnered with CHWY to expand its sales activities. This allows CHWY to diversify its product portfolio, thereby attracting a higher volume of customers.
CHWY’s revenues rose 45% year-over-year to $1.78 billion in the fiscal third quarter that ended October 2020. Gross margin rose 180 basis points from the year-ago value to 25.5%.
The company has an impressive earnings surprise history, as it beat the street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $1.96 billion for the current quarter ending January 2021 indicates a 45.2% rise year-over-year. CHWY’s stock has gained 193% over the past year.
CHWY is rated a “Strong Buy” in our POWR Ratings system. It has an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade, and a “B” for Industry Rank. In 34-stock Consumer Goods Industry, it is ranked #2.
Etsy, Inc. (ETSY)
Etsy operates as an online marketplace for buyers and sellers around the world. It acts as a business starter for aspiring entrepreneurs. The company's seller services include payment processing, advertising, shipping labels, and providing various seller tools for inventory management, customer interaction, and promotion. ETSY was added to the S&P 500 Index in September.
ETSY had 69 million active buyers in the third quarter. In addition, the ETSY marketplace saw an influx of 14.8 million new buyers and reactivated buyers. The synergies from the acquisition of Reverb last year, was reflected in its quarterly results. Etsy was perfectly able to ride the pandemic induced e-commerce boom.
ETSY generated total revenue of $451.48 million in the third quarter that ended September 2020, up 128.1% year-over-year. Net income increased 520% to $91.76 million. EPS rose 525% to $0.75.
Analysts expect revenue to grow 87.2% year-over-year in the current quarter (ending December 2020) to $505.44 million. The company has an impressive earnings surprise history, as it beat the street EPS estimates in three out of trailing four quarters. The consensus EPS estimate of $0.57 for the ongoing quarter indicates a 228% rise from the year-ago value. ETSY’s stock has gained 301.9% over the past year.
It’s no surprise that ETSY is rated a “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. It is currently ranked #11 out of 60 stocks in the Internet industry.
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MELI shares were trading at $1,657.63 per share on Tuesday afternoon, up $39.57 (+2.45%). Year-to-date, MELI has gained 189.83%, versus a 16.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands.3 Unstoppable E-Commerce Growth Stocks to Buy Now: MercadoLibre, Chewy, and Etsy appeared first on StockNews.com