During the COVID-19 pandemic, e-commerce stocks were flying high. Fundamentals backed the rally, as social distancing prompted consumers to go online. The post-pandemic era witnessed significant readjustments in terms of shifting back to shopping in physical stores. As a result, growth estimates were revised on the downside for some of the major e-commerce players. That translated into a big correction from premium valuations.
However, even after discounting the valuation readjusted, e-commerce stocks seem oversold. With an optimistic long-term growth outlook, it’s a good time to accumulate e-commerce stocks for multibagger returns.
To put things into perspective, the global e-commerce market was valued at $18.98 trillion in 2022. The market size is expected to reach $47.7 trillion by 2030. Therefore, there is ample headroom for growth and value creation for some of the best e-commerce companies.
This column discusses three e-commerce stocks likely to surge higher in the next 36 months.
Coupang (CPNG)
Coupang (NYSE:CPNG) stock is among the attractive e-commerce stocks to buy, with strong fundamentals and healthy growth visibility. After a deep correction since March 2021, CPNG stock has stabilized in the last 12 months.
With health growth metrics, the stock will likely surge higher in the coming quarters. For Q4 2023, Coupang reported active customers of 21 million, higher by 16% year-over-year (YoY). For the same period, the net revenue per active customer increased by 6% to $312. A combination of these two factors is positive for the company’s EBITDA margin.
Coupang reported adjusted EBITDA margin of 4.4% last year. The company is targeting a long-term margin of 10%. With ample scope for growth within Korea and with international expansion, I expect revenue and EBITDA growth to remain robust.
It’s also worth noting that in January, the company completed the acquisition of European fashion and luxury e-commerce platform Farfetch. Therefore, Coupang’s growth ambitions are not limited to emerging markets.
Sea Limited (SE)
Sea Limited (NYSE:SE) stock witnessed a massive fall from its high of $370 in October 2021. The stock touched all-time lows of $32.3 last year before some recovery. At a forward price-earnings ratio of 31.6, SE stock is attractive, and as the company focuses on profitability, I am expecting a big reversal rally.
For 2023, Sea Limited reported revenue and EBITDA of $13.1 billion and $1.2 billion, respectively. It’s worth noting that in 2022, the company reported an adjusted EBITDA loss of $878 million. The shift to profitability is a big catalyst for SE stock upside.
The management further believes the current year will be profitable, and EBITDA margin expansion will likely sustain. I must add here that besides the e-commerce business, the management expects growth and profitability for the digital financial services and digital entertainment business. Growth will likely accelerate on a year-on-year basis. I also like the fact that Sea Limited ended 2023 with a cash buffer of $8.5 billion. High financial flexibility allows the company to continue investing in user acquisition in a highly competitive market.
JD.com (JD)
In general, Chinese stocks have been depressed, and I believe long-term investors can consider selective exposure. Among e-commerce stocks, JD.com (NASDAQ:JD) looks attractive and can deliver multibagger returns in the next 24 to 36 months.
It’s worth noting that JD stock trades at a forward price-earnings ratio of 8.7. That is indicative of the valuation gap, and the stock also offers a healthy dividend yield of 2.74%. After remaining sideways in the last six months, a breakout on the upside seems likely considering the valuation factor.
While the stock has been depressed, JD.com has reported revenue growth at a CAGR of 19% between 2018 and 2023. Further, the company’s operating and free cash flows have been robust.
That provides flexibility to invest in a wide spectrum of businesses. Besides JD Retail, the company’s growth in JD Logistics segment has also been steady. At the same time, the company has been investing in emerging businesses.
With one of the best logistics networks in China, expansion in tier II and III cities and financial flexibility, JD.com will create value in the coming years.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions 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.