As per a report by The Business Research Company, the global e-commerce industry is expected to reach $4.90 trillion by the end of 2027. Accordingly, this translates into a compounded annual growth rate of 11.4%.
This growth will be driven by the high adoption of smartphones and a surge in the number of internet users. This sector has been growing annually at a clip of around 15%. Additionally, the pandemic was partly responsible for this growth, as more shoppers looked for online options to continue spending their money.
Due to the pandemic and lockdowns, consumers went online and the e-commerce sector boomed. This is a well-known phenomenon.
However, moving forward, some of these trends are likely to remain. Thus, the “stickiness” of this trend is what I’m most interested in. And personally, I think e-commerce is the future, making some of these e-commerce growth stocks among the best ways long-term investors can opt into massive capital appreciation potential.
Let’s dive in.
| JD | JD.com | $43.89 |
| BABA | Alibaba | $102.18 |
| EXPE | Expedia | $97.03 |
JD.com (JD)
It is impossible to think of e-commerce growth stocks without thinking about China. One of the largest Chinese e-commerce players, JD.com (NASDAQ:JD), is a great place to start our discussion.
JD.com is unique from its peers, as the company targets China’s second-tier cities. Accordingly, the company has invested heavily in its logistics network, while cutting expenses.
Notably, JD’s 2022 free cash flow came in at $5.2 billion, which is significantly up from its 2021 numbers. Currently, JD stock is trading around $44 today with massive growth potential. The stock is currently trading at a discount, due to several headwinds tied to the Chinese market.
However, the China opening could benefit JD.com significantly. That’s because the company is vertically-integrated, with several segments such as JD Industrials, JD Health, JD Logistics, and JD Property. These divisions are supported by a large warehouse network that supports all its businesses. Recently, the company announced that it plans to spin off JD Property and JD Industrials through separate listings on the Hong Kong stock exchange.
Investors should keep in mind that the total addressable market in China is in the trillions, and even if JD manages to get a hold of a small piece of this pie, the company’s growth potential is immense.
Alibaba (BABA)
I’ve always loved Alibaba (NYSE:BABA) as an e-commerce business. While the company is past its best days, it still remains one of the top e-commerce giants, with a massive consumer base.
The stock is up roughly 12% year-to-date, despite the market volatility, trading just shy of $103 today. Alibaba’s management team has an increasingly upbeat outlook. This is bolstered by the company’s impressive market positioning, which was reflected in impressive numbers this past quarter. Alibaba posted 15% growth in free cash flow, as well as 16% growth in EBITDA.
As far as momentum is concerned, BABA stock is on a nice upward trend. Thus, for those of the view this market momentum can continue, BABA stock is one to watch over the near-term.
Over the longer-term, I think Alibaba’s move to break up its conglomerate into six separate businesses that will have their own funding, leadership teams, and IPOs, is a good move. Additionally, the Chinese market reopening could benefit the company and we could see the stock inching closer to the 52-week high of $125.
My InvestorPlace colleague David Moadel explains whether Alibaba can hit $200, since a lot of analysts are bullish on the stock. If China’s economy accelerates this year, we could see the stock pick up its pace.
Expedia (EXPE)
Travel companies are set to benefit from revenge travel and the re-opening of the world. Indeed, one of the top online travel agencies, Expedia (NASDAQ:EXPE), has seen this trend play out, posting very strong fourth-quarter results.
Currently, EXPE stock is trading around $97 per share today, and is up 9% year-to-date. The company reported 15% growth in the top line and a 17% growth in net income. Additionally, Expedia hit an impressive milestone, with 70.8 million booked room nights. That’s a massive rise, considering the pandemic-driven slump which still pervaded last year’s numbers. This led to 36% growth in revenue in 2022, and I believe this momentum will continue throughout 2023.
A lot of people have realized that they do not want to wait for cheaper airfares or for the right time to travel. The pandemic has changed the way we look at travel and spend money on this line item. Today, it has become more of a necessity than a luxury.
Expedia ended the year with record profits, posting an improvement in its business in January as compared to the previous quarter. This means we should be prepared for even better numbers this year.
At current levels, EXPE stock looks undervalued, with the potential to trade much higher. Analysts are bullish on the stock and believe that it will trade over $100 very soon. Regardless, this is one stock that is set to reward long-term investors, in my view.
On the date of publication, Vandita Jadeja did not have (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.