It’s no secret that e-commerce spending has skyrocketed over the past decade. In fact, according to data from the US Census Bureau, total e-commerce sales in the US have more than quadrupled in the past 10 years, and are expected to top $1 trillion this year.
Although this transition to online sales is already well underway, there is still a lot of growth to come. As cross-border sales become more ubiquitous, around a quarter of global sales are expected to occur online by 2025, up from 17.8% in 2019. With that trend in mind, here are two e-commerce stocks to watch. for the decade to come.
When investors hear the name Wix.com (WIX 1.39% ), e-commerce is probably not the first thing that comes to mind. Since its inception, Wix has been best known for its no-code drag-and-drop platform that allows anyone to quickly and easily create a website. But today, the company offers much more.
Over the past few years, Wix has expanded its tools available to users and developed the features needed to run an online business. Now, instead of just helping users set up their website, Wix can also serve as a digital operating system for entrepreneurs and businesses. Its full suite of features includes everything from planning to shipping, payments or calculating taxes, and much more.
This wide array of tools, combined with Wix’s easily customizable web design platform, has not only attracted six million premium subscriptions, but also processed approximately $10 billion in payment volume. gross in 2021, an increase of 78% compared to the previous year.
Additionally, Wix also announced a partnership with Amazon which will make it easy for merchants to tap into the e-commerce giant’s unparalleled execution capabilities. By leveraging Amazon’s more than 200 fulfillment centers located around the world, Wix can help its merchants deliver their products faster while saving billions on the investment needed to develop its own logistics network.
This relentless drive to meet user needs has allowed the company to quickly gobble up market share among content management systems (CMS) in recent years. In fact, since 2017, the percentage of websites using Wix as a CMS has increased from 0.6% to 3.3%, all signs that this trend will continue.
With Wix currently reinvesting the majority of its excess cash into marketing efforts and expanding its business solutions, it’s difficult to assess the company based on current earnings or cash flow metrics. Instead, it may help to look at Wix’s current price-to-sales ratio, which stands at just 4.6, roughly the lowest in six years. For investors looking to capitalize on the continued growth of e-commerce, Wix is an easy way to do so without paying a steep premium.
coupang ( CPNG 0.28% ) is the largest e-commerce marketplace in South Korea. Similar to Amazon, Coupang offers delivery of a wide selection of items ranging from basic consumer goods like electronics to fresh food or groceries. And thanks to several favorable demographic trends, Coupang is able to elevate customer comfort to new heights.
Besides having the highest smartphone penetration rate of any country in the world, South Korea’s population is also quite dense. In fact, despite being only 1% the size of the United States geographically, South Korea is home to approximately 52 million people, or 16% the size of the US population. As a result, about 70% of the population lives within seven miles of a logistics hub in Coupang.
With this high population density, Coupang is able to deliver almost all of its orders within a day or less. And with its Dawn Delivery service, customers can actually order certain items before midnight and have them delivered by 7 a.m. the next morning.
This customer-centric focus has not only helped the company build an active customer base of approximately 18 million people, but it has also driven existing customers to spend more. In fact, according to the company’s latest investor presentation, Coupang’s 2017 cohort of customers spent 4.5 times more in 2021 than they did in the first year. This increased spending helped Coupang reach $18.4 billion in revenue for 2021, up 54%.
Although Coupang is growing rapidly, the company spent $674 million in capital expenditures last year to further expand its distribution network. These increased investments hurt Coupang’s cash flow and left the company with negative free cash flow for the year.
However, even with current losses in mind, Coupang has demonstrated its ability to generate cash in the past, and management continues to reiterate its belief that the business can achieve long-term Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin of more than 7%.
Assuming these estimates are correct, Coupang’s current price-to-sales ratio of just 1.4 is an attractive price to pay given the considerable opportunities and Coupang’s unique business model.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.