The e-commerce industry has been one of the major beneficiaries of the pandemic-led changes in consumer behavior. With the second wave of the infections now requiring another round of lockdowns and continued strict social distancing norms in many countries, online shopping platforms are gaining traction. According to a report by Statista, e-commerce revenues are projected to grow to $6.54 trillion by 2022.
As increasing numbers of consumers get familiar with the online marketplace, the companies are ramping up their logistics and upgrading their platforms.
Investor bullishness toward the industry is evident in the performance of the Global X E-Commerce ETF (EBIZ), which has rallied 69.1% year-to-date.
As most of the well-known e-commerce stocks are trading at high valuations, investing in some lesser known e-commerce names, such as Farfetch Limited (FTCH), Jumia Technologies AG (JMIA) and Revolve Group, Inc. (RVLV), which possess strong fundamentals, we think could be rewarding.
Farfetch Limited (FTCH)
FTCH is a technology platform operating in the global fashion industry. It is a luxury goods marketplace that functions through three segments: Digital Platform, Brand Platform, and In-Store. It also provides web design, build, development, and retail distribution solutions for retailers and brands.
In November, FTCH announced a strategic partnership with Alibaba Group Holding Ltd (BABA) and Richemont. This was done to accelerate its digitization of the global luxury industry while expanding to the Chinese e-commerce markets.
FTCH non-GAAP revenues have increased 69.5% year-over-year to $386.78 million in the third quarter ended September 30, 2020. Its EBITDA margin increased 87.2% from the negative year-ago value, while its EPS rose 15% from the negative year-ago values over this period.
The consensus revenue estimate of $515.77 million for the current quarter ending December 31, 2020 represents a 34.9% rise year-over-year. The consensus EPS estimate for the next year, ending December 31, 2021 represents a 55.9% improvement from the year-ago value. FTCH has gained 570.9% over the past year.
How does WMT 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 cannot ask for better. It is currently ranked #11 of 61 stocks in the Internet Industry.
Jumia Technologies AG (JMIA)
JMIA is a Germany-based e-commerce platform operating primarily in Africa. It operates as an online marketplace for a wide range of products. It also provides logistics and payment services.
In November, JMIA announced that its logistics service could be used by third parties. Prior to this, the service was reserved exclusively for ecommerce and food vendors operating on its marketplace. This was a strategic move taken to expand its business operations.
In late November, JMIA entered an "at the market offering" sales agreement with Citigroup Global Markets Inc. (CITI) for approximately 8 million of its ads. The agreement should generate proceeds to help the company easily press on with its operational plans.
JMIA’s gross profit has increased 22.5% year-over-year to €23.25 million in the third quarter ended September 2020. Its EBITDA improved 50.1% from the negative year-ago value.
Analysts expect JMIA’s revenues to rise 27.2% to $218.99 million for the next year ending December 31, 2021. The company has an impressive earnings surprise history; it beat the Street EPS estimates in each of the trailing four quarters. The consensus EPS estimate for the next year represents a 13.2% improvement over the same period last year. The stock has gained 667.7% over the past year.
It is no surprise then that JMIA is rated a “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank.
Revolve Group, Inc. (RVLV)
RVLV operates as an online fashion retailer internationally through its two segments: REVOLVE and FORWARD. It primarily targets Millennial and Generation Z consumers. The Company’s offering includes apparels, footwear, accessories, and other products sourced from third-party brands.
To expand its customer base, RVLV in October launched upgraded service levels in Canada. This was done to elevate its customers’ experience in one of its largest international markets by providing hassle-free returns at no cost and free two-day express shipping.
RVLV/s non-GAAP EBITDA increased 66.4% year-over-year to $24.03 million in the third quarter ended September 30, 2020. Its Non-GAAP EPS rose 107.7% from the year-ago value to $0.27, while its free cash flow increased 86.3% to $13.88 million over the same period.
The consensus revenue estimate of $684.01 million for the next year ending December 31, 2021 indicates an 18.8% rise. The company has an impressive earnings surprise history; it beat the street EPS estimates in each of the trailing four quarters. The consensus EPS estimate for the current year ending December 31, 2020 represents a 26% rise. RVLV has gained 63.8% over the past year.
RVLV’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Peer Grade, and Buy & Hold Grade and “B” for Industry Rank. Among the 37 stocks in the Consumer Goods Industry, it is ranked #7.
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FTCH shares rose $0.16 (+0.25%) in after-hours trading Tuesday. Year-to-date, FTCH has gained 526.47%, versus a 15.74% 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.
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