The e-commerce industry has been a hot starting point for investors looking for explosive growth in recent years, and no company in the sector has been a bigger winner than ShopifyThe company has also generated incredible returns for its shareholders, with its share increasing by around 4,000% over the past five years.
As impressive as Shopify’s performance is, investors should be aware that the global ecommerce market is still young in the grand scheme of things and the growth is far from being exploited. With that in mind, this panel of Motley Fool contributors identified three actions with promising prospects in the area of e-commerce. Read on to see if they think these companies have what it takes to be the next Shopify.
Baozun: the Shopify of China
Keith Noonan (Baozun): Chinese e-commerce company Baozun (NASDAQ: BZUN) is sometimes referred to as “the Shopify of China”. Both companies provide online retail website building tools and maintenance services, but there are major differences between the two despite frequent comparison.
Although Baozun has a platform that caters to the needs of small and medium-sized businesses, the overwhelming majority of its revenue and profit comes from servicing big brands. Baozun mainly helps large western companies to launch and expand their e-commerce business in the Chinese market with additional warehousing, order fulfillment and customer management services. However, the long-term potential of expanding its services for small domestic businesses is part of the appeal of Baozun stock.
After being the only major economy to increase its GDP in 2020, the Chinese economy is expected to grow 8.1% this year, according to the IMF. The country is on track for tremendous economic growth over the next decade and beyond, and increased purchasing power per capita and an explosion in small business creation could prove to be d huge favorable winds for Baozun. If the company is able to continue to grow with Western brands and take advantage of an explosion of new business start-ups in China, it could perhaps match Shopify’s incredible returns.
However, while the Chinese market presents a huge avenue for long-term growth, there are some unique risk factors that those who invest in Chinese stocks need to consider. Many companies based in the country, including Baozun, do not meet the reporting standards of the Securities and Exchange Commission despite being listed on the US stock exchanges. Regulators and lawmakers have taken steps to delist some Chinese stocks, and lingering political tensions between the two economic powers mean additional uncertainty for investors.
Baozun looks attractively valued, trading at around 27 times expected earnings this year, but it’s a high-risk, high-reward game.
Paysafe has enormous potential
Joe tenebruso (Paysafe): An often overlooked aspect of Shopify’s success is its payment processing platform, which helps its merchant customers accept credit cards and other payment methods quickly and easily. Similar momentum could help another fast growing payment platform – Paysafe (NYSE: PSFE) – Offer investors above-market returns.
Paysafe went public last week after its $ 9 billion merger with a special purpose acquisition company (SPAC) Foley Trasimene Acquisition Corp. II. Paysafe provides payment processing, digital wallet and online payment solutions. Main clients include the leader in sports betting DraftKings and Amazonthe Twitch game streaming platform.
Paysafe is uniquely positioned to benefit from the growing iGaming market, which is expected to exceed $ 127 billion by 2027, up from less than $ 60 billion in 2020, according to Grand View Research. Almost three in four online betting companies use Paysafe for their payment processing needs.
The merger with Foley Trasimene will allow Paysafe to repay its debt and strengthen its cash reserves. The combined company is also looking for acquisitions in the iGaming space that could help accelerate its growth in this booming market.
With Paysafe, investors have the opportunity to acquire a leader in a rapidly expanding industry that is still early in its growth cycle, which as Shopify has shown can be very lucrative.
Coupang is dedicated to long-term success
Jamal Carnette (Coupang): The South Korean e-commerce company has only been publicly traded for a month, but Coupang (NYSE: CPNG) has a growth track of several decades. In fact, the “Jeff Bezos of South Korea” surpassed Amazon.com in its home country and is well located to take advantage of the unique advantages that make South Korea an ideal market for e-commerce growth.
The first advantage of South Korea is population density: almost 20% of the country lives in the capital of Seoul, and the population density is five times higher than in the United States This is important because it facilitates the creation of a company. a strong distribution and logistics network. Coupang notes that nearly 70% of all Koreans live within seven miles of one of its logistics centers, which is why Coupang’s Rocket Service can deliver 99% of its products in one day.
South Korea also has a higher internet penetration rate than the United States (96% vs. 90%), a well-educated population, and the 12th largest economy as measured by GDP. Unsurprisingly, South Korea is expected to be the world’s third largest e-commerce market this year, behind only the United States and China.
Coupang is capitalizing on this growth by recently snatching the title of South Korea’s largest e-commerce company. Upon registering S-1 IPO, the company posted 91% full-year sales growth. Despite the strong growth, the company is trading at 6.8 times its sales, which is significantly lower than developing e-commerce stocks such as Jumia Technologies, Free market, and Sea Limited this trade at 21.9, 17.6 and 23.4 times, respectively.
Growth stocks may currently be out of favor, but savvy investors should take this opportunity to grab Coupang before Wall Street catches up with it.
This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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