Five eCommerce Stocks to Buy Now

eCommerce is almost 40 years old, however surprising that might sound. In 1979, English inventor Michael Aldrich came up with the idea of connecting a television set to a transaction processing computer with a telephone line. However, business-to-consumer online shopping didn’t take off until 1991, when World Wide Web became open to public. Over the following two decades, thousands of companies emerged in the eCommerce space, most notable of which were Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY). In 2005, Amazon.com, Inc. (NASDAQ:AMZN) took the eCommerce space a step further by launching Prime, a service that would allow people to get two-day free shipping for an annual payment of $79. The launch of Prime revolutionized online shopping by incentivizing consumers to buy everyday stuff like shampoo or detergent.

So, even though eCommerce as we know it is around two decades old and the times when it was viewed as a disruptor to retail are over, the industry’s growth days are far from over. In fact, even though online shopping is viewed by many as the main reason for the record number of closings among brick-and-mortar stores and the bankruptcy of many once-top retail brands like Toys R Us, Rue 21, or RadioShack, eCommerce still represents a small portion of the total retail sales.

In the US, eCommerce sales represented just 9.1% of total retail sales in the fourth quarter of 2017, according to the US Census Bureau. Overall, total e-Commerce sales in the US for 2017 were estimated at $453.5 billion, up by 16% on the year, and accounted for 8% of total sales. Worldwide, eCommerce sales amounted to around $1.50 trillion last year and are expected to grow to $1.71 trillion in 2018 and to reach $2.13 trillion by 2010, as it is aided by emerging technology like blockchain or Internet of Things. Moreover, even with this growth rate, eCommerce will still represent less than 10% of the global retail sales in the foreseeable future.

So, it seems like eCommerce is a good industry to invest in, given its strong outlook. However, the optimism regarding the industry is widespread, which is why many stocks seem overvalued. One way to approach the research is to see which eCommerce stocks smart money is buying. At Insider Monkey, we follow over 600 hedge funds and other institutional investors, because our research has shown that their consensus picks can help retail investors outperform the market. Our own strategy that focuses on stocks that 100 best-performing hedge funds are collectively bullish on has returned 74.4% since May 2014 and outperformed the S&P 500 ETF (SPY) by more than 20 percentage points. You can access the latest picks from our strategy by accessing our newsletters free of charge for 14 days.

When it comes to eCommerce stocks, we see that several stocks have seen a continuous decline in popularity among hedge funds in the last couple of years. For example, eBay Inc (NASDAQ:EBAY) though it still ranks among hedge funds’ top eCommerce picks, has seen the number of bullish investors decline to 48 at the end of 2017 from 72 at the end of 2015. On the other hand, other eCommerce stocks saw an inflow of hedge fund capital in the last two years. On the next page, we will discuss the top eCommerce stocks among hedge funds in our database, focusing on those that saw an increase in popularity at least during 2017.

Let’s start with Amazon.com, Inc. (NASDAQ:AMZN), which has been the most popular eCommerce stock among hedge funds tracked by us in the last two years and one of the favorite tech stocks among billionaire investors. At the end of 2017, there were 136 funds long Amazon.com, Inc. (NASDAQ:AMZN), down by three over the quarter, but up from 123 funds that held shares a year earlier. Amazon.com, Inc. (NASDAQ:AMZN)’s stock surged by over 50% in 2017, as the eCommerce behemoth saw its sales grow by 31% to $177.9 billion. The company is seeing strong subscription growth for Prime, with more people having joined Prime in 2017 than any previous year. Amazon.com, Inc. (NASDAQ:AMZN) has been expanding geographically. It recently has entered Australia and last year it launched Prime in Singapore and has been expanding its presence in other markets, such as India and Brazil. In addition, the company’s cloud division, Amazon Web Services, is showing robust growth with expanding infrastructure and new services. With growth on all fronts and leading R&D spending, it’s not surprising that Amazon.com, Inc. (NASDAQ:AMZN) is a popular pick among hedge funds. Many analysts believe that Amazon.com, Inc. (NASDAQ:AMZN) is on path to hit a market cap of $1.0 trillion within the next 12 months.

Even though the number of funds long Alibaba Group Holding Ltd (NYSE:BABA) declined by 18 during the fourth quarter, it surged by 29 to 115 funds during 2017. Moreover, at the end of 2015, there were just 77 funds in our database long Alibaba Group Holding Ltd (NYSE:BABA). The company’s stock almost doubled last year amid the company maintaining its revenue growth trajectory. In each of the last five reported quarters, Alibaba Group Holding Ltd (NYSE:BABA)’s revenue surged by over 50% on the year and topped the consensus estimates, while EPS was better-than-expected in three of these five quarters. Moreover, Alibaba Group Holding Ltd (NYSE:BABA) has been diversifying its business by expanding its presence in the brick-and-mortar space and investing into new tech startups.

In Booking Holdings Inc (NASDAQ:BKNG), the number of funds from our database with long positions inched down by four over the quarter, but appreciated by three funds to 79 during 2017. Booking Holdings Inc (NASDAQ:BKNG) is the company that had been known as Priceline Group until February 21, when it changed its name in order to show the shift of focus to its hotel and home rental unit. As one of the largest online travel companies, Booking Holdings Inc (NASDAQ:BKNG) is showing robust growth. In 2017, aside from registering better-than-expected profits and revenue, the company also showed a 19% growth in gross travel bookings to $81.2 billion. In 2018, the company expects gross travel bookings growth between 14.5% to 18.5% and revenue growth is expected between 17.5% to 21.5%, compared to last year’s revenue appreciation of 18% to $12.68 billion.

Next in line is  Mercadolibre Inc (NASDAQ:MELI), which operates a number of sites, including mercadolibre.com, the most popular eCommerce site in Latin America. There were 30 funds long Mercadolibre Inc (NASDAQ:MELI) at the end of 2017, compared to 28 funds a quarter earlier and 25 funds at the end of 2016. Moreover, since the end of 2015, the number of investors bullish on Mercadolibre Inc (NASDAQ:MELI) doubled. The company has a lot of growth potential, given that the Latin American eCommerce market has more room to grow, but the company is also facing stiffer competition from Amazon.com, Inc. (NASDAQ:AMZN), which is reportedly looking at leasing a big warehouse in Brazil. In addition, Mercadolibre Inc (NASDAQ:MELI) has been facing some issues with the Brazilian post office regarding shipping rates. In March, the Federal Justice court issued an injuction preventing shipping rate increases, but the decision could be appealed by the post office. The cost of shipping for Mercadolibre Inc (NASDAQ:MELI) is an important issue for the company as it focuses on growth through market and promotions like free shipping.

Last but not least, Etsy Inc (NASDAQ:ETSY) saw 29 funds tracked by Insider Monkey holding shares of the company heading into 2018, unchanged over the quarter, but up by seven funds on the year. Two years earlier, there were just 13 funds holding shares of Etsy Inc (NASDAQ:ETSY). Since the beginning of the year, Etsy Inc (NASDAQ:ETSY)’s stock has surged by almost 45% amid the company reporting a strong fourth quarter. Etsy Inc (NASDAQ:ETSY) posted EPS of $0.15, which topped the estimates by $0.07, while revenue of $136.27 million increased by 24% on the year and was $3.72 million better than expected. The company also disclosed a solid outlook for the 2018, which includes revenue growth between 21% and 23%.

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