E-commerce giants are capitalizing on the internet's integral role in modern life, accelerated digitalization, and smart infrastructure expansion. As shopping trends shift with the rise of Gen Z consumers, demand for unique and personalized products is increasing, especially during the upcoming holidays.
Therefore, in this piece, I discuss why it is worth buying top e-commerce stocks before the holiday season, focusing on Amazon.com, Inc. (AMZN) and Alibaba Group Holding Limited (BABA).
This holiday season, e-commerce companies are driving sales through discounts, engaging holiday marketing emails, membership programs, personalized gifts, and improved SEO to meet changing consumer needs. Additionally, AI-powered tools for content generation and analytics are enhancing operational efficiency for over one million merchants, reducing costs in design and marketing.
As a result, U.S. e-commerce revenue is expected to grow by $657.80 billion, or 53.79%, from 2024 to 2029. Holiday retail sales are also projected to reach $960 billion in 2024, underscoring how e-commerce has empowered businesses to reach global customers, boost sales, and offer innovative products and services tailored to unique occasions and demands.
Furthermore, the Chinese e-commerce market is set to grow rapidly in 2024, with mobile shopping and digital payments playing key roles. Innovation and evolving consumer habits will drive success, as retailers adapt to advanced technologies. The market is projected to grow by 6.3% annually, reaching $3.10 trillion in 2024, with a steady CAGR of 5.55% through 2028.
Considering these conducive trends, let’s take a look at the fundamentals of the two above-mentioned e-commerce stocks.
Amazon.com, Inc. (AMZN)
AMZN engages in the retail sale of consumer products and subscriptions through online and physical stores in North America and internationally. It operates through three segments: North America, International, and Amazon Web Services (AWS). The company's products offered through its stores include merchandise and content purchased for resale; and products offered by third-party sellers.
On October 16, 2024, AMZN launched a new Kindle lineup featuring the first-ever color Kindle, a reimagined Kindle Scribe, the fastest Paperwhite, and a compact entry-level Kindle. The devices offer improved features like color displays, faster performance, and AI-powered note-taking.
On October 15, 2024, AMZN’s Amazon Web Services (AWS) and e& announced a strategic $1 billion-plus agreement to deliver cloud solutions, AI deployment, and digital transformation across the Middle East. This partnership aims to accelerate cloud adoption, support regulated industries, and provide regional businesses with advanced AI tools and infrastructure.
In terms of the trailing-12-month net income margin, AMZN’s 7.35% is 60.4% higher than the 4.58% industry average. Likewise, its 9.86% trailing-12-month Capex / Sales is 235.4% higher than the 2.94% industry average. Moreover, the stock’s 1.17x trailing-12-month asset turnover ratio is 17.5% higher than the 1x industry average.
AMZN’s total net sales during the fiscal second quarter that ended June 30, 2024, increased 10.1% year-over-year to $147.98 billion. The company’s operating income grew 91% from the year-ago value to $14.67 billion. In addition, the company’s net income and EPS came in at $13.49 billion and $1.26, up 99.8% and 93.8% over the prior-year quarter, respectively.
Street expects AMZN’s EPS and revenue for the quarter ended September 30, 2024, to increase 20.9% and 9.9% year-over-year to $1.14 and $157.24 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 47.4% to close the last trading session at $188.90.
AMZN’s POWR Ratings reflect its robust outlook. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
AMZN has a B grade for Momentum, Sentiment, and Quality. It is ranked #15 out of 53 stocks in the B-rated Internet industry. Beyond what we have stated above, we also have given AMZN grades for Growth, Value, and Stability. Get all the AMZN’s ratings here.
Alibaba Group Holding Limited (BABA)
Based in Hangzhou, People's Republic of China, BABA provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses engage with their users and customers internationally. The company operates through seven segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others.
On September 5, 2024, BABA announced a partnership with Mastercard and Cardless to launch the Alibaba.com Business Edge Credit Card, offering rewards like cashback and interest-free terms for small businesses' purchases. The card aims to support cross-border and domestic sourcing, with added benefits for U.S. businesses.
In terms of the trailing-12-month EBITDA margin, BABA’s 18.58% is 63.2% higher than the 11.39% industry average. Its 15.04% trailing-12-month levered FCF margin is 201.3% higher than the 4.99% industry average. Similarly, the stock’s 7.38% trailing-12-month Return on Total Assets is 61.1% higher than the 4.58% industry average.
For the first quarter that ended June 30, 2024, BABA’s revenue increased 3.9% year-over-year to RMB243.24 billion ($34.25 billion) and its income from operations was RMB35.99 billion ($5.07 billion) billion for the quarter.
BABA’s non-GAAP net income and EPS came in at RMB40.69 billion ($3.37 billion) and RMB2.05 for the quarter, respectively. Furthermore, the company’s adjusted EBITDA was RMB51.16 billion ($7.20 billion) for the quarter.
Analysts expect BABA’s revenue for the quarter ended September 30, 2024, to increase 8.8% year-over-year to $33.77 billion. Its EPS for the quarter ending December 31, 2024, is expected to rise 3.7% year-over-year to $2.74. Over the past nine months, the stock has gained 47.9% to close the last trading session at $100.55.
BABA’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #16 out of 41 stocks in the B-rated China industry. It has a B grade for Momentum and Quality. Click here to see BABA’s Growth, Value, Stability, and Sentiment ratings.
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AMZN shares rose $0.31 (+0.16%) in after-hours trading Monday. Year-to-date, AMZN has gained 24.44%, versus a 23.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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