Ecommerce store shoppers

Which Ecommerce Stock is a Better Buy?

According to ReportLinker, the global e-commerce market is poised to increase to reach $ 10.87 trillion by 2025, demonstrating a CAGR of 29% during the forecast period. Therefore, e-commerce companies are expected to capitalize on this growth.

That being said, today I’m going to analyze and compare two ecommerce stocks: Shopify Inc. (STORE) and MercadoLibre, Inc. (MELI). Founded in 2004, SHOP is an Ottawa-based e-commerce company that provides a cloud-based commerce platform for merchants, enabling them to operate their business through various sales channels.

Based in Buenos Aires, Argentina, MercadoLibre is an e-commerce company that provides its online e-commerce solutions to individuals and businesses primarily in Latin America. It owns and operates Mercado Libre, Mercado Pago, Mercado Shops and others.

Since the start of the year, shares of SHOP have risen 20%, while those of MELI have fallen 27%.

Recent developments

December 16, Evercore ISI upgraded Shopify’s rating from “In-Line” to “Outperform” with a target price of $ 1,770.00, which implies a rise of over 38% from Monday’s closing price. Analyst Mark Mahaney believes the stock is undervalued, given an EV / futures sales of 24x and an expected 2021-2023 revenue CAGR of 34%.

December 13, MercadoLibre announced the acquisition of a Chilean payment service provider known as Redelcom. This purchase is expected to strengthen the company’s Mercado Pago business unit. In addition, this acquisition aims to expand MercadoLibre’s presence in Chile, which presents significant growth opportunities.

Financial overview and analyst estimates

In the third quarter ended September 30, 2021, Total Shopify Revenue Grows 45.9% YoY to $ 1.12 Billion, however missing Wall Street’s expectations of $ 30 million. Its Merchant Solutions segment revenues, which accounted for 70% of total third quarter sales, grew 51% year-on-year to $ 787.5 million, while Subscription Solutions segment revenues grew 37% year-on-year. annually to reach $ 336.2 million.

The company’s net profit was $ 1.15 billion, mainly due to $ 1.34 billion of unrealized capital gains on its equity investments, compared to its net profit in Q3 2020 of $ 191.1 million. As a result, SHOP’s non-GAAP EPS was reported at $ 0.81, with analysts missing the estimate by $ 0.41.

Company EPS Expected to Decrease 16.52% YoY to $ 1.32 in the fourth quarter of 2021. However, analysts expect SHOP’s revenue to grow 37.85% year-on-year to $ 1.35 billion in the current quarter.

On November 4, MercadoLibre published the results of the third quarter 2021. In the third quarter, the company’s total net revenue increased 61.7% year-over-year to $ 1.86 billion. However, the company missed analysts’ revenue estimates of $ 30 million. Its gross margin increased 68% year-over-year to $ 806.6 million, with a margin of 43.4% compared to the 3Q2020 gross profit margin of 43.0%. Net income reached $ 95.2 million in the third quarter, leading to GAAP EPS of $ 1.92, well above analyst consensus of $ 1.29.

Total payment transactions amounted to $ 865.7 million, representing a 54.7% year-over-year increase.

Currently, Wall Street expects MercadoLibre earnings to improve in Q4 2021 to $ 1.03 a share from its year-ago figure of ($ 1.02). In addition, its revenue is expected to increase 53.94% to $ 2.04 billion in the fourth quarter.

Compare ratings

In terms of forward GAAP P / E, MELI is currently trading at 385.02x, which is significantly higher than 48.93x from the SHOP. Regarding Forward EV / EBITDA, SHOP’s 198.71x is 107% higher than MELI’s 96.01x.

However, their Forward P / E GAAP and EV / EBITDA multiples are trading well above the industry median threshold.

The bottom line

It is estimated that the global e-commerce industry will continue to strengthen its dominance even after the pandemic is over. While both SHOP and MELI are expected to benefit, I believe MELI is more attractive at current levels due to its superior financial position, relatively lower valuation, and higher forward growth rates.

SHOP stock was trading at $ 1,360.96 per share on Tuesday afternoon, up $ 78.79 (+ 6.15%). Year-to-date, SHOP has gained 20.23%, compared to 24.93% for the benchmark S&P 500 during the same period.

About the Author: Oleksandr Pylypenko

Oleksandr Pylypenko has more than 5 years of experience as a financial analyst and financial journalist. He previously worked on Seeking Alpha, Talks Market and Market Realist. Following…

More resources for actions in this article

Source link