My 2 Favorite E-Commerce Stocks for 2022

Plenty of tech and e-commerce investors are looking forward to putting 2021 in the rearview mirror after stocks in these categories crashed year to date. High-quality companies like Sea Limited (NYSE:SE) or Shopify (NYSE:SHOP) are currently down substantially off their all-time highs,and both Global-E (NASDAQ:GLBE) and Coupang (NYSE:CPNG) are no exception to this trend. 

Both are down over 25% off their all-time highs as of this writing, but I think that these dips are appealing buying opportunities. With both businesses performing well operationally in 2021, these two stocks look to continue their operational success with some growth potential. These avenues could play out in 2022, which could result in strong stock performances next year and beyond, which is why I like these stocks today.

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1. Global-E: A cross-border beast

Anyone who has bought something on Shopify from an overseas company has experienced Global-E without even knowing it. Global-E is a cross-border e-commerce enabler that makes it easier for merchants to grow their international brands. The company helps merchants boost their international presence by localizing price and language for the consumer while helping merchants navigate the complex world of refunding, taxes, and regulatory processes. 

Global-E is not just talking the talk — it is walking the walk with operations in over 170 markets. It can also support over 150 payment methods across the world in 100 currencies, and it supports messaging in 25 languages. 

Over 520 merchants have decided to use Global-E to help them navigate the international e-commerce world, including Shopify. Shopify has partnered with Global-E to bring its services to Shopify merchants, a very large customer pool for Global-E. Additionally, Shopify has rolled out new products to enable international commerce for its merchants, and Global-E is at the forefront. 

This has led to impressive growth for the company. It grew its revenue 77% year over year to $59 million in the third quarter, and the company’s net retention rate has consistently been over 140% since 2018. While the company is showing strong growth, it is not profitable. In Q3, the company spent $35 million on marketing its product, representing 69% of its total operating expenses, and resulting in a net loss of $28.5 million. The company did generate $5 million in free cash flow in Q3, but that doesn’t offset its losses.

Its unprofitability is a risk, but the company’s product is quite sticky. It is expensive to attract customers, but as the international e-commerce market grows to be worth $736 billion by 2023, Global-E’s services will become a necessary product for companies looking to sell internationally. Also, once companies offload the issues of global commerce to Global-E, it is highly unlikely they will want to revert to dealing with them independently, which is why Global-E’s churn rate is consistently around 2%. As the company continues expanding into markets through partnerships, it could work to lower the operational expenses to finally capitalize off of its strong revenue growth and retention in the form of net profits.

The company is trading at a nosebleed valuation of nearly 60 times sales. However, this company has a very sticky product in a market that will become a cornerstone of the international economy. With its partnership with Shopify, I think that Global-E could see amazing success, which is why I believe this company is worth paying up for.

2. Coupang: An underrated Asian e-commerce player

While many of us might think that Amazon‘s (NASDAQ:AMZN) two-day shipping is the highest-quality e-commerce service in the world, we would be wrong. Coupang’s customer service puts Amazon to shame with its one-day delivery — which almost 100% of its customers receive for free. It also has same-day delivery, and Dawn Delivery, where consumers who place an order before midnight will have their package on their doorstep by dawn the next morning. The South Korean e-commerce company can do this because of the country’s density and its penetration in the country: 70% of the Korean population lives within seven miles of a Coupang logistics center.

In Q3, Coupang’s active customers grew 20% for the 15th consecutive quarter, showing that despite its broad hold on the Korean e-commerce market, its importance is still increasing. This has resulted in continued revenue growth of 48% year over year in Q3 to $4.6 billion. The company has plans to expand this dominance even further. It has expanded into Japan and Taiwan already in 2021, and there have been rumors about expansion into Singapore.

The main lowlight of Coupang is its unprofitability. The company grew its net loss 87% year over year compared to 48% top-line growth year over year in Q3. Additionally, the company’s free cash flow is negative for the year, losing over $713 million. Although the company’s net loss makes up just 7% of revenue, a widening loss and negative free cash flow are never a good sign.

At just 2.5 times sales, this $52 billion company is trading at a smaller multiple than Amazon — one of the biggest companies in the world. This is especially low when compared to other fast-growing international e-commerce companies like Sea Limited, which trades at 14 times sales. With customer service that seems unreplicable and bright international futures, I think this undervalued company could turn around its unprofitability and be a massive winner in 2022 and beyond.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.