We recently compiled a list of the 10 Best E-Commerce Stocks To Invest In. In this article, we are going to take a look at where eBay Inc. (NASDAQ:EBAY) stands against the other e-commerce stocks.
An Overview of the E-Commerce Industry
According to a report by Forbes, the e-commerce industry is expected to grow to a valuation of $7.9 trillion by 2027 from $6.3 trillion in 2024. In 2027, 23% of retail purchases are expected to be made online, up from 20.1% in 2024.
An increase in consumer confidence, after a period of sluggish growth, has been a key catalyst in improving the position of the e-commerce industry. On July 30, Reuters reported that the consumer confidence index, in the US, increased to 100.3 in July after it was revised down to 97.8 in June. Previously, experts predicted the index to fall to 99.7 after reaching 100.4 basis points. Chief Economist, Dana Peterson, suggested that while consumers remain resilient they are concerned over rising prices and interest rates. However, despite an uncertain macroeconomic environment, e-commerce companies are taking advantage of the current consumer sentiment by reducing prices. Companies like Target have also revised their profits for FY 2024 as lowered prices have drawn more customers.
To shed light on the state of online retail, US Mastercard Economics Institute Chief Economist, Michelle Meyer appeared in an interview on Yahoo Finance on August 16. Online retail sales went up by 8.2% in July, compared to a 2.9% growth rate in July 2023. She further explains that personal finances, time efficacy, and the overall state of the labor market impact which sites consumers choose to shop from. Meyer also added that in the past quarter, the average individual in the United States saw an appreciation in wealth, which has a positive bearing on consumer spending and therefore online retail.
What Does the Competitive E-Commerce Landscape look like?
The future of e-commerce is unpredictable. Bans on products from China, questions about cheap labor, criticism over fast fashion, and the increasing use of technology are different forces shaping the industry. In the first quarter of 2024, the US pushed to ban TikTok in the country, which mongered fear among Chinese e-commerce sites such as Shein and Temu. In April, law-making agencies in the US suggested a ban on Temu over labor rights infringement. Moreover, on August 21, Shein sued Temu over copyright infringements. The former suggested that Temu stole the company’s designs and trade secrets resulting in Temu losing money over every sale. Despite such, the founder of Temu, Colin Huang, stands as the wealthiest person in China with a net worth of $51.4 billion, as of August 22. You can also take a look at the best Chinese stocks to buy now.
On the other hand, e-commerce sites in the United States are trying to win against their competitors using advanced technology. Walmart, for instance, launched a generative AI search tool that customers can prompt and get a list of ideal products or items needed. For example, a customer who wants to throw a birthday party, but is unaware of the items needed, could use the search tool to save time. Similarly, Amazon launched Rufus, an AI shopping assistant, earlier this year. Rufus is capable of personally assisting a shopper and helping them find the right products. While we discuss technology, we cannot ignore eBay’s magical listing tool for sellers backed by artificial intelligence. The tool can analyze images, categories, and titles to curate product descriptions, prices, and shipping costs. You should also read our piece on the latest AI news and analyst ratings you should not miss.
As the e-commerce industry grows, it is crucial to know which companies are pioneering the race. You can also read our piece on the best advertising stocks to buy according to short sellers.
Our Methodology
To compile the list of the 10 best e-commerce stocks to invest in, we looked at holdings of e-commerce ETFs and screened for Internet Retail companies on the Finviz stock screener. We sorted our screen by market cap and looked at the 20 largest e-commerce companies. We picked stocks that were the most widely held by institutional investors, as of Q2 2024. The list is in ascending order of the number of hedge fund holders for each stock.
Note: All pricing data is as of August 22.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up view of a customers phone, using the mobile app to buy products.
eBay Inc. (NASDAQ:EBAY)
Number of Hedge Fund Holders: 38
eBay Inc. (NASDAQ:EBAY) ranks 10th on our list of the best e-commerce stocks to invest in. eBay Inc. (NASDAQ:EBAY) is a multinational e-commerce company headquartered in the United States. Customers on eBay can find a range of products such as electronics, cars, fashion products, clothing items, and collectibles.
eBay Inc. (NASDAQ:EBAY) sells in more than 200 countries preventing overseas shipping, customs, returns, and refunds. Customers are not required to pay an international selling fee on international shipping either. Currently, eBay has over 135 million active buyers and almost 19 million sellers, of which close to 7 million are based in the United States.
The use of technology and artificial intelligence has helped eBay retain its buyers. The company uses features such as magical listing, enhanced personalization, vertical browsing pages, and improved filtering to improve the shopping experience and reduce the time it takes to shop.
Overall, eBay Inc. (NASDAQ:EBAY) is focused on sustainable and consistent growth. In the second quarter of 2024, the company reported an increase in its gross merchandise value (GMV), by 1% year-over-year, to $18.4 billion. Revenue reached $2.57 billion, up by 2% year-over-year.
While macroeconomic headwinds have been a deterrent to the company, it is reportedly expected to log $18.2 billion in GMV and $2.56 billion in revenue, in Q3 2024, up by 1% and 3% year-over-year, respectively.
Analysts are bullish on EBAY and their 12-month high price target of $65 points to an 11% upside from current levels. 38 investors were bullish on EBAY at the end of Q2 2024, with total stakes amounting to $924.63 million. As of June 30, Harris Associates was the largest shareholder with a position worth $250.72 million.
EBAY is attractive at current levels. The stock is trading 11.8 times its forward earnings, a discount of 23% from its sector P/E. Analysts expect earnings to expand by 14% this year.
Overall EBAY ranks 10th on our list of the best e-commerce stocks to buy. While we acknowledge the potential of EBAY as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EBAY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
