Comparing 6 E-commerce Stocks Reporting Earnings this Week

Internet – Commerce: A Leading Industry Group

Though the U.S. stock market is entering a holiday-shortened week, investors are awaiting a spat of earnings from one of the strongest groups in the market – the Internet–Commerce group. Because the Internet–Commerce industry is ranked in the top 21% (ranked #52 out of 251) of industries tracked by Zacks, we expect it to outperform the major indices over the next 3 to 6 months.


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While the internet commerce industry was battered in 2022, it has outperformed the broader market from both a technical and fundamental perspective recently. That said, the industry is diverse and wide-ranging. For example, there is a plethora of domestic and international players, penny stocks and pricy stocks, and profitable and unprofitable companies.

Leaders vs. Laggards

Since the many businesses and stocks vary so much, we will use today’s article to differentiate the leaders from the laggards and cover some key stocks in the group reporting earnings this week.

Leader

Zacks Rank #1 (Strong Buy) stock MercadoLibre Inc MELI is often dubbed the “Amazon of South America” and is the largest e-commerce platform in Latin America. The fast-growing company is based in Argentina but derives the largest portion of its revenue from the Brazilian market. While Amazon AMZN has a footprint in Latin America, MercadoLibre outpaces the e-commerce giant in the area and is the dominant player. Since becoming a public company in 2007, shares have been up more than 4,000%. Over the past ten years, the stock is up some 1,220.60% versus just 229.60% for the S&P 500 Index.

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Fundamental View: Looking back at MercadoLibre’s fundamental history, it is easy to understand why the stock has been such a serial outperformer. Over the past two quarters, EPS grew 33% and 77% on revenues of 45$ and 52%. Meanwhile, since 2017, its sales have been on a near-perfect growth trajectory. In 2017, sales were under $2 billion. For 2023 sales are expected to be $12 billion. From a bottom-line perspective, the company has been profitable since 2021, and in 2023, EPS is expected to nearly double.

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Analysts are betting that the future is just as bright as the past. Over the past 90 days, Zacks Consensus Estimates have increased twice for MELI’s 2023 EPS estimates.

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Technicals: From a technical standpoint, MercadoLibre is beginning to turn the corner. Below, you can see that the 50-day moving average (green line) has crossed above the 200-day MA (red line), triggering a bullish “golden cross”. Shares are also pulling back in a constructive bull flag manner.

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With earnings due Thursday, investors looking to minimize binary risk can wait for a post-earnings (earnings are due 2/23) break-out from the bull flag formation or look to scoop up shares on any weakness near the 50-day moving average and psychologically important $1,000 level. MercadoLibre may also stand to benefit from a resurgence in the Argentine stock market. Year-to-date, the Global MSCI Argentina ETF ARGT, the most liquid domestically traded ETF tracking Argentina, is up a strong 29.50% and is constructively digesting gains.

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Laggard

Zacks Rank #3 (Hold) stock ContextLogic WISH is a global e-commerce company providing online retail services and merchants the ability to sell merchandise via wish.com. Since going public in 2021, the stock is down 95.60%. ContextLogic could not be on a more opposite trajectory than Mercadolibre.

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Fundamental View: ContextLogic has yet to turn an annual profit. What’s worse is that the company is not only unprofitable, but also highly inefficient. For each dollar of capital invested WISH loses approximately $0.23 (in 2021, the # was as high as $0.80!).

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Though the fundamentals are somewhat improving, the fundamental picture remains ugly, and the company is in trouble if it cannot turn things around quickly.

Technical View: Unlike MELI, which trades North of $1,000 per share, WISH shares trade at just $0.75. WISH shares remain entrenched in an ugly downtrend below their 200-day moving average and should be avoided into Thursday’s earnings release. While amateur investors may gravitate toward penny stocks with the idea they will get more shares, institutional investors tend to gravitate toward higher-priced stocks while avoiding lower-priced stocks – mirroring the old adage, “you get what you pay for.”

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Leader

Zacks Rank #2 (Buy) Wayfair W is a leading seller of home goods products via Wayfair.com. Wayfair’s niche is that it offers quality home furnishings at a reasonable price and fast shipping.

Fundamental View: Often, a company’s fundamentals and the stock’s price action can be disconnected. With Wayfair, this is not the case. Dating back to 2019, the stock’s price action has corresponded directly to the share price. From 2018-2020, EPS fell, and so did shares. From 2020 to 2021, EPS shot higher and so did W shares. Now, Zacks Consensus Estimates suggest that the company will turn around earnings in 2023-2024, so we expect shares to rise in tandem with EPS if those estimates end up coming to fruition.

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Beyond the numbers, Wayfair is taking its winning domestic blueprint and beginning to expand its business internationally. Wayfair also sees some of the most robust customer engagement in the industry – customers visit Wayfair.com more than ten times on average during each purchase cycle.

Technical View: Early in 2023, Wayfair retook its 200-day moving average for the first time in more than a year. The stock is retesting the 200-day moving averageahead of its earnings release on Thursday. Looking back at the stock’s history, it tends to trend for long periods in each direction once the key moving average is breached.

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Laggard

Zacks Rank #4 (Sell) stock Overstock.com OSTK is an e-commerce competitor of Wayfair. While the COVID-19 pandemic benefitted companies like Overstock, the company is a second-tier player in a highly competitive industry that includes Wayfair, Amazon, Target TGT, Walmart WMT, and others.

Fundamental View: Overstock’s last earnings report resulted in an earnings beat if 8.33% above Zacks Consensus Estimates. However, top-line numbers lagged the consensus by 6.30% and EPS declined 75% year-over-year. The stock also has a negative Expected Surprise Prediction (ESP), meaning a negative surprise is the most likely scenario when earnings are released Wednesday.

Technical View: Overstock is lagging behind Wayfair and is below its 200-day moving average. For now, the stock is an avoid.

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Leader

Zacks Rank #2 (Buy) stock Alibaba BABA is the largest e-commerce company based in China. After a brutal bear market, Alibaba and other Chinese-related internet stocks such as Pinduoduo PDD, New Oriental Education (EDU), and Vipshop Holdings VIPS are benefitting from the removal of strict COVID-19 measures, a solid Chinese equity market, and a strong stimulus push from the People’s Bank of China (PBOC).

Fundamental View: BABA has positive macro factors at its back and is flashing its lowest (most attractive) price-to-sales ratio since its inception.

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Furthermore, in 2023 Zacks Consensus Estimates suggest that earnings will pick back up. With such a low valuation and growth on the horizon, the stock may attract investors who prefer a GARP (growth at a reasonable price) strategy.

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Technical View: Since bottoming in March of 2022, BABA shares have been stair-stepping higher and making higher highs and higher lows. With the fundamental tailwinds mentioned above, investors should view the current pullback as a gift that should lead to higher prices over the next 6-12 months. BABA will report earnings Thursday. After a multi-week pullback to the psychologically important $100 level, the stock may also find support.

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Laggard

While it may be unfair to categorize Zacks Rank #2 (Buy) stock JD.com JD as a laggard, it stacks up slightly behind its biggest competitor, Alibaba.

Fundamental View: From a fundamental lens, JD is near neck and neck with BABA. Last quarter JD saw earnings grow by a robust 80%. Like Alibaba, its P/S ratio is hitting multi-year lows and the recent Consensus Estimate Trend is favorable.

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Technical View: JD finishes behind BABA from a technical perspective. BABA is drastically outperforming JD.com over the past 3 months (+29.90% to JD’s +1.0%)

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To make matters worse, JD is stuck below its 200-day moving average while BABA has regained it. Overall, the companies are very evenly matched. However, the price action may be suggesting something is going on beneath the surface. While JD is strengthening from a fundamental perspective, BABA is the better choice currently. Investors will get a clearer view of JD.com’s earnings when the company reports earnings in March.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

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Walmart Inc. (WMT) : Free Stock Analysis Report

Overstock.com, Inc. (OSTK) : Free Stock Analysis Report

Vipshop Holdings Limited (VIPS) : Free Stock Analysis Report

MercadoLibre, Inc. (MELI) : Free Stock Analysis Report

JD.com, Inc. (JD) : Free Stock Analysis Report

Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report

Wayfair Inc. (W) : Free Stock Analysis Report

Global X MSCI Argentina ETF (ARGT): ETF Research Reports

ContextLogic Inc. (WISH) : Free Stock Analysis Report

PDD Holdings Inc. (PDD) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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