Moving The E-Markets: Today's Top Trading Ideas In E-Commerce

by: Abe Garver


At the end of August, the median e-commerce stock in our Index trades for 16.6x TTM cash flow.

Standing 987%, 543% and 101% above that level are Zulily, FragranceNet and Groupon.

Based on my experience as an M&A advisor in the sector, I'm not convinced that these premiums to market are justified or sustainable.

At the other extreme, eBay, Vistaprint and PetMed Express appear to be undervalued based on the fundamentals.

Creating a portfolio of these three long (eBay (NASDAQ:EBAY), Vistapoint (VPRT) and PetMed Express (NASDAQ:PETS)) and three short (Zulily (NASDAQ:ZU), FragranceNet (OTC:FGNT) and Groupon (NASDAQ:GRPN)) ideas may generate excess return over a six-month holding period.

Upcoming Wayfair IPO

Although not a member of the "Moving the e-Markets" Index (since it is still private), it is noteworthy to report that Wayfair filed its Form S-1 on August 15 and stated its intention to raise a maximum of $350 million via IPO.

In the filing, Wayfair said its revenue for the first 6 months of 2014 was $574.1 million, and that it generated a net loss of $51.4 million and adjusted EBTIDA of -$37.0 million.

On the same day, Forbes' staff writer Abram Brown reported that, "The past funding rounds put a $2 billion figure on the company (for 2.2 times sales)... and it seems reasonable to assume Wayfair will become a public company somewhere in that region of 2.2 times sales."

I have an opinion as to the reasonableness of using a multiple of revenue to value a traditional drop-ship e-commerce company which doesn't make money, but will keep that to myself until there is an opportunity to share something that is actionable.

If you're interested in this subject, please follow me on Twitter @AbeGarver.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.