3 Top E-commerce Companies For 2016

Includes: BABA, GRPN, MELI
by: Zacks Investment Research

As we get older in life, we need to realize that the way we think is often changed by the younger generation, and dictated by advances in technology. The days of getting ready, driving the car to the mall, or walking miles through the city to compare prices and do normal shopping has begun to change drastically. Now sitting in your PJ's sipping a cup of coffee, and scrolling through the internet is the way people look for new items, and compare prices. And it is not just looking at your local store's web page on your personal computer, you can now access stores from any point in the world with your phone, or other wireless device.

The trend is e-commerce, and it is having a huge impact on shopping habits, and the way we live our day-to-day lives. Statistically, retail e-commerce sales worldwide reached $1.67 trillion U.S. dollars in 2015, and B2C (business to customer) e-commerce sales worldwide reached $1.7 trillion U.S. dollars in 2015. That is an increase of +24.5% for retail, and +15.6% B2C from 2014 to 2015. Further, it is expected that in 2016, retail will jump to $2.46 trillion, and B2C will vault up to $1.9 trillion.

The newest trend, mobile commerce, is now accounting for 30% of all U.S. e-commerce, according to internetretailer.com. Their data shows that in 2015 U.S. mobile commerce sales added up to about $104 billion, which was up 38.7% from the 2014 numbers. This is a huge shift in shopping patterns, and is being driven by the younger generation.

This generation drive is showing up in the subsector of U.S. apparel and accessories in retail e-commerce revenues which has seen significant growth over the past few years. According to statista.com, retail e-commerce revenues from apparel and accessories are expected, by 2018, to reach $86 billion in the U.S after producing $44.9 billion in 2013, and $60 billion in 2015. Further, according to eMarketer, in 2016 they estimate that 37.5 million people in the U.S. (19% of smartphone users), will transact with their phones at the point of sale, which would be an overall increase of 61% from the previous year.

With these stunning shifts in shopping habits, it would be wise to look at some of the top e-commerce companies today.

Top E-commerce Companies for 2016

Alibaba Group (NYSE:BABA), which currently carries a Zacks Rank of #1 (Strong Buy), operates online and mobile marketplaces in retail and wholesale trade, as well as cloud computing and other services. They provide technology and services to enable consumers, merchants, and other participants to conduct commerce in its ecosystem.

The company just reported their December 2015 quarterly results where they reached a landmark goal by having over 400 million annual active buyers, and maintained their lead position in the mobile segment. Also, the company posted annual revenue growth of +32%. The company witnessed China retail increase +21% from the previous quarter to 407 million active buyers, and mobile MAUs (monthly active users) jumped up +13.5% to 393 million from the previous quarter.

As you can see from the graph below, estimates for BABA have been improving over the past two years.

Groupon Inc. (NASDAQ:GRPN), which carries a Zacks Rank #2 (Buy), operates a shopping website which offers goods and services at a discount in North America and internationally. They offer deals in health and beauty, retail, services, activities, events, and food and drink.

In their most recent earnings announcement, Groupon posted gross billings of $1.47 billion with revenues of $713.6 million. Further, the company posted gross profits of $328.9 million, and had $963.6 million in cash and cash equivalents.

The company is expected to announce Q4 earnings on February 11. Over the past four quarters, Groupon has posted an average positive earnings surprise of +75%.

As you can see from the graph below, Groupon has a solid track record of posting positive earnings surprises over the past few years.

MercadoLibre Inc. (NASDAQ:MELI), which carries a Zacks Rank #1 (Strong Buy), is the largest online trading platform in Latin America. The company is market leader in e-commerce in each of Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay and Venezuela, based on unique visitors and page views. With a market of over five-fifty million people and a region with one of the world's fastest-growing Internet penetration rates, they provide buyers and sellers a robust online trading environment that fosters the development of a large and growing e-commerce community.

In their most recent earnings announcement, MercadoLibre saw total items sold increase 26.2% YoY, and saw gross merchandise volume (GMV) of $1.8 billion, up 9.5% from the previous year. Also, MercadoPago's total payment transactions grew to 22 million which was up 75.2% YoY. Finally, total payment volume was $1.38 billion with a staggering 42% YoY growth.

The company is expected to post Q4 earnings on February 24.

As you can see from the graph below, MELI has produced a nice price bounce each quarter they beat the Zacks Consensus Earnings Estimate.

Bottom Line

The e-commerce trend continues to gain steam as the younger generation has been quickly adapting to the advancing technology, while the older generations are shifting their shopping patterns to the online world. Further, the improvements in the mobile device segment has created another avenue for shoppers to access the online marketplace.

These shifting trends are starting to show up in the top lines of many e-commerce companies as seen in their most recent earnings reports. Yet, it is the potential for further growth in the e-commerce segment that has investors excited about the future of the group.

Original Post