Which E-commerce Stock Does Wall Street Currently Favor?

Stock Market

The Covid-19 pandemic accelerated the growth of several e-commerce players as consumers moved to online shopping channels amid lockdowns. However, with the reopening of the economy, spending has shifted back to brick-and-mortar stores and to experiences like travel. Further, high inflation and fears of a recession are impacting consumers’ purchasing power.

That said, the long-term outlook for e-commerce growth remains positive. Shopify (NYSE:SHOP) estimates global e-commerce sales to reach $5.5 trillion this year and increase to nearly $7.4 trillion in 2025.

While keeping this backdrop in mind, I used the TipRanks Stock Comparison tool to compare the following e-commerce stocks to pick the one that attracts a more bullish view from Wall Street analysts.

Ticker Company Price
ETSY Etsy, Inc. $86.79
W Wayfair Inc. $51.86
MELI MercadoLibre, Inc. $709.05

E-Commerce Stocks: Etsy, Inc. (ETSY)

Etsy logo is over an orange background with a little shopping cart with packages in it. ETSY stock.

Source: Sergei Elagin / Shutterstock

Etsy (NASDAQ:ETSY) is an online marketplace that connects sellers of unique and handmade items with interested buyers. At the end of the first quarter, there were 7.65 million active sellers and 95.1 million active buyers on Etsy’s platform.

Last year, Etsy strengthened its business with the acquisition of Elo7, a Brazil-based online marketplace, and Depop, a U.K.-based fashion resale marketplace.

Etsy is now witnessing normalized growth rates following its phenomenal rise earlier in the pandemic. The company’s first-quarter revenue grew 5.2% to $579 million and surpassed analysts’ estimates. However, it reflected a slowdown compared to the stellar growth rates seen last year. Moreover, first-quarter earnings per share (EPS) declined 40% to 60 cents, which was in line with analysts’ expectations. However, Etsy’s second-quarter guidance fell short of Wall Street’s estimates and further spooked investors.

Recently, Oppenheimer analyst Jason Helfstein cut Etsy’s second-quarter gross merchandise sales and revenue estimates to reflect weak May conversion data and moderating e-commerce market share gains. The analyst also lowered his revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) estimates for 2022 and 2023 and cut his price target for Etsy stock to $120 from $140. However, Helfstein maintained a “buy” rating on Etsy stock as he continues to be optimistic about the company’s long-term market position.

Overall, the Street is cautiously optimistic on Etsy, with a “moderate buy” consensus rating based on 12 “buys” and six “holds.” The average Etsy price target of $119.88 implies 38.7% upside potential from current levels.

Wayfair (W)

The Wayfair (W) logo on the screen of a mobile phone with a purple background

Source: rafapress / Shutterstock.com

Wayfair (NYSE:W) not only benefited from the pandemic-induced spike in e-commerce, it also gained from the heightened demand for home goods as people were restricted to their houses during lockdowns.

The reopening of physical stores and supply chain bottlenecks impacted Wayfair’s first-quarter performance, with the company slipping into an adjusted loss per share of $1.96 from adjusted EPS of $1 in the prior-year quarter. Revenue in the U.S. declined 9.9% to $2.5 billion, while active customers dropped 23.4% year-over-year to 25.4 million.

Recently, Wells Fargo (NYSE:WFC) analyst Zachary Fadem advised investors to avoid Wayfair, Bed Bath & Beyond (NASDAQ:BBBY), and Joann Inc. (NASDAQ:JOAN) as he sees outsized downside risk for each of these stocks amid bearish retail trends.

With regard to Wayfair, Fadem stated, “Wrong stock, wrong tape as investor appetite for high growth negative EBITDA/FCF pandemic winners is very low.” In addition, Fadem also cited “limited trend visibility, elevated reinvestment levels plus a CFO transition” as the reasons for his negative risk-reward view for Wayfair. Fadem currently has a “sell” rating on Wayfair stock with a price target of $50.

Overall, the Street is sidelined on Wayfair stock with a “hold” consensus rating that breaks down into seven “buys,” ten “holds,” and eight “sells.” The average Wayfair price target of $85.58 suggests 64.4% upside potential from current levels.

E-Commerce Stocks: Mercadolibre (MELI)

MercadoLibre (MELI) homepage on a smartphone

Source: rafapress / Shutterstock.com

MercadoLibre (NASDAQ:MELI) has rapidly emerged as the largest e-commerce platform in Latin America. It has developed a solid ecosystem of six integrated e-commerce services, including Mercado Libre Marketplace and financial technology (fintech) platform Mercado Pago.

Despite the fading of pandemic tailwinds, MercadoLibre delivered strong first-quarter results, with revenue growing 63% year-over-year to $2.25 billion. The company swung to EPS of $1.30 from a loss per share of $0.68 in the prior-year quarter.

MercadoLibre’s commerce revenue stream accounted for 57% of the overall first-quarter revenue, while fintech generated the remaining 43%. That said, the fintech business is grabbing attention due to its quick growth. In the first quarter, fintech revenue grew 108%, while commerce revenue was up 40%.

At the end of the first quarter, MercadoLibre’s platform had 81 million unique active users. The company seems well-positioned to attract more users to its ecosystem given the rising e-commerce penetration in Latin America and the massive opportunity to grow fintech businesses in the region.

Following a meeting with MercadoLibre’s management, Morgan Stanley (NYSE:MS) analyst Andrew Ruben stated, “Macro pressures persist, but we see this being outweighed by company-specific drivers such as eCommerce share gain, ads/logistics uptake, and Fintech pricing.”

Based on his growth estimates for gross merchandise value and EBITDA, Ruben feels that there is a “disconnect between fundamental trends” and MercadoLibre’s stock price, which makes him see a “highly attractive risk-reward skew” in the stock. Ruben reiterated a “buy” rating on MELI stock with a price target of $1,690.

All in all, MercadoLibre scores a “strong buy” consensus rating based on 12 “buys” and one “hold.” At $1,339.23, the average MercadoLibre price target implies 89.2% upside potential from current levels.

Conclusion

Among the three e-commerce stocks discussed above, Wall Street analysts are highly bullish on the growth prospects of MercadoLibre, based on its strong positioning in the Latin America e-commerce market and robust growth potential in the fintech space. While all three stocks have declined significantly this year, analysts see higher upside potential in MercadoLibre stock.

On the date of publication, Sirisha Bhogaraju did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Sirisha Bhogaraju has over 15 years of experience in financial research. She has written in-depth research reports and covered companies across various sectors, with a primary focus on the consumer sector. Sirisha has a master’s degree in finance. 

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