In today’s internet-driven world, consumers prioritize convenience, competitive pricing, and a wider selection, fueling sustained demand for e-commerce platforms. Despite inflation pressures, online sales continue to outpace in-store sales, highlighting e-commerce's resilience and growth potential over traditional retail.
Given this, investors may want to consider purchasing high-growth e-commerce giants like Amazon.com, Inc. (AMZN), Alibaba Group Holding Limited (BABA), and CarGurus, Inc. (CARG) before year-end.
The recent rise in online sales reflects a clear shift in consumer preferences toward e-commerce, with online platforms experiencing significant growth. Major players are capitalizing on this trend, strengthening their dominance in the online shopping space. With the year-end approaching, holiday spending is expected to increase 3.2% year-over-year, reinforcing a positive outlook for e-commerce.
Moreover, social media platforms like TikTok and Instagram are tapping into mobile shopping trends, while brands are offering aggressive discounts to attract deal-seekers this holiday season. From groceries and essentials to even cars, e-commerce is now the go-to choice for consumers. As a result, U.S. online retail sales are expected to hit $1.20 trillion this year, marking a $108 billion (9.8%) increase from last year.
Considering these conducive trends, let’s examine the fundamentals of the three above-mentioned e-commerce stocks.
Amazon.com, Inc. (AMZN)
AMZN engages in the retail sale of consumer products and subscriptions through online and physical stores in North America and internationally. It operates through three segments: North America, International, and Amazon Web Services (AWS). The company's products offered through its stores include merchandise and content purchased for resale; and products offered by third-party sellers.
On December 2, 2024, AMZN and Comcast announced that Comcast has migrated its 5G wireless core to AWS’s cloud infrastructure, enabling scalable, secure, and cost-effective 5G services for Xfinity Mobile and Comcast Business Mobile customers across the U.S., with improved innovation and network performance.
On the same date, AMZN announced new generative AI enhancements for Amazon Connect, aimed at improving customer service through proactive outreach, personalized self-service, and AI-powered agent evaluations. These features help businesses enhance customer experiences while reducing operational costs.
AMZN’s total assets grew at a CAGR of 15.2% over the past three years. Similarly, its revenue grew at a CAGR of 10.6% during the same period.
In terms of the trailing-12-month net income margin, AMZN’s 8.04% is 88.2% higher than the 4.27% industry average. Likewise, its 11.25% trailing-12-month Capex / Sales is 290.2% higher than the 2.88% industry average. Moreover, the stock’s 1.16x trailing-12-month asset turnover ratio is 16.7% higher than the 0.99x industry average.
AMZN’s total net sales for the fiscal third quarter, which ended on September 30, 2024, rose 11% year-over-year to $158.88 billion. The company’s operating income was $17.41 billion, up 55.6% year-over-year. Additionally, the company’s net income and EPS were $15.33 billion and $1.43, respectively, reflecting increases of 55.2% and 52.1% from the year-ago values.
Street expects AMZN’s EPS and revenue for the quarter ending December 31, 2024, to increase 47.2% and 10.2% year-over-year to $1.47 and $187.24 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 44% to close the last trading session at $210.71.
AMZN’s POWR Ratings reflect its robust fundamentals. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
AMZN has an A grade for Sentiment and a B for Growth, Momentum, and Quality. It is ranked #15 out of 52 stocks in the A-rated Internet industry. Beyond what we have stated above, we also have given AMZN grades for Value and Stability. Get all the AMZN’s ratings here.
Alibaba Group Holding Limited (BABA)
Based in Hangzhou, People's Republic of China, BABA provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses engage with their users and customers internationally. The company operates through seven segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others.
On September 5, 2024, BABA partnered with Mastercard and Cardless to launch the Alibaba.com Business Edge Credit Card. The card offers cashback, interest-free terms, and rewards for small businesses, supporting both cross-border and domestic sourcing, with added benefits for U.S. businesses.
BABA’s revenue grew at a CAGR of 16.7% over the past five years. Also, its tang book value grew at a CAGR of 3.6% over the past three years.
In terms of the trailing-12-month EBITDA margin, BABA’s 18.16% is 59% higher than the 11.42% industry average. Its 8.75% trailing-12-month levered FCF margin is 90.1% higher than the 4.60% industry average. Similarly, the stock’s 4.90% trailing-12-month Return on Total Assets is 24.7% higher than the 3.93% industry average.
For the second quarter ending September 30, 2024, BABA’s revenue increased by 5.2% year-over-year to RMB236.50 billion ($32.53 billion), and its income from operations was RMB35.25 billion ($4.85 billion), up 4.9% year-over-year.
BABA’s non-GAAP net income and EPS were RMB 36.52 billion ($5.02 billion) and RMB1.88 for the quarter, respectively. Furthermore, the company’s adjusted EBITDA for the quarter was RMB47.33 billion ($6.51 billion).
For the quarter ending December 31, 2024, BABA’s EPS and revenue are expected to increase 4.3% and 5.8% year-over-year to $2.75 and $38.29 billion, respectively. Over the past nine months, BABA’s stock has gained 16.1% to close the last trading session at $85.95.
BABA’s POWR Ratings reflect this optimistic outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Growth, Momentum, and Quality. It is ranked #8 out of 43 stocks in the A-rated China industry. To access the additional grades of BABA for Value, Stability, and Sentiment, click here.
CarGurus, Inc. (CARG)
CARG operates an online automotive platform for buying and selling vehicles internationally. It operates through two segments: U.S. Marketplace and Digital Wholesale.
On November 4, 2024, CARG launched its Digital Deal solution in Canada, allowing consumers to complete more of the car buying process online, including financing applications and trade-ins, for a more seamless in-store experience. The solution connects dealers with ready-to-buy shoppers and simplifies the sales process.
CARG’s tang book value grew at a CAGR of 7.5% over the past three years. Also, its revenue grew at a CAGR of 9.8% over the past five years.
In terms of the trailing-12-month gross profit margin, CARG’s 80.76% is 54.5% higher than the 52.26% industry average. Its 6.35% trailing-12-month Return on Total Capital is 63.5% higher than the 3.88% industry average. Moreover, the stock’s 0.97x trailing-12-month asset turnover ratio is 97% higher than the 0.49x industry average.
During the fiscal third quarter that ended on September 30, 2024, CARG’s revenue grew 5.4% year-over-year to $231.36 million. Its gross profit increased 11.1% year-over-year to $182.55 million. The company’s non-GAAP net income attributable to common stockholders was $47.06 million, or $0.45 per share, up 22.7% and 32.4%, respectively, compared to the prior-year quarter.
Analysts expect CARG’s EPS for the quarter ending December 31, 2024, to increase 48.9% year-over-year to $0.52. Its revenue for the same quarter is expected to grow 3.6% year-over-year to $231.12 million. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 72.7% to close the last trading session at $37.87.
CARG’s strong prospects are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B for Quality. It is ranked #8 in the Internet industry. To see CARG’s grades for Value, Momentum, Stability, and Sentiment, click here.
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AMZN shares were trading at $211.32 per share on Tuesday morning, up $0.61 (+0.29%). Year-to-date, AMZN has gained 39.08%, versus a 28.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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