Head of Equity Strategy
Summary: In today's equity update, we take a look at 48 companies within e-commerce representing $3.5trn in market value. The group has revenue growth of 30% based on the latest earnings releases and analysts continue to be positive on the majority of the e-commerce stock seeing 16% upside on average over the coming 12 months. This group of e-commerce stocks represent around 6% of the global equity market value, but with half of Amazon's value likely coming from its cloud business the real weight is probably only 4% leaving plenty of room for market value increase over the coming decade.
With the Q3 earnings season almost done and the Covid-19 pandemic still raging on across the globe it is time to look at e-commerce companies which got the biggest boost this year. We have identified 48 companies operating within e-commerce as their primary domain (see list at the bottom) with combined market value of $3.5trn representing around 6% of the global equity market. These companies are still growing rapidly with the average growth around 30% y/y based on their latest earnings reports. As a group e-commerce companies are still not delivering positive ROIC numbers but is primarily a function of a lot of smaller e-commerce companies focusing on revenue growth in stead of profitability. The average ROIC among the 10 largest e-commerce companies is around 5% impacted negatively by China-based Pinduoduo.
Analysts continue to be positive on the industry with the average price target being around 16% higher than the current price level. If this e-commerce group collectively delivers 16% over the next 12 months that is a very attractive return given the uncertainty in the economy. The high growth does not come cheap with the average valuation on 12-month forward EV/EBITDA being 69x or 5 times more expensive than the global equity market. But valuations shouldn't scare investors from investing in e-commerce companies. The lesson from Microsoft is that its stock was also 5 times more expensive than the US equity market in 1986 but has still managed to deliver 26.6% annualised return excluding dividends for its shareholders. The lesson is, that if you are picking tomorrow’s winners valuation means less as the market often undervalues the long-term compounding effects of a winning business.
Another important principle worth considering is the fact that per definition all the biggest companies in the equity market today, or at any given time, was a high-growth company and thus if you are long-term winner your objective should be to pick the long-term winners. Said in another way, long-term investors should focus on growth companies.
| Name | Region (*) | Market Cap (USD mn.) | Sales growth (%) | ROIC (%) | Diff to PT (%) | 12M Fwd EV/EBITDA |
| Amazon.com Inc | Global | 1,574,189 | 20.5 | 13.4 | 21.5 | 24.2 |
| Alibaba Group Holding Ltd | China | 718,752 | 35.3 | 9.4 | 28.8 | 18.3 |
| Meituan | China | 217,599 | 49.5 | 2.8 | 4.3 | 71.2 |
| Pinduoduo Inc | China | 133,487 | 129.7 | -34.4 | -19.4 | #N/A |
| JD.com Inc | China | 129,636 | 24.9 | 8.7 | 6.1 | 25.8 |
| Shopify Inc | Global | 115,465 | 47.0 | -0.9 | 18.2 | 241.1 |
| Booking Holdings Inc | Global | 81,911 | 3.7 | 4.3 | -5.2 | 25.7 |
| MercadoLibre Inc | Brazil | 64,933 | 59.5 | 3.3 | 10.9 | 189.8 |
| NetEase Inc | China | 61,909 | 15.8 | 15.1 | 15.7 | 16.1 |
| eBay Inc | Global | 32,888 | 0.5 | 27.2 | 30.2 | 9.4 |
| Chewy Inc | United States | 26,379 | 37.2 | #N/A | 11.7 | 221.0 |
| Delivery Hero SE | MENA | 25,351 | 86.1 | -26.9 | 6.1 | #N/A |
| Wayfair Inc | United States | 25,035 | 34.6 | 0.8 | 18.9 | 36.4 |
| Zalando SE | Europe | 24,966 | 20.3 | 9.3 | 4.4 | 31.2 |
| Ocado Group PLC | United Kingdom | 23,174 | 9.9 | -4.2 | -10.8 | 198.7 |
| Trip.com Group Ltd | China | 21,054 | 15.2 | 0.4 | -7.5 | 32.8 |
| Expedia Group Inc | Global | 16,933 | 7.5 | -17.1 | -5.1 | 21.9 |
| Just Eat Takeaway.com NV | Europe | 16,680 | 79.0 | -1.2 | 24.4 | 38.8 |
| Etsy Inc | United States | 16,466 | 35.6 | 18.2 | 22.6 | 31.8 |
| Rakuten Inc | Japan | 15,345 | 14.7 | -4.0 | 13.5 | -16.6 |
| Farfetch Ltd | Global | 14,475 | 69.5 | -46.3 | -7.5 | 799.0 |
| Vipshop Holdings Ltd | China | 14,128 | 10.0 | 19.9 | 2.2 | 10.0 |
| HelloFresh SE | Europe | 9,108 | 41.4 | 48.9 | 29.7 | 16.8 |
| ZOZO Inc | Japan | 8,252 | 6.0 | 55.9 | 6.4 | 19.0 |
| THG Holdings PLC (Hut Group) | Global | 7,898 | 24.5 | #N/A | 33.3 | 36.9 |
| Williams-Sonoma Inc | United States | 7,452 | 4.0 | 17.1 | 4.1 | 10.2 |
| Dada Nexus Ltd | China | 6,990 | 61.3 | -43.3 | 17.0 | #N/A |
| Grubhub Inc | Global | 6,820 | 30.3 | -6.5 | 2.0 | 42.0 |
| Mercari Inc | Japan | 6,380 | 47.6 | -12.1 | 28.7 | 106.3 |
| ASOS PLC | United Kingdom | 6,029 | 19.4 | 17.8 | 9.9 | 15.7 |
| Fiverr International Ltd | United States | 5,643 | 41.8 | -7.3 | 7.2 | 217.5 |
| ANGI Homeservices Inc | United States | 5,383 | 17.1 | 0.2 | 26.8 | 28.0 |
| boohoo Group PLC | United Kingdom | 4,593 | 44.1 | 30.4 | 57.9 | 16.7 |
| LendingTree Inc | United States | 4,096 | 44.7 | 0.7 | 15.1 | 28.6 |
| Stitch Fix Inc | Global | 3,924 | 8.5 | -10.7 | -19.5 | 42.0 |
| Qurate Retail Inc | Global | 3,629 | -4.3 | 11.2 | 22.8 | 4.6 |
| LivePerson Inc | United States | 3,556 | 16.7 | -30.8 | 31.0 | 90.3 |
| Stamps.com Inc | United States | 3,518 | -2.6 | 21.2 | 93.3 | 15.2 |
| TripAdvisor Inc | Global | 3,385 | -3.4 | -12.9 | -10.1 | 20.1 |
| Baozun Inc | China | 3,061 | 35.0 | 7.9 | 14.4 | 20.2 |
| Shop Apotheke Europe NV | Germany | 2,940 | 29.9 | #N/A | 20.8 | 91.0 |
| Shutterstock Inc | Global | 2,490 | 4.4 | 15.7 | 11.4 | 14.5 |
| MakeMyTrip Ltd | India | 2,457 | 5.3 | -38.6 | -15.6 | #N/A |
| Overstock.com Inc | United States | 2,226 | -19.9 | 3.6 | 93.4 | 20.5 |
| Yelp Inc | Global | 2,138 | 7.6 | -2.2 | -3.1 | 10.3 |
| eHealth Inc | United States | 1,897 | 101.4 | 15.4 | 74.7 | 8.9 |
| Jumia Technologies AG | Africa | 1,051 | 24.3 | -164.2 | 0.8 | #N/A |
| PetMed Express Inc | United States | 645 | 0.2 | 27.6 | 3.6 | 12.2 |
| Aggregate / mean | 3,485,674 | 29.6 | -1.9 | 15.7 | 69.1 |
Source: Bloomberg and Saxo Group
* Region is the main geographical revenue segment, and global if geographical segments are almost equal
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
