Thanks in no small part to Amazon (NASDAQ:AMZN), online shopping was a secular growth trend of the 2010s. But the pandemic accelerated e-commerce technology adoption, and has made it a tool for smaller businesses too. Online marketplaces are proliferating here and abroad and expanding the reach of retailers and entrepreneurs, and making more products available for consumers.
However, 2021 wasn’t the kindest year to many of these digital retail platforms. Lapping tough comparisons from economic lockdowns in 2020, many stocks have backtracked and are down big double-digit percentages. Business itself is just fine, though, which means some of these beaten-down companies could be ready to break out again in 2022. Farfetch (NYSE:FTCH), Pinterest (NYSE:PINS), and MercadoLibre (NASDAQ:MELI) are three I have my eye on.
Farfetch: Luxury still going digital
Luxury online retail platform Farfetch is one of those 2020 top performers (with a 517% jump in share price) that hasn’t been able to catch a break in 2021 (down 50% year to date as of this writing). But that doesn’t mean the high-end goods industry is backtracking on the digital progress it made earlier in the pandemic.
On the contrary, Farfetch said the gross merchandise value (GMV, the value of goods sold via its marketplace and services) increased 27% year over year in third-quarter 2021 to $1.02 billion. While that isn’t a sizzling rate of expansion, bear in mind Farfetch is lapping Q3 2020, in which GMV exploded 62% higher from pre-pandemic levels. Even though they now have other options besides online shopping this year, luxury companies and their patrons are still making ample use of Farfetch’s offerings.
Sometimes expectations for a business simply get too lofty. I believe that’s simply all that happened to Farfetch in 2021. Nevertheless, now double the size it was in 2019 and still projecting double-digit percentage growth for itself and the industry’s continual migration to the internet overall, I like Farfetch stock more than ever. Trading for just four times expected revenue for 2022, this could be a great long-term e-commerce value in the making.
Granted, Farfetch is only now beginning to reach profitability (as measured by adjusted EBITDA). I expect most investors won’t be comfortable owning a high-risk but potentially high-reward stock like this, given that the company is funneling plenty of cash to promote expansion. In spite of the continued volatility that no doubt lies ahead, though, I plan to keep adding to my position in this small but emerging digital commerce ecosystem for the luxury industry.
Pinterest: Struggling user metrics, positive financial performance
Visual search and social media outlet Pinterest has fallen out of favor with growth-minded investors as of late. On some counts this is totally …….