Buy the Dip on These 2 Emerging Markets E-Trading Stocks
Concerns about global inflation, rising borrowing costs and the economic fallout from the war in Ukraine overwhelmed the stock market throughout the year. Since the beginning of the year, the S&P500 dropped by 23%, and the Nasdaq Compound fell 32% as investors shunned high-growth tech companies and instead relied on safer assets like bonds and value stocks.
E-commerce businesses have felt the chaos. After receiving a major boost during the pandemic, online shopping platforms have seen demand temper as of late. But with the global e-commerce market expected to top $7.5 trillion by 2030 from $3.9 trillion today, investors can be sure that the current headwinds are temporary.
Here are two emerging market e-commerce stocks that investors shouldn’t hesitate to jump into today.
After its stock soared nearly 300% from April 2020 to January 2021, the Latin American-based company MercadoLibre (MELI 3.68%) has seen it plummet 53% since the start of the year. In addition to its growing e-commerce platform, the company offers consumers a variety of value-added services. Mercado Pago is a digital payment platform, Mercado Envios is a logistics solution focused on shipping and fulfillment, and Mercado Crédito enables business and consumer loans.
The company released a strong report for the first quarter to start 2022. Total revenue jumped 62% year-over-year to $2.2 billion, beating Wall Street forecasts, and diluted earnings per share reached $1.30, a notable improvement from its loss of $0.68 a year ago. The company’s operating margin fell 42 basis points year-over-year to 6.2%.
On its online marketplace, gross merchandise volume (GMV) rose 32% year-over-year to $7.7 billion, and items sold soared 20% to 266 .7 million. Mercado Pago’s total payments volume jumped 81% to $25.3 billion, with out-of-market payments volume (which includes payments processed for third-party businesses) increasing 139% to $17.3 billion. dollars. Its logistics network handled 91% of its market’s shipment volume in the first quarter, up 10.5 percentage points from a year ago, and the company’s credit portfolio grew 319% to reach $2.4 billion.
MercadoLibre’s diversified business makes it a very attractive investment for those interested in the rapidly developing Latin American economy. And with the stock’s 3.9 price/sell multiple, the lowest in five years, there is a great window of opportunity to buy stocks today.
2. Jumia Technologies
Jumia Technologies (JMIA 2.82%) reached over $60 per share in February 2021, but the narrative has changed to “the Amazon of Africa” since then. Over the past year, the stock has fallen 79% and now sits around $6. Yet, contrary to what its stock market movement may suggest, the African e-commerce company has shown marked improvement in recent quarters.
In its first quarter of 2022, the company generated sales of $47.6 million, translating to 44% year-over-year growth, and its GMV climbed 27% to reach $252.7 million. Total active customers and orders also saw strong growth in the quarter, up 29% and 40% year-over-year, respectively.
Due to aggressive marketing and technology spending, the company is currently incurring a significant loss, making it a much riskier investment than MercadoLibre. In the first quarter, Jumia suffered an adjusted loss of $55.3 million in earnings before interest, taxes, depreciation and amortization (EBITDA), much higher than a year earlier.
On the bright side, management appeared confident on the earnings call that the company passed its peak in quarterly adjusted EBITDA losses and should start reporting reduced losses in 2023. And like MercadoLibre, Jumia operates a fintech wing through its mobile payment platform, JumiaPay, and continues to develop its logistics as a service.
Although a risky investment at the moment, the company has unlimited potential to tap into Africa’s 1.2 billion consumers. Additionally, the stock has a price/sales multiple of just 3, its lowest level since the company went public in 2019.