Three Unusual Stocks That Are Surfing The E-Commerce Wave

Pandemic or no pandemic, e-commerce is a megatrend as physical retail is ceding ground to its digital counterpart. Although our minds go directly to companies like Amazon.com, Inc. AMZN, there are all kinds of companies who are riding this trend. Here are three companies that are doing a great job. One is preparing to monetize 78% of its users, another is growing by triple digits, and the third has 36% of its market and is still growing.

Visual E-commerce

Pinterest Inc PINS is a social media company that generates all of its revenue from displaying ads. It's doing a great job at not annoying its users with ads as they are browsing ideas in the form of pictures and are looking for inspiration on what to buy anyway. Therefore, this unique platform offers superior ad experience to marketers. Although it isn't a typical e-commerce company because it doesn't have its native checkout feature nor it plans on adding one anytime soon, retailers are realizing that they need to show their offerings to Pinners. This includes many small and medium-sized businesses due to its partnership with Shopify Inc SHOP, hence the label.

Pinterest's management intends to prioritize international SMBs this year, which is where over 78% of its monthly active users live. While the company's revenue grew 48% YoY to almost $1.7 billion last year, its international user base remains incredibly under-monetized with international revenues only 16% of 2020's total revenue.

The pandemic disabled Pinterest to educate international companies on the benefits of its platform, but it will invest heavily to push for adoption this year and continue growing.

E-crafts

Just a decade ago, Etsy Inc ETSY was selling just a few handcrafted items. Now it is a top-of-mind platform for hand-crafted and personalized items. During the pandemic, consumers ran to Etsy to search for face masks, but it does not owe its success to the pandemic. Revenue was up 36% YoY in 2019 and in the fourth quarter of 2020, gross merchandise sales increased 118% YoY when excluding mask sales.

Face mask sales just illustrate the positioning Etsy achieved with 4.3 million active sellers on its platform. There are almost 82 million active buyers, which is a 77% increase from 2019 which can only help drive an additional influx of quality sellers looking to make money from their crafts.

E-pizza

If e-commerce is just ordering a product digitally and having it delivered to your home, Domino's Pizza, Inc. DPZ can qualify as one. In 2020, 75% of its sales came through digital channels turning the pizza maker into an e-commerce pizza maker. When it comes to pizza delivery, the company estimates it had a 36% market share in the U.S. in 2020. Consumers used food-delivery services like never before during the pandemic now whether the shift is permanent or temporary is up for debate.

However, third-party food delivery services like Uber Eats UBER and GrubHub Inc GRUB are dealing with controversies which are disabling them from becoming long-term winners because they're expensive for restaurants and consumers alike. The high cost is causing friction for the e-commercialization of food whereas Dominos' delivery is kept in-house, which allows it to provide delivery and avoid this disadvantage.  Over the next few years, management expects 6% to 10% annual sales growth, it's authorized to repurchase $1 billion in stock, and it has a fast-growing dividend. It delivered strong returns over the past decade and pandemic or no pandemic, the e-pizza maker seems well-positioned to continue doing so.

To Sum Up…

While e-commerce seems like old news in 2021, the reality is the shift from brick-and-mortar to online retail is happening and there's no going back to how things were, even though we still don't know how exactly a new normalcy will look like. Pinterest, Etsy, and Dominos found unique ways to ride the e-commerce trend and they have more rewards to reap.

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