We recently compiled a list of the 7 Best E-commerce Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Coupang, Inc. (NYSE:CPNG) stands against the other e-commerce stocks to buy according to hedge funds.
The Retail Debreif: Growing Consumer Confidence in the US
E-commerce is growing faster than expected and as new avenues of selling online open up, companies are bound to keep up with trends and innovative strategies. According to a report by Forbes, the e-commerce industry is expected to grow to a valuation of $7.9 trillion by 2027 from $6.3 trillion in 2024. In 2027, 23% of retail purchases are expected to be made online, up from 20.1% in 2024.
In the United States, low-income households, with a yearly income of $50,000 or less, happened to spend the most on online spending compared to other groups. On October 17, Reuters reported that retail sales in September increased, as gas prices fell, allowing consumers to spend elsewhere. Overall, the average consumer in the United States spent mostly on clothing, health and personal care stores, and miscellaneous items. Amid rising consumer confidence and spending, the Atlanta Fed raised its GDP estimates for Q3 to 3.4%, up from a previous guidance of 3.2%. Overall, retail sales grew by 0.4% last month.
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Chinese E-commerce Platforms: A Threat or Opportunity?
Chinese e-commerce stocks have been on the rise, despite uncertain macro-economic conditions in the country. As the Chinese government attempts to stimulate the economy, these companies may perform better than expected, meaning other global e-commerce stocks will have to ramp up their investments in sustainable growth strategies. On October 21, Reuters reported that the world’s largest luxury brands in France and Italy reported a decline in quarterly sales as the growing second-hand and grey market for luxury goods in China continues to expand, and demand for luxury brands falls. The second-hand luxury goods market is estimated to be valued at $57 billion, fueled by platforms such as DeWu, where used luxury products are sold at discounted prices. Reuters estimates that DeWu reported a 19% increase across its 48 brands during Q2 2024. Since China makes up 25% of the revenues in the retail sector, consumers shifting to local platforms may cause a hit to global commerce and retail companies.
On October 9, Reuters reported that amid fierce market competition online shopping has been increasing in Europe and other parts of the world. The online shopping market in Europe is expected to reach EUR 958 billion in 2024, up from EUR 887 billion in 2023, representing an increase of 8%, or 5% in inflation-adjusted terms. However, e-commerce experts in Europe share concerns over the growing popularity of cheap e-commerce platforms, especially Temu, increasing competition for local brands. On the flip side, Temu states that it believes in supporting local brands and has invited local merchants in the United Kingdom, Germany, France, Italy, and Spain to join the platform.
The e-commerce industry is rapidly changing and growing, thanks to technology, macroeconomic conditions, and geopolitics. Despite the turmoil, some stocks continue to outperform others. That said, let’s take a look at the 7 best e-commerce stocks to buy according to hedge funds.
Our Methodology
To compile the list of the 7 best e-commerce stocks to buy according to hedge funds, we looked at holdings of e-commerce ETFs and screened for Internet Retail companies on the Finviz stock screener. We sorted our screen by market cap and looked at the 20 largest e-commerce companies. We picked stocks that were the most widely held by institutional investors, as of Q2 2024. The list is in ascending order of the number of hedge fund holders for each stock.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A woman holding a laptop, wearing a graphic t-shirt, casually checking her e-commerce order.
Coupang, Inc. (NYSE:CPNG)
Number of Hedge Fund Holders: 62
Coupang, Inc. (NYSE:CPNG) is an e-commerce company based in Seoul, South Korea, with a market share of 25% in the country. The online retail company sells beauty, skincare, snacks, electronics, and clothing items on its platform, Coupang Marketplace.
Coupang’s exemplary e-commerce infrastructure contributes to its ranking on our list. It has more than 100 unique fulfillment centers covering more than 47 million square feet. This means Coupang, Inc. (NYSE:CPNG) serves 70% of the South Korean population living within a 7-mile radius. Technology is central to its business model. The company uses AI and machine learning to enhance customer experiences. In addition to that, its high speeds of delivery are supported by the growing automation within the company, reducing employee workload by 65%.
In the second quarter of 2024, the company logged $7.3 billion in net revenues, up by 25% year over year. Coupang’s product commerce revenue increased by 13% year-over-year and active customers by 12% in the fiscal second quarter of 2024. Apart from its strong e-commerce infrastructure, Coupang (NYSE:CPNG) is a customer favorite, as evidenced by its 21 million strong customer base.
While the company continues to experience customer growth, its priority lies in retaining existing customers. Overall, the company is a strong contender in the e-commerce industry because of its efficiency gains, its e-commerce network, and its expanding customer base. Coupang, Inc. (NYSE:CPNG) experienced a 150% increase in sellers joining its Fulfillment and Logistics by Coupang (FLC) network, a testament to its growth trajectory.
Overall CPNG ranks 7th among the 7 best e-commerce stocks to buy according to hedge funds. While we acknowledge the potential of CPNG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CPNG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.