The growth of e-commerce has transformed the retail sector over the course of this decade. As we get ready to turn the chapter on the 2010s, it’s worth looking at two companies in e-commerce that have a lot to prove in the 2020s. I still like both stocks as a long-term pick up before the New Year. Let’s dive in and explore why.
Shopify
Shopify (TSX:SHOP)(NYSE:SHOP) stock has dropped 9.5% over the past month as of close on November 15. The stock is still up nearly 120% in 2019 so far.
Global Info Research, a Hong Kong-based market research firm, projects that the global retail e-commerce software market will expand at a CAGR of 10.6% between 2019 and 2024.
Last week I’d discussed why Shopify was a great target for investors seeking exposure to artificial intelligence development.
Shares of Shopify took a hit after it released its third quarter 2019 results on October 31. The company reported an adjusted earnings per share loss of $0.29, which fell far below analyst expectations.
It was a mixed bag in the quarter, as Shopify did post revenue of $390.6 million which exceeded projections. Shopify announced that more than one million merchants were now on its platform.
CEO Tobias Lütke said that the company has not seen any weakness in holiday season purchasing so far. Investors should pay close attention as we approach Black Friday and Cyber Monday weekend.
Shopify is expensive even after its recent dip, but the stock has been a growth monster for shareholders since its IPO. Investors should be aware of the risks in this one, albeit its history of growth may be too tempting for some to pass up.
Namaste Technologies
Namaste Technologies (TSXV:N) is an e-commerce company operating specifically in the cannabis sector. Back in August I’d suggested that investors pick up Namaste, as it had fallen into technically oversold territory. The stock has still plunged 54% in 2019 so far.
The cannabis sector has been hit hard in the second half of 2019. Top cannabis producers like Canopy Growth and Aurora Cannabis have posted disappointing earnings, causing them to push back their profit guidance, and in the case of Aurora, pull back on construction plans. While it’s extremely difficult to trust producers in this environment, Namaste still deserves your attention.
In the third quarter, Namaste reported consolidated revenue of $3.8 million, down from $3.9 million in the prior year. However, gross margin improved to 26% over 24% in Q3 2018.
The company finished the quarter with positive working capital of $54.2 million. In Q3, Namaste received approval from Health Canada for an amendment to its license, which will allow CannMart to offer cannabis oil concentrates on its online marketplace.
Cannabis’ e-commerce side should see additional activity, as a slew of new cannabis products are set to hit shelves in December. These will include vape pens, edibles, and oils. The stock had an RSI of 33 at the time of this writing, putting it just outside of technically oversold territory.
