2 E-Commerce Stocks That Could Boost Your Wealth in 2023

E-commerce stocks like Shopify (TSX:SHOP) could increase your wealth in 2023.

| More on:
A shopper makes purchases from an online store.

Image source: Getty Images

Are you interested in e-commerce stocks?

If so, you may be making a wise choice. E-commerce is out of favour this year, with several major e-commerce companies having lost even more market cap than other tech stocks did last year. In 2022, tech stocks massively underperformed, and e-commerce names were among the worst of the bunch.

Historically speaking, out-of-favour stocks have tended to provide the best returns in the future, as lower prices typically result in higher earnings per dollar invested. There are some cases when stocks simply go low because they have suffered permanent damage, but temporary unpopularity is the more common cause for big selloffs. In this article, I will explore two e-commerce stocks, whose “damage” appears to be temporary rather than permanent, that could boost your wealth in 2023.

Pinduoduo

Pinduoduo (NASDAQ:PDD) is a Chinese technology stock that I started buying just recently. It is best known in North America for its Temu app, which lets Americans buy Chinese goods at low prices. There are other apps that let customers do this, such as AliExpress, but Temu keeps its inventory at American warehouses, so it has much shorter shipping times than AliExpress does. Unfortunately, Temu isn’t available in Canada yet, but you can gauge its success by its number of app installs: it was one the most popular app downloads in the U.S. last year.

Apart from its service catching on, what makes Pinduoduo a good stock?

First, it’s growing quickly. Over the last five years, PDD has grown its revenue at a rate of 123% per year, which is just phenomenal.

Second, it’s newly profitable. In the first couple years after going public, Pinduoduo was one of those “high-growth, no-profit names,” a promising but risky opportunity. Today, PDD is actually profitable, so the risk is now lower than it was in the past.

Third and finally, PDD is relatively cheap. At today’s prices it only trades at 26 times earnings, which is absolutely unheard of for stocks growing revenue at 100% per year. So, the overall combination of growth, profitability, and value being observed here is phenomenal.

Shopify

Shopify (TSX:SHOP) is Canada’s best-known e-commerce company. It develops a platform that lets people host their own online stores. This is in contrast to Pinduoduo, which owns a platform that users sell on directly.

Shopify is not growing as fast as Pinduoduo is. Its revenue only grew 22% in the most recent quarter, which is much slower than PDD’s growth rate. It also isn’t as profitable or cheap as PDD is: it is unprofitable and trades at about 12 times sales.

However, Shopify may have one advantage over Pinduoduo.

It’s a Canadian company. Canada’s market has been studied by international organizations and found to be safe to invest in, with investors possessing many rights. By contrast, many people think of China as a “risky” market, where investors have no protection. As a Pinduoduo shareholder, I disagree, but just remember that in the markets, perceived risk tends to prevail in the short term. By that score, SHOP has one advantage over PDD.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.

More on Tech Stocks

Different industries to invest in
Tech Stocks

TSX Information Technology in April 2024: The Best Stocks to Buy Right Now

For investors looking for the best stocks to buy to play a surge in IT spending in 2024 and beyond,…

Read more »

four people hold happy emoji masks
Tech Stocks

Forget Side Hustles: This Blue-Chip Stock Is Your Next Income Stream

Don't waste your time (literally) on a side hustle. Instead, consider this proven blue-chip stock that's seen average growth of…

Read more »

data analyze research
Tech Stocks

1 Stock I’m Buying Hand Over Fist in April Despite the Market’s Pessimism

Are you looking for a stock to buy this month despite the pessimism in the market?

Read more »

Male IT Specialist Holds Laptop and Discusses Work with Female Server Technician. They're Standing in Data Center, Rack Server Cabinet with Cloud Server Icon and Visualization
Tech Stocks

Constellation Software Stock: Buy, Sell, or Hold?

Constellation Software stock has rallied 186% in the last five years and is now valued at an expensive 100 times…

Read more »

Money growing in soil , Business success concept.
Tech Stocks

3 High-Growth Stocks That Could Help You Become a Millionaire

Are you looking to grow your nest egg? Here are three Canadian stocks that should be on your watch list.

Read more »

Man holding magnifying glass over a document
Tech Stocks

Watching This 1 Key Metric Could Help You Beat the Stock Market

One key metric that Buffett looks at is the return on equity. Here's why you should watch it.

Read more »

Daffodils in bloom
Tech Stocks

2 Best “Magnificent Seven” Stocks to Buy in April

Two surging mega-cap tech stocks are the best buys among the “Magnificent Seven” this April.

Read more »

clock time
Tech Stocks

Up 47%, Is it Time to Buy Payfare Stock?

Payfare (TSX:PAY) stock has been rising higher in the last six months after dropping significantly since 2021. Is it time…

Read more »