Investors looking to add growth stocks to their portfolio can consider buying shares of companies part of the e-commerce vertical. The shift towards online shopping is a global trend that gained significant momentum at the onset of COVID-19.
But online sales in the U.S. still account for less than 20% of total retail sales, and this figure is much lower in other global markets. So, there is plenty of room for top-line growth for e-commerce companies, as this global market is forecast to surpass US$7 trillion, up from US$3 trillion in 2022.
Here are three e-commerce stocks Canadian investors can buy in June 2023.
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Shopify stock
One of the largest tech stocks in Canada, Shopify (TSX: SHOP) has surged a whopping 2,640% to shareholders since its initial public offering in 2015. However, it’s currently trading 60% below all-time highs, allowing you to buy the dip.
Shopify provides a portfolio of tools and solutions to help merchants set up an online presence. These services range from digital marketing to online payments. In the last five years, Shopify has increased its gross merchandise volume by 658% while sales were up 732%. It ended the first quarter (Q1) with a gross merchandise volume (GMV) of US$49.6 billion and revenue of US$1.5 billion.
The company is wrestling with macro headwinds in the last year, including inflation and interest rate hikes, which, in turn, has led to lower online sales. But its attach rate, which is the ratio of GMV to sales, rose to 3.04% in Q1, suggesting Shopify is able to benefit from higher fees over time.
Shopify has onboarded two million merchants on its platform and commands a 29% market share in the U.S., making it the second-largest online player after Amazon.
Aritzia stock
A high-end vertically integrated design house, Aritzia (TSX: ATZ), increased sales by 43.5% year over year to $637.6 million in fiscal Q4 of 2023 (ended in February). E-commerce sales were up 51% in Q4 and now account for 43% of total sales.
Aritzia continues to reinvest in organic growth and spent $38.5 million in capital expenditures in Q4 compared to $16.4 million in the prior-year quarter. The company opened eight new boutiques in the last four quarters, allowing it to drive sales higher.
ATZ stock is priced at 25.2 times forward earnings, which is reasonable for a growth stock. It’s currently trading at a discount of 40% to consensus price target estimates.
Gildan Activewear stock
The final TSX retail stock on my list is Gildan Activewear (TSX: GIL). It is a vertically integrated manufacturer of apparel and other clothing products. These products are sold to distributors and retailers in the Americas, Europe, and Asia-Pacific through its own retail network, third-party sellers, and an e-commerce platform.
Valued at a market cap of $7.3 billion, GIL stock has returned 121% to shareholders in the past decade. It also pays shareholders an annual dividend of $1.01 per share, indicating a yield of 2.5%. Due to a low payout ratio, Gildan Activewear has increased dividends by 20% annually in the last 10 years.
Priced at 10.4 times forward earnings, GIL stock is very cheap and trades at a discount of 20% to consensus price target estimates.
