Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
You can access both of our platforms from a single Saxo account.
E-commerce stocks are expensive but have roaring growth rates
Peter Garnry
Chief Investment Strategist
Summary: In today's equity update, we take a look at 48 companies within e-commerce representing $3.5trn in market value. The group has revenue growth of 30% based on the latest earnings releases and analysts continue to be positive on the majority of the e-commerce stock seeing 16% upside on average over the coming 12 months. This group of e-commerce stocks represent around 6% of the global equity market value, but with half of Amazon's value likely coming from its cloud business the real weight is probably only 4% leaving plenty of room for market value increase over the coming decade.
With the Q3 earnings season almost done and the Covid-19 pandemic still raging on across the globe it is time to look at e-commerce companies which got the biggest boost this year. We have identified 48 companies operating within e-commerce as their primary domain (see list at the bottom) with combined market value of $3.5trn representing around 6% of the global equity market. These companies are still growing rapidly with the average growth around 30% y/y based on their latest earnings reports. As a group e-commerce companies are still not delivering positive ROIC numbers but is primarily a function of a lot of smaller e-commerce companies focusing on revenue growth in stead of profitability. The average ROIC among the 10 largest e-commerce companies is around 5% impacted negatively by China-based Pinduoduo.
Analysts continue to be positive on the industry with the average price target being around 16% higher than the current price level. If this e-commerce group collectively delivers 16% over the next 12 months that is a very attractive return given the uncertainty in the economy. The high growth does not come cheap with the average valuation on 12-month forward EV/EBITDA being 69x or 5 times more expensive than the global equity market. But valuation should scare investors from investing in e-commerce companies. The lesson from Microsoft is that its stock was also 5 times more expensive than the US equity market in 1986 but has still managed to deliver 26.6% annualised return excluding dividends for its shareholders. The lesson is, that if you are picking tomorrow’s winners valuation means less as the market often undervalues the long-term compounding effects of a winning business.
Another important principle worth considering is the fact that per definition all the biggest companies in the equity market today, or at any given time, was a high-growth company and thus if you are long-term winner your objective should be to pick the long-term winners. Said in another way, long-term investors should focus on growth companies.
| Name | Region (*) | Market Cap (USD mn.) | Sales growth (%) | ROIC (%) | Diff to PT (%) | 12M Fwd EV/EBITDA |
| Amazon.com Inc | Global | 1,574,189 | 20.5 | 13.4 | 21.5 | 24.2 |
| Alibaba Group Holding Ltd | China | 718,752 | 35.3 | 9.4 | 28.8 | 18.3 |
| Meituan | China | 217,599 | 49.5 | 2.8 | 4.3 | 71.2 |
| Pinduoduo Inc | China | 133,487 | 129.7 | -34.4 | -19.4 | #N/A |
| JD.com Inc | China | 129,636 | 24.9 | 8.7 | 6.1 | 25.8 |
| Shopify Inc | Global | 115,465 | 47.0 | -0.9 | 18.2 | 241.1 |
| Booking Holdings Inc | Global | 81,911 | 3.7 | 4.3 | -5.2 | 25.7 |
| MercadoLibre Inc | Brazil | 64,933 | 59.5 | 3.3 | 10.9 | 189.8 |
| NetEase Inc | China | 61,909 | 15.8 | 15.1 | 15.7 | 16.1 |
| eBay Inc | Global | 32,888 | 0.5 | 27.2 | 30.2 | 9.4 |
| Chewy Inc | United States | 26,379 | 37.2 | #N/A | 11.7 | 221.0 |
| Delivery Hero SE | MENA | 25,351 | 86.1 | -26.9 | 6.1 | #N/A |
| Wayfair Inc | United States | 25,035 | 34.6 | 0.8 | 18.9 | 36.4 |
| Zalando SE | Europe | 24,966 | 20.3 | 9.3 | 4.4 | 31.2 |
| Ocado Group PLC | United Kingdom | 23,174 | 9.9 | -4.2 | -10.8 | 198.7 |
| Trip.com Group Ltd | China | 21,054 | 15.2 | 0.4 | -7.5 | 32.8 |
| Expedia Group Inc | Global | 16,933 | 7.5 | -17.1 | -5.1 | 21.9 |
| Just Eat Takeaway.com NV | Europe | 16,680 | 79.0 | -1.2 | 24.4 | 38.8 |
| Etsy Inc | United States | 16,466 | 35.6 | 18.2 | 22.6 | 31.8 |
| Rakuten Inc | Japan | 15,345 | 14.7 | -4.0 | 13.5 | -16.6 |
| Farfetch Ltd | Global | 14,475 | 69.5 | -46.3 | -7.5 | 799.0 |
| Vipshop Holdings Ltd | China | 14,128 | 10.0 | 19.9 | 2.2 | 10.0 |
| HelloFresh SE | Europe | 9,108 | 41.4 | 48.9 | 29.7 | 16.8 |
| ZOZO Inc | Japan | 8,252 | 6.0 | 55.9 | 6.4 | 19.0 |
| THG Holdings PLC (Hut Group) | Global | 7,898 | 24.5 | #N/A | 33.3 | 36.9 |
| Williams-Sonoma Inc | United States | 7,452 | 4.0 | 17.1 | 4.1 | 10.2 |
| Dada Nexus Ltd | China | 6,990 | 61.3 | -43.3 | 17.0 | #N/A |
| Grubhub Inc | Global | 6,820 | 30.3 | -6.5 | 2.0 | 42.0 |
| Mercari Inc | Japan | 6,380 | 47.6 | -12.1 | 28.7 | 106.3 |
| ASOS PLC | United Kingdom | 6,029 | 19.4 | 17.8 | 9.9 | 15.7 |
| Fiverr International Ltd | United States | 5,643 | 41.8 | -7.3 | 7.2 | 217.5 |
| ANGI Homeservices Inc | United States | 5,383 | 17.1 | 0.2 | 26.8 | 28.0 |
| boohoo Group PLC | United Kingdom | 4,593 | 44.1 | 30.4 | 57.9 | 16.7 |
| LendingTree Inc | United States | 4,096 | 44.7 | 0.7 | 15.1 | 28.6 |
| Stitch Fix Inc | Global | 3,924 | 8.5 | -10.7 | -19.5 | 42.0 |
| Qurate Retail Inc | Global | 3,629 | -4.3 | 11.2 | 22.8 | 4.6 |
| LivePerson Inc | United States | 3,556 | 16.7 | -30.8 | 31.0 | 90.3 |
| Stamps.com Inc | United States | 3,518 | -2.6 | 21.2 | 93.3 | 15.2 |
| TripAdvisor Inc | Global | 3,385 | -3.4 | -12.9 | -10.1 | 20.1 |
| Baozun Inc | China | 3,061 | 35.0 | 7.9 | 14.4 | 20.2 |
| Shop Apotheke Europe NV | Germany | 2,940 | 29.9 | #N/A | 20.8 | 91.0 |
| Shutterstock Inc | Global | 2,490 | 4.4 | 15.7 | 11.4 | 14.5 |
| MakeMyTrip Ltd | India | 2,457 | 5.3 | -38.6 | -15.6 | #N/A |
| Overstock.com Inc | United States | 2,226 | -19.9 | 3.6 | 93.4 | 20.5 |
| Yelp Inc | Global | 2,138 | 7.6 | -2.2 | -3.1 | 10.3 |
| eHealth Inc | United States | 1,897 | 101.4 | 15.4 | 74.7 | 8.9 |
| Jumia Technologies AG | Africa | 1,051 | 24.3 | -164.2 | 0.8 | #N/A |
| PetMed Express Inc | United States | 645 | 0.2 | 27.6 | 3.6 | 12.2 |
| Aggregate / mean | 3,485,674 | 29.6 | -1.9 | 15.7 | 69.1 |
Source: Bloomberg and Saxo Group
* Region is the main geographical revenue segment, and global if geographical segments are almost equal
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...