With the pandemic accelerating the shift to online shopping by as much as five years, ecommerce companies appear very well-placed for growth in the coming years.
But how should investors gain exposure to this trend? Two ecommerce companies that are rated as buys are listed below:
Kogan.com Ltd (ASX: KGN)
One of Australia’s fastest growing ecommerce companies is Kogan. After a stellar performance in FY 2020, Kogan’s strong form has continued in the current financial year.
During the first four months of FY 2021, Kogan’s sales were up 99.8% on the prior corresponding period. Things were even better for its earnings thanks to margin improvements. The company’s operating earnings grew a massive 268.8% over the same period last year.
Since then, the company has bolstered its growth through the value accretive acquisition of fellow ecommerce company Mighty Ape for $122 million. Mighty Ape operates online stores in New Zealand and Australia and has a focus on gaming, toys, and other entertainment categories. It has more than 690,000 unique customers and more than 895,000 subscribers.
For the 12 months ended 30 September, Mighty Ape generated revenue of A$120.1 million, gross profit of A$37.8 million, and EBITDA of A$9.9 million.
One broker that was a fan of the acquisition was Canaccord Genuity. It has a buy rating and $25.00 price target on Kogan’s shares. It sees the potential for significant revenue and cost synergies from the deal.
MyDeal.com.au Limited (ASX: MYD)
Another ecommerce company growing quickly is MyDeal.com.au. It is an online retail marketplace provider with a focus on furniture, homewares, appliances, technology, baby products, and hardware.
As with Kogan, MyDeal has been a very strong performer over the last 12 months and this has continued in FY 2021. During the first quarter, the company delivered a 317% increase in gross sales to $56.67 million. This was underpinned by a 268% increase in active customers to 669,897.
RBC Capital Markets is very positive on the company. The broker has a buy rating and $1.60 price target on its shares. It believes MyDeal is at an inflection point as annualised gross transaction value exceeds $200 million and customer numbers close in on 700,000.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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