2 leading ASX e-commerce shares that could be buys in August 2021

Adore Beauty is one of the e-commerce potential opportunities in August 2021.

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The ASX shares in the e-commerce space have seen significant change over the last 18 months. Some of them could still be an opportunity.

Businesses in the digital space are tapping into growing demand for the ability to buy products online. Customers have been buying a lot of things online due to various effects of the global COVID-19 pandemic.

These two ASX shares in the e-commerce space could be opportunities:

Adore Beauty Group Ltd (ASX: ABY)

Adore Beauty is a beauty focused e-commerce business. The business says that it has integrated content, marketing and an online retail platform. It partners with a broad and diverse portfolio of over 260 brands and 10,800 products. Adore Beauty operates in both Australia and New Zealand.

It’s currently rated as a buy by the broker UBS with a price target of $5.60. That suggests a double digit increase of the share price over the next 12 months, if the broker is right.

The broker is attracted to the story of the digital growth trend, loyal customers and long-term growth of revenue.

In an update for the third quarter of FY21, it said that its revenue was $39.4 million – an increase of 47% on the prior corresponding period. It also said that its active customers had increased 69% over the prior corresponding to 687,000.

Adore Beauty boasted of strong retention and re-engagement rates for new customers acquired during the COVID-19 period. It’s seeing a structural shift in consumer behaviour towards online retail, based on continued strong retention of customers.

At the time, the e-commerce ASX share said that it was on track to achieve FY21 revenue growth of between 43% to 47%.

The company is investing heavily for growth, but it’s expecting scale benefits and increased operating leverage as it gets bigger, leading to a higher earnings before interest, tax, depreciation and amortisation (EBITDA) margin.

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is another business in the e-commerce space.

The company is very clear with its goals. At the time of its FY21 result release, it said:

We will continue our reinvestment strategy, investing into growth areas of the business to grow our online market leadership position with the ultimate goal of becoming the largest retailer (online and offline) for furniture and homewares in our home market.

The business is seeing high levels of demand and growth and it wants to pursue even more.

In FY21 it saw full year revenue growth of 85% to $326.3 million. In the first few weeks of FY22 in July it saw revenue growth of 39%.

The e-commerce ASX share says it is benefiting from a number of tailwinds. That includes the ongoing adoption of online shopping due to structural and demographic shifts, an acceleration of these trends due to COVID-19, an increase in discretionary income due to travel restrictions and strong housing market growth.

Revenue per active customer increased 12% year on year due to customers repeat buying more often and spending more when they do.

Temple & Webster is expecting scale benefits as it gets bigger. But for now, it’s going to heavily invest for growth so it can capture the shift to online spending by households.

Should you invest $1,000 in Adore Beauty right now?

Before you consider Adore Beauty, you'll want to hear this.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has recommended Temple & Webster Group 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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