5 Hot IPO Stocks to Buy for the Future of Shopping

Posted on February 22, 2021 |

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5 Best IPO Stocks in Ecommerce to 10x Your Money

If there is one trend I’d say every investor needs exposure to for the next decade, I would say it’s got to be ecommerce.

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Online Spending Surges During the Pandemic

Online spending of $861 billion represented 21.3% of total retail sales last year, up from just 15% in the year prior. According to data from Shopify, 84% of consumers shopped online during the pandemic with 150 million people going online to shop for the first time. In fact, the jolt the pandemic gave to online shopping was like 10-years’ worth of growth all in just one quarter of the year.

Data from Mastercard shows the online spending spree isn’t over with online sales up 62% in January versus the year before and even overall retail sales up 9.2% from 2020. Home goods logged their eighth-consecutive month of gains and after weakness last year, consumers got back to refreshing their wardrobe driving online apparel sales up 52% last month.

The Potential of Ecommerce

And the reason why I say this is the #1 trend investors need to be in is that, unlike AI or virtual reality or all the other big trends I’m investing for, ecommerce has the momentum of more than a decade behind it and at least another decade ahead.

So we have this unstoppable trend pushing ecommerce stocks higher but I don’t think the best opportunities are in the established players. The Amazons, the Googles, even the smaller players like Overstock and StitchFix which I recommended in August just before shares surged 250% over the last six months. These companies have had years to benefit from the trend in ecommerce…I want new startups, ones just seeing that booming growth!

How to Find Ecommerce Stocks with Recent IPOs

Instead, in this video, I’m going to highlight the ecommerce stocks that have just recently issued shares. Those IPOs from this year and last that are changing how we shop and the companies taking market share fast. I’ll show you how to find ecommerce stocks with recent IPOs, how to narrow your list and what to look for. Then, I’ll reveal the five best IPO stocks I’m watching in ecommerce for the future of shopping!

To find my list of stocks to research, I’m going to use the Stockcard.io platform because it’s got two features I really like for searching stock lists. I can click here on the Discover tab and see these collections of stocks around certain themes and we’ve got one here for the future of shopping.

The collection includes 112 stocks in that ecommerce theme and I can click through to see all the fundamentals laid out in these four cards; growth, operations, stock performance and valuation.

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I could also just search here for a theme, so ecommerce and the drop-down is going to show me all the stock lists in that. Here we’ve got a few different lists from general ecommerce to luxury, social and even some in that automotive platforms space.

Finally here, if I want to narrow my list by recent IPOs, I can start a filter and type in IPO as a keyword search. The platform creates stock lists by IPO year, so I’ll grab all the 2020 IPO stocks and then filter by company size and growth potential.

5 Hot IPO Stocks in Ecommerce

Now I’ve taken those lists and I want to narrow it to those five ecommerce stocks to watch. I’ll do that by looking for companies with strong sales growth and an industry trend that should support growth beyond just the shift to ecommerce. I also want to make sure I’m investing in different categories within the trend, so not just ecommerce stocks of apparel retailers or auto platforms but getting that broader exposure to the them.

Our first ecommerce stock is one of the larger ones at $5.4 billion, Poshmark, ticker POSH.

The company is an online apparel marketplace with over 70 million users and $4 billion in gross merchandise volume. What really drives the app though is the social community built up around it and more than 20.5 billion social interactions in 2019 alone.

What I really like about Poshmark is its data-driven approach. A feed algorithm is used to customize the shopping experience, so the more someone uses it, the better that user experience is going to get.

Now the company just had its IPO in January of this year so there isn’t going to be a lot of data to go on but we do have financials back to 2018. Poshmark grew revenue by 38% in 2019 from the year before and 28% in the first nine months of last year but more impressive was even on that growth, it was able to lower its costs by $15 million so the operating profitability jumped into positive territory.

Shares trade for about 21-times last year’s sales but are actually down about 10% from the IPO. I like this one on that long-term ecommerce trend and think this one might be a takeover target eventually on that data-driven algorithm. All that consumer data as well as the social network built up around the app, that could be worth big money for a traditional retailer.

Next was one of the biggest IPOs of last year, delivery app DoorDash, ticker DASH.

The delivery app connects over 390,000 merchants and 18 million customers, completing 900 million orders since 2013. DoorDash is by far the market leader in food delivery with upwards of half the market but that still represents less than 6% of the U.S. population so still plenty of growth left.

The company built its platform to target that $600 billion market for restaurant and food services but could be about to expand into other verticals outside of food. It’s got the logistics network and merchant services, it’s a short leap into delivery for just about anything.

Sales grew by over 200% in 2019 and of course, the company was one of the few to benefit from the lockdowns, driving a three-fold increase in revenue over the first nine months of 2020. The company has yet to turn a profit but it’s another that was able to control expenses while it grew sales.

Now there was a lot of talk around valuation for DoorDash when it issued shares in the IPO. Shares are only up about 8% since the IPO and trade for nearly 25-times expected sales from last year. If it can move into delivering other products, I think that rationalizes the valuation here very quickly but keep your eye on this one.

Shift Technologies, ticker SFT, is one of two auto ecommerce platforms on the list and in a great trend.

Shift offers an all-in-one ecommerce platform for the used car market from research to test drives, ownership and selling. Users can get inspections, schedule a test drive and do all the purchase work directly through the app.

Ecommerce is less than 1% of the auto retail market though 97% of consumers say they do online research before shopping…so those customers are already there and ready to start the process. The U.S. used car market is over $841 billion but completely fragmented between personal sales and small dealers.

Now Shift is pre-revenue so probably one of the riskier stocks in the group and shares are flat from its IPO last February. It’s a disruptive app though and could change the way we buy cars.

After the massive run in Shopify over the last year, I was excited when BigCommerce Holdings, ticker BIGC, had its IPO last September.

The company operates a software-as-a-service ecommerce platform helping businesses get online and grow. It’s a little better known for the business-to-business side of the market but also has that consumer-user side as well like Shopify.

Ecommerce platform spending is rising along with that general theme in sales and is expected to reach $7.8 billion by 2024 for 19% annualized growth. Bigcommerce grew sales by 22% in 2019 and revenue was up 35% in the first three quarters of last year.

Shares are flat since the September IPO and trade for 35-times expected 2020 revenue…which seems really high until you consider that shares of Shopify trade for 72-times annual sales. So I think this could be a sleeper in the ecommerce platform space and a single earnings release is all it could take to send shares higher.

Vroom Inc, ticker VRM, is a competitor to Shift Technologies but larger and with established revenue.

Vroom offers the same end-to-end used car experience for both buyers and sellers and announced in December its acquisition of CarStory to add AI-driven data analytics and retailing services.

Revenue was up 25% to $221 million in the third quarter with gross profit up 120%. For the first three quarters of last year, units sold rose 86% with total revenue up 62% on a year-over-year basis.

This one is actually the cheapest of the group, trading at under 10-times on a price-to-sales basis and booking excellent growth.

The best opportunity is in the recent IPO stocks that will take the online shopping trend and steal market share. It's about time you invest in these ecommerce IPO stocks.