Shutterstock Shares Down Post Merger; Ex-GameStop CEO to Run Marketplace

The e-commerce giants are increasingly solidifying their dominance in the global retail market. With the proliferation of digital shopping platforms, these companies are leveraging advanced technology, logistics networks, and competitive pricing strategies to capture a significant share of the retail pie.

Given the industry’s robust prospects, investors may want to explore leading e-commerce stocks, including Amazon.com, Inc. , Alibaba Group Holding Limited , and Sea Limited , for potential gain and growth.

The companies are spearheading technological advancements in e-commerce, including artificial intelligence, machine learning, and big data analytics. Advances in AI and machine learning have enabled deep personalization techniques to customize content by user, which also increases customer retention, leading to an efficient sales process. Also, innovations like voice-activated shopping assistants and augmented reality fitting rooms are setting new benchmarks in the online retail space.

According to the Census Bureau of the Department of Commerce reports, in the third quarter of 2024, retail e-commerce sales were $300.1 billion, indicating an increase of 7.4% year-over-year. Further, the expected global e-commerce growth for the fourth quarter of 2024 is $3.64 trillion.

The global e-commerce market is anticipated to reach $83.26 trillion by 2030, exhibiting a CAGR of 18.9%. Considering these conducive trends, let’s examine the fundamentals of the three above-mentioned e-commerce stocks.

Amazon.com, Inc. (AMZN)

AMZN is a global giant in the retail sector, offering consumer products, advertising, and subscription services through online and physical stores across North America and international markets. The company has a market cap of $1.76 trillion and operates through three segments: North America; International; and Amazon Web Services (AWS).

On December 9, AMZN and Intuit Inc. announced a multi-year partnership to empower millions of Amazon sellers with Intuit’s AI-driven platform, offering financial management tools, compliance support, and capital access. Intuit’s AI-driven expert platform will allow AMZN’s sellers to discover and access Intuit’s platform seamlessly, benefiting from powerful financial insights.

AMZN's trailing-12-month ROCE and ROTA of 22.56% and 8.53% are 107.3% and 119.6% higher than their respective industry averages of 10.88% and 3.88%. Likewise, its trailing-12-month asset turnover ratio of 1.16x is 17.8% above the industry average of 0.98x.

For the third quarter of 2024, which ended on September 30, AMZN's total net sales increased 11% year-over-year to $158.88 billion, while the operating income stood at $17.41 billion, up 55.6% year-over-year. Its net income amounted to $15.33 billion, representing an increase of 55.2% from the last year’s period. Also, the company’s EPS for the quarter increased 52.1% year-over-year to $1.43.

Analysts expect AMZN’s revenue for the fourth quarter (ended December 2024) to increase 10.2% year-over-year to $187.27 billion, while its EPS for the same quarter is expected to grow 47.8% from the prior year to $1.48. Moreover, the company has surpassed Street EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 52.9%, closing the last trading session at $222.11.

AMZN’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

AMZN has an A grade for Sentiment and a B for Growth, Momentum, and Quality. It is ranked #16 out of 50 stocks in the A-rated Internet industry. Click here to see the additional ratings for AMZN (Value and Stability).

Alibaba Group Holding Limited (BABA)

Based in Hangzhou, China, BABA provides technology infrastructure and marketing platforms to help merchants, brands, retailers, and other businesses to engage with their users and customers globally. The company operates through seven segments: China Commerce; International Commerce; Local Consumer Services; Cainiao; Cloud; Digital Media and Entertainment; and Innovation Initiatives and Others.

On December 5, 2024, BABA launched Pic Copilot, an advanced AI-driven e-commerce design tool in the United States tailored for SMEs to save photography and design costs while boosting sales. This launch features advanced tools like virtual try-ons, generating significant savings and enhanced marketing performance during its successful Black Friday trial.

The stock’s trailing-12-month net income margin of 8.98% is 105.36% higher than the industry average of 4.37%. Similarly, its 8.75% trailing-12-month levered FCF margin is 93.6% above the industry average of 4.52%. Also, its trailing-12-month ROTA of 4.90% compares favorably to the industry average of 3.88%.

In the fiscal second quarter that ended on September 30, 2024, BABA’s consolidated revenue increased 5.2% year-over-year to $33.70 billion. The company reported income from operations of $5.02 billion, indicating a 4.9% growth from the prior-year quarter. Its net income came in at $6.21 billion, up 63.1% year-over-year, while its earnings per ADS grew 68.7% from the prior-year quarter to $2.59.

Street expects BABA’s revenue for the fiscal third quarter (ended December 2024) to increase 5.2% year-over-year to $38.05 billion. Its EPS for the same period is expected to register a 3.6% growth from the prior year, settling at $2.73.

BABA’s shares have surged 17.9% over the past nine months and 15.7% over the past year to close the last trading session at $84.48.

BABA’s POWR Ratings reflect its positive outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

It also has a B grade for Growth, Momentum, Sentiment, and Quality. In the 43-stock A-rated China industry, it is ranked #9. To see BABA’s Value and Stability ratings, click here.

Sea Limited (SE)

Headquartered in Singapore, SE engages internationally in digital entertainment, e-commerce, and digital financial service businesses. The company provides a Garena digital entertainment platform to access online games, eSports operations, and other entertainment content, as well as a Shopee e-commerce platform for integrated payment and logistics infrastructure and seller services.

In terms of the trailing-12-month levered FCF margin, SE’s 11.08% is 25.1% higher than the 8.86% industry average. Similarly, its 0.78x trailing-12-month asset turnover ratio is 58.2% higher than the industry average of 0.49x.

During the fiscal third quarter that ended on September 30, 2024, SE’s revenue increased 30.8% year-over-year, amounting to $4.33 billion. Its gross profit amounted to $82.89 million, increasing 29.1% year-over-year. Its operating income came in at $202.42 million compared to the year-ago net loss of $127.74 million.

In addition, the company’s net income stood at $153.32 million compared to the prior-year quarter’s loss of $143.98 million, while its EPS came in at $0.24 versus a loss of $0.26 per share last year. Also, the total adjusted EBITDA rose significantly from the prior year’s quarter to $521.34 million.

The consensus revenue estimate of $4.60 billion for the fiscal fourth quarter (ended December 2024) represents a 27.3% increase year-over-year. The consensus EPS estimate of $0.70 for the ongoing quarter indicates a significant improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus revenue estimates in each of the trailing four quarters.

The stock has gained 180.7% over the past year and 92.5% over the past nine months to close the last trading session at $106.42.

SE’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has an A grade for Growth and a B for Momentum, Sentiment, and Quality. Within the A-rated Internet industry, it is ranked #21 out of 50 stocks. Click here to see SE’s ratings for Value and Stability.

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AMZN shares were trading at $222.88 per share on Wednesday afternoon, up $0.77 (+0.35%). Year-to-date, AMZN has gained 1.59%, versus a 0.44% rise in the benchmark S&P 500 index during the same period.

The merger of Getty Images and Shutterstock may draw questions from regulators, given that they are leaders in the stock images market, Macquarie analysts Tim Nollen and Ross Compton say in a research note. A combination would appear to consolidate a market that's already narrowly defined, they say. That said, online imagery is already widely available through Google or other internet resources, and generative AI is poised to upend the imagery market anyway, the analysts say. Getty may be looking at the merger as a means to better compete in a media world being infiltrated by generative AI, they say. (dean.seal@wsj.com)

By Dean Seal

Shares of Getty Images Holdings dropped close to an all-time low, shedding gains made Tuesday after the company announced its merger with Shutterstock.

The visual content company's stock was down more than 16% at $2.67 in afternoon trading. Shares had been recovering from a record low of $2.06 at the end of December and rose 24% on Tuesday to close at $3.19.

Before Tuesday's opening bell, Seattle-based Getty and stock-photo rival Shutterstock said they would merge to form a company worth about $3.7 billion. The combined companies would aim to meet booming demand for licensed images and videos as artificial intelligence disrupts content creation.

Macquarie analysts Tim Nollen and Ross Compton said in a research note Tuesday that the deal would be accretive through cost synergies, though they noted that some regulatory questions could arise, since the merger would consolidate a market that is already narrowly defined.

New York-based Shutterstock also tumbled Wednesday, losing 10% to $30.97.

Write to Dean Seal at dean.seal@wsj.com