The major indices are all trading lower at midday following an active and volatile start to the holiday-shortened week, with the escalating Ukraine crisis in focus. Russian leaders sent troops to the disputed eastern regions of Ukraine, violating its previous promises and triggering a swift response from the U.S. and its allies, with several trade-related and financial sanctions already being put in place today. While global risk assets are trading well above their overnight lows, despite a massive initial selloff, U.S. stocks still hit multi-week lows in early trading, with the tech sector and the Nasdaq suffering the biggest hit.
Stock Pick Summary:
Today, we are extending our stake in one of our killer picks that we identified when not many people spotted it, resulting in stellar returns for our members. Today, as several other growth stocks, the company is out of favor, but we see it as an opportunity for patient investors.
It is more than just a commerce tool as many see it as. While it derives the majority of its revenue from taking slices of transactions processed on its platform, the true value is in the ecosystem it creates. Fulfillment, payment processing, point-of-sale systems, and marketing are only a few of the value-added options that merchants have when it comes to using it as a commerce platform, and each of these is a vital piece of its increasingly sticky solution.
The growth naturally picked up in the early months of the COVID-19 crisis. Revenue went from climbing at an impressive 47% clip in 2019 to a stunning 86% pace in 2020. Growth has slowed to a 66% increase through the first nine months of 2021 and is decelerating. However, it is still showing healthy platform performance. It now commands the country's second-thickest slice of the e-commerce market after the juggernaut Amazon.
The e-Commerce company submitted an impressive earnings card for the fourth-quarter that continued to show massive year over year gains in revenues and gross merchandise value. However, the outlook for FY 2022, which assumes slowing growth in the e-Commerce market, spooked investors.
Strong Revenue Growth
Source: Company Earnings Report
Surging subscription and merchant revenues were the result of after-effects stemming from the COVID-19 pandemic which shifted a considerable amount of traffic and gross merchandise value (GMV) to online sellers that use its products and services. As the pandemic waned in FY 2021, growth in gross merchandise value also decelerated. Gross merchandise value still surged 31% year over year to $54.1B in Q4'21 and 47% year over year to $175.4B in FY 2021. The annual rate of GMV growth, however, declined from 96% in FY 2020. While it is true that the gross merchandise value growth is decelerating, the e-Commerce firm still added a massive $55.8B in new gross merchandise value to its platform in FY 2021.
It has also been compensating for churn (loss of customers) by improving monetization of customers that do stay on their platform. Revenue growth within the annual new customers, driven by GMW growth and expanded wallet share has helped offset revenue loss from merchants leaving the platform.
A slowdown in revenue and gross merchandise value growth has the potential to add pressure to its already lowered sales multiplier factor going forward. However, we believe that a normalization of growth rates in the e-Commerce sector after the pandemic is not a reason to panic. We expect it will continue to grow rapidly, especially in the market for online merchant solutions which generates the majority of the e-Commerce company's revenues. Be prepared for a volatile ride, but patient members could be rewarded.
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