Morgan Stanley is forecasting global e-commerce to grow 8% growth per year through 2027 when it will reach $5 trillion, according to a report published April 23.
The report highlighted that e-commerce volumes represented 22% of overall retail sales globally, excluding autos, restaurants, and services last year as penetration rose 220 basis points from 2019 pre-Covid levels.
While the highest-penetration countries and categories saw reversion in 2022, Morgan Stanley forecasts a multiyear, secular up-trend persisting. The analysts broadly forecast e-commerce penetration resuming gains, reflecting secular trends around retail digitalization and reduced buying friction.
The MS analysts highlight seven emerging market countries with >15% forecast e-commerce compound annual growth rates through 2027. They see the marketplace mix shift continuing at the company-level, highlighting outsized marketplace growth for operators with hybrid merchandise models.
The report also indicates that Morgan Stanley’s conviction around core pricing has stablilized across global e-commerce providers.
Morgan Stanley has called out Amazon.com (US:AMZN), Alibaba Group Holding (US:BABA) and MercadoLibre (US:MELI) as its top picks, but also highlighted that it has positive calls on PDD Holdings (US:PDD), Sea Ltd (US:SE), Coupang (US:CPNG), Farfetch (US:FTCH) and Temple & Webster (AU:TPW).
Amazon.com (US:AMZN)
The MS analysts like AMZN stock because the business is experiencing growth in share gains, returning to pre-COVID levels, with Amazon gaining ~160 basis points share of adjusted retail sales in 2022, up from ~70 bps in 2020, and closer to the ~200 bps of share it gained annually from 2016 to 2019. Morgan Stanley highlights how AMZN’s inventory and speed of Prime delivery continues to lead the sector. The report also discussed how the AMZN offering can better compete for the ~$1.9 trillion of offline spend in the U.S. alone on categories including grocery, household products, prescriptions, and alcohol.
Alibaba Group Holding (US:BABA)
Alibaba Group Holding is Morgan Stanley’s top pick in the China Internet sector, with an inflection in customer management revenue (CMR) and cloud to drive high-quality earnings upside. Alibaba has leverage on a consumption recovery in China, given a likely stronger rebound in categories it has higher indexing and monetization rates, driving CMR to return to positive growth in Q1 of fiscal 2024. Cloud revenue growth is also expected to reaccelerate in that period, driven by non-Internet industries.
MercadoLibre (US:MELI)
MercadoLibre is seen as a share gainer in a region, Latin America, that still has a multiyear e-commerce penetration opportunity. MELI’s integrated ecosystem drives customer engagement and accelerates market share gains, particularly in Brazil and Mexico. The analysts believe the company can capture incremental share in these markets, with e-commerce penetration at just 6% in Brazil and 3% in Mexico.
PDD Holdings (US:PDD)
The broker likes PDD Holdings because of its resilient gross merchandise value compared to other e-commerce players. Morgan Stanley is forecasting 17% growth through to 2026 which is well above the China e-com average of 10% over the same period. They also believe the company will gain market share through its improving take rates, resilient low-price user mindset and increased wallet share.
Sea Ltd (US:SE)
Sea Ltd was chosen due to the market leadership of its Shopee platform across Asean. The Singapore-based company is exposed to one of the fastest-growing regions across the globe and the company thinks its Digital Financial Services offering is not priced in to the current valuation.
Coupang (US:CPNG)
Morgan Stanley analysts think Korea’s Coupang is in a unique position because it is the only e-commerce platform with nationwide end-to-end logistics infrastructure, giving it a clear advantage over competitors. They think that CPNG’s push to attract third party volumes is possible because it has fully built out a network that it can use to attract merchants giving them next-day delivery that continues to be important for customers.
Farfetch (US:FTCH)
Farfetch was listed as it is taking market share in an underpenetrated luxury e-commerce category. Morgan Stanley forecasts that this segment of the sector could be the fastest growing as global brands move away from wholesale models that included physical stores and online wholesale distribution.
Temple & Webster (AU:TPW)
The final stock listed with a positive call is Australia’s largest pure-play online homewares and furniture retailer, Temple & Webster. The firm boasts about its wide range of 210,000-plus products from more than 500 suppliers across 200 categories. The analysts highlight that TPW stock is mainly a business-to-consumer model (B2C) but is also growing its business-to-business (trade & commercial) as well as its home improvement business.
This article originally appeared on Fintel
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