The 3 Most Undervalued E-Commerce Stocks to Buy in September 2023

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Joel Baglole

Sat, Sep 16, 2023, 7:00 AM 4 min read

Online merchants and payment companies thrived during the pandemic when the whole world was forced to shop virtually. However, as the Covid-19 crisis has retreated, so too have the share prices of e-commerce companies. Even a dominant player like Amazon (NASDAQ:AMZN) is trading 20% lower today than the market’s pandemic peak in November 2021.

Yet the e-commerce sector remains formidable. According to Statista, revenue generated by e-commerce companies worldwide is expected to surpass $3.5 trillion this year. And while we’ve all returned to in-person shopping, online payments and purchasing goods through the internet have become necessary and ubiquitous to our everyday lives.

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As the industry rolls on, let’s look at the three most undervalued e-commerce stocks to buy this month.

eBay (EBAY)

Source: ShutterStockStudio / Shutterstock.com

Remember when eBay (NASDAQ:EBAY) gave rival Amazon a serious run for its money in the online retailer space?

Yet in the last decade, Amazon has clearly sprinted ahead and today dwarfs eBay in terms of annual sales and market capitalization. With its focus on online auctions and the resale market for consumer products, eBay has fallen behind as an e-commerce player. While it enjoyed a resurgence during the Covid-19 pandemic, EBAY stock today is trading 42% lower than where it was in October 2021. In the last five years, eBay’s share price has gained 30%, about half the increase seen in AMZN stock.

EBAY stock looks like a bargain right now, trading at 17 times future earnings. It also pays a dividend of 25 cents a share for a yield of 2.25%.

Why hope for a turnaround in eBay’s business? The company is focusing more on its advertising business lately and charging merchants more to promote their products on its site. And eBay recently launched a new consignment business for luxury goods that are being sold on its platform.

While it might never rival Amazon, the built-in customer base, attractive valuation, and dividend payout make EBAY stock worth considering.

PayPal (PYPL)

PayPal logo and front of headquarters. PYPL stock

Source: Michael Vi / Shutterstock.com

CNBC host Jim Cramer recently raised a few eyebrows when he called online payments company PayPal Holdings (NASDAQ:PYPL) a “value trap“.

However, the criticism seems warranted given the poor performance of PYPL stock. Over the last 12 months, the company that was co-founded by Peter Thiel and Elon Musk, has fallen 33%, including a near 15% decline this year. Looking out five years, the stock is down 29%.

Currently trading with a price-earnings (P/E) ratio of 18, considered low for a tech firm, PYPL stock looks undervalued.

Can the decline be reversed? PayPal’s downfall has been due to many factors, such as rising competition in the online payments space. In addition, factor in a significant slowdown in users and activity on its platform after the Covid-19 pandemic. Some analysts say the company hasn’t been the same since eBay spun it off to shareholders in 2015, making it an independent company again.

Etsy (ETSY)

Etsy logo is over an orange background with a little shopping cart with packages in it. ETSY stock.

Source: Sergei Elagin / Shutterstock

Etsy (NASDAQ:ETSY) sells handmade and vintage items ranging from jewelry and handbags to clothing and crafts.

Slowing growth on its platform has pushed ETSY stock down 78% from its pandemic high in November 2021. In the last 12 months, the share price has pulled back 40%. While that kind of decline might make many investors take a pass, not all is lost with this stock.

For example, Wolfe Research is bullish on ETSY stock, giving it a “buy” rating and a $100 price target on shares. The price target is 50% higher than its current trading spot. Wolfe analysts point to Etsy’s improving financial situation, which was on display with its Q2 financial results.

Etsy reported a profit of 45 cents a share and revenue of $629 million, compared to analysts’ expected earnings of 42 cents a share and sales of $619 million. Wolfe Research also notes that Etsy has made several strategic acquisitions coming out of the pandemic that should help its business grow, and points to improving margins at the company.

In time, sentiment towards ETSY stock should improve, thus making it one more e-commerce stock to buy now.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.