Why I am Buying This E-commerce Stock!
Introduction
In this report, I will be delving into my recent stock purchase. This is a company that gained widespread attention over the last couple of years, becoming a household name in the commerce industry. The Covid-19 Pandemic saw the share price explode, far beyond an overvalued price point. Now after immense downwards pressure, the share price looks extremely undervalued.
Market Overview
Overview
E-Commerce describes how companies and individuals buy and sell goods and services over the internet. The segments of E-Commerce are made of computers, tablets, smartphones and other devices. With how dependent we have become on the internet, pretty much everything can be bought and sold over the internet. E-Commerce has become integral to how we trade on a global scale. This has made the industry extremely competitive, with a few leaders controlling the space.
As our dependency on technology changes, so will our interaction with computers through commerce. We have already seen extreme changes in the E-Commerce space and this is likely to continue to align in our daily lives.
Across E-Commerce, is the SaaS industry. This stands for “Software as a Service” and is one of the largest industries in the world. Many of the biggest companies in the world adopt SaaS models, by offering their software on a subscription basis. The business provides the infrastructure, security and servers - for the customer to ‘rent the service’ every month.
The world has transitioned into a subscription-based model for almost every leading business. The recurring revenue and predictability of monthly users have become extremely favourable for business owners. This has been met by large flows of capital from investors allowing these businesses to grow explosively over the last decade.
Market growth
SaaS businesses are expected to continue to grow for the foreseeable future. The following data has been taken from Spendesk.com:
The US SaaS sector saw record levels of US venture capital investment in 2021: $94 billion USD invested across 4,459 deals. (Silicon Valley Bank)
It’s estimated that by 2025, 85% of business apps will be SaaS-based. (Bettercloud)
Investments in Indian SaaS companies increased to $4.5 billion in 2021, a 170% increase over 2020. (Economic Times)
The SaaS industries in China, India, and Brazil are expected to grow by over 2x between 2020 and 2025.
According to SkyQuest Technology: “The Global SAAS Market is expected to reach a value of USD 720.44 Billion by 2028, at a CAGR of 25.89% over the forecast period (2022 - 2028) - SkyQuest Technology”.
For the retail sales industry, Statista has provided the following data:
Forbes - “According to a recent industry report, e-commerce will account for 20.4% of global retail sales by the end of 2022, up from only 10% five years ago”. This is expected to continue.
Future of the Industry
Because we can reasonably expect both the SaaS and retail sales industries to grow for the foreseeable future, a business that incorporates both sectors could be an extremely valuable company.
Especially one that has a huge influence on social media-based businesses. Around 3.5 billion people are on social media platforms, with a high number of them purchasing sponsored ads or brand pages. According to the 2021 Sprout Social Index™, 90% of consumers will purchase from a brand they follow on social media.
The synergy between social media and commerce has become so intertwined that businesses that are not effective at both are left behind. Only the strongest survive in this modern-day marketplace.
When we start to put this all together, we can see that service-based subscription businesses are not only going to continue but become more predominant in the business world. This is also true for how businesses and consumers interact with each other through social media. Online stores that use social media to market are only going to continue. The stock we are exploring today is…