E-commerce
is
set
for
a
boom,
according
to
Morgan
Stanley,
which
predicts
that
the
industry
will
be
worth
$5
trillion
by
2027.
That’s
an
increase
of
8%
at
a
compound
annual
growth
rate
from
$3.4
trillion
in
2022,
the
bank
said
in
a
recent
report.
“We
largely
saw
a
focus
on
profitability
over
growth
emerge
through
2022,”
Morgan
Stanley
analysts
wrote.
“We
see
a
more
rational
investment
and
customer
acquisition
stance
supporting
our
case
around
marketplace
monetization
and
profitable
growth
potential.”
Morgan
Stanley
picked
stocks
to
play
the
boom,
choosing
them
based
on
their
“outsized
growth
potential,”
market
leadership
and
“attractive”
trading
multiples
relative
to
history,
among
other
factors.
It
named
eight
overweight-rated
stocks
in
the
report,
three
of
which
are
the
bank’s
top
picks.
They
are
Amazon
,
Alibaba
and
Argentinian
company
MercadoLibre
.
Here’s
what
the
bank
said
about
each
stock.
Amazon
Morgan
Stanley
noted
that
although
Amazon
has
around
37%
of
the
U.S.
e-commerce
market,
it
has
captured
only
9%
of
U.S.
retail
sales.
That
indicates
it
has
room
to
grow
as
consumers
continue
to
shift
to
online
shopping,
according
to
the
bank.
“When
it
comes
to
core
consumer
offerings
(depth
of
inventory,
guaranteed
speed
of
shipping,
incremental
offerings
beyond
eCommerce)
and
overall
volume
of
business,
Amazon
continues
to
lead
peers,”
it
wrote.
The
bank
is
optimistic
about
the
company’s
cloud
business
AWS,
predicting
it
will
grow
around
19%
year
on
year
in
2024.
“Amazon’s
high-margin
businesses
continue
to
allow
Amazon
to
drive
greater
profitability
while
still
continuing
to
invest,”
the
bank’s
analysts
wrote,
adding
that
cloud
adoption
is
reaching
an
“inflection
point.”
It
gave
Amazon
a
price
target
of
$150,
implying
42%
upside
from
Friday’s
closing
price
of
$105.66.
Alibaba
The
market
has
underappreciated
Alibaba’s
“leverage
to
a
consumption
recovery”
in
China,
Morgan
Stanley
said.
“Valuation
remains
attractive.
At
current
levels,
we
think
the
stock
underrepresents
the
value
of
cloud,
other
business
segments
and
investments,”
the
analysts
added.
“Strong
cash
flow-generating
capabilities
and
continued
share
buyback
could
also
provide
downside
support.”
The
bank
added
that
the
e-commerce
giant
is
a
key
beneficiary
of
the
country’s
easing
regulations.
“For
the
past
1-2
years,
Alibaba
has
been
in
focus,
so
we
think
it
could
outperform
other
Chinese
Internet
stocks
as
the
[regulatory]
environment
eases,”
the
bank
said.
It
gave
Alibaba
a
price
target
of
$150,
implying
80%
upside
from
Friday’s
closing
price
of
$83.22.
MercadoLibre
Morgan
Stanley
said
it
sees
MercadoLibre
as
a
“share
gainer”
in
a
region
that
still
has
a
“multiyear
eCommerce
penetration
opportunity.”
It
said
MercadoLibre
is
the
leading
marketplace
in
Latin
America,
and
predicts
the
firm’s
regionwide
share
will
grow
by
2
percentage
points
to
31%,
supported
by
its
logistics
investments
and
benefits
of
scale.
“MELI
is
a
LatAm
eCommerce
and
fintech
leader.
We
see
the
company
well
positioned
to
capture
the
secular
growth
opportunities
on
both
fronts,”
the
bank
said,
adding
that
the
firm
can
profit
from
an
expansion
of
services
such
as
adverstising
and
logistics.
It
gave
MercadoLibre
a
price
target
of
$1,770,
or
42%
potential
upside.
—
CNBC’s
Michael
Bloom
contributed
to
this
report.
