It has been a tough few months for investors that own e-commerce ASX shares.
The discussion surrounding inflation, interest rates and COVID-19 reopening continues and this has hurt investor sentiment about those businesses.
However, I think the valuations have fallen so far that they actually represent good long-term value.
I believe that more people are going to do more of their shopping in the coming years.
The e-commerce model has the potential to deliver rising profit margins as they see more volume.
These two ASX shares could be opportunities:
Kogan.com Ltd (ASX: KGN)
Kogan is one of the leading e-commerce companies. It sells a wide range of products like TVs, appliances, clothes, furniture, phones, computers and so on.
The Kogan share price has dropped 44% since the start of the 2021 calendar year.
One of the interesting things Bout the Kogan model is that it also offers a number of extra services like mobile, insurance, superannuation, credit cards and energy.
The final string to Kogan’s bow is its membership program that gives benefits like free shipping.
The e-commerce ASX share has definitely suffered some growing pains. Excessive inventory and demurrage costs are going to take their toll on the 2021 calendar year earnings.
But I think there’s a good chance those issues are going to be solved in the coming months. The
Looking ahead, CommSec numbers suggest Kogan can generate 48 cents of earnings per share in FY23. That puts the Kogan share price on 22 times the 2023 financial year earnings. That looks reasonably priced to me.
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty has an e-commerce website with over 260 brands and 10,800 products.
The Adore Beauty share price is down 18.75%, since the start of the 2021. However, it’s actually up 37% over the last month after the decline in reaction to a trading update.
That trading update was actually pretty strong from the e-commerce ASX share in my opinion. FY21 third quarter revenue was up 47% to $39.4 million, with active customers up 69% to 687,000. Adore Beauty explained that it’s seeing strong retention and re-engagement rates for new customers acquired during the COVID period.
The Adore Beauty Loyalty program was launched in March, with sign-ups ahead of expectations.
Management provided guidance that it’s on track to achieve revenue growth of 43% to 47% year on year.
Over the longer-term, Adore Beauty thinks it can achieve scale benefits and operating leverage, leading to higher EBITDA margins (EBITDA explained) over time as it grows revenue.
There are other ASX growth shares in the e-commerce space that might make good longer-term investments.
