At the beginning of 2021, I wrote this piece where I made a few predictions. As 2021 comes to an end, I am reviewing those predictions and grading myself. This is Part 3 of 2021 review. You can find Part 1 here and Part 2 here

One prediction that I made at the beginning of 2021 was that the e-commerce and fintech sector will do well and I picked the following companies in these sectors. Mercadolibre (MELI), Sea Limited (SE), Etsy (ETSY) and Amazon (AMZN). Let’s see how these four companies have done so far in 2021.

Stock Jan 1, 2021 Price

This Year 

High

This Year

 Low

Current

 Price

Performance
MELI $1,675.22 $2020.00 $1,018.73 $1,178.22 -29.66%
SE $196.06 $372.70 $178.80 $212.23 8.25%
ETSY $177.91 $307.75 $153.80 $222.90 25.29%
AMZN $3,256.93 $3,773.08 $2,881.00 $3,394.73 4.23%
Total          8.11%

 

As a basket, this group of 4 stocks is up about 8%. As usual, I also shared the 52 weeks high and low for all four stocks to show how volatile these stocks can be. However, remember that looking at the stock price performance, you might think that these companies are performing poorly but as I share below, that is far from the truth. You will find that these companies are executing flawlessly and taking market share from the physical retail and growing revenues at a brisk pace. Let’s start by looking at MELI revenues and their growth

I wrote after MELI reported Q2 2021 here and below I am updating the table after Q3 results

MELI Revenues 

  Q1 (YoY%) Q2 (YoY%) Q3 (YoY%) Q4 (YoY%)
2019 $474m (93%) $545m (102%) $603m (91%) $674m (84%)
2020 $652m (70%) $878m (123%) $1,116m (149%) $1,300m (149%)
2021 $1.4B (158%) $1.7B (103%) $1.9B (73%)  

 

Forget everything about the stock price of MELI. If you own this business and its quarterly revenues have more than tripled in two years, how would you feel? I would be ecstatic. Not only that, the story of MELI is just starting in Latin America and it has so much more room to grow. MELI is the equivalent of PayPal, Square, Shopify, eBay and Amazon of Latin America and it is about a $60B business with last twelve month revenues of $6.3B making its Price to Sales ratio of less than 10. I have bought and held MELI since 2012 and added several times since then and plan to hold it at least until 2026.

Next up is Sea Limited (SE). I have not written about SE before. First, SEA stands for South East Asia although that is a misnomer. SE runs three different businesses (gaming, e-commerce and fintech) primarily in the South east Asian region although now they are expanding in Latin America and Europe as well. Both MELI and SE are founder-led and firing on all cylinders. Let’s look at SE’s last two years of revenues.

SE Revenues 

  Q1 (YoY%) Q2 (YoY%) Q3 (YoY%) Q4 (YoY%)
2019 $579m (194%) $665m (203%) $763m (214%) $909m (134%)
2020 $914m (58%) $1,287m (93%) $1.2B (99%) $1.6B (102%)
2021 $1.8B (147%) $2.3B (159%) $2.7B (122%)  

I can pretty much copy and paste here what I wrote for MELI above because that is true for SE as well. Here is a business whose revenues have almost tripled in two years and they have such a huge market that they are going after. They are still growing revenues in triple digits even after growing at a breakneck speed in 2020 after the pandemic-induced growth. SE is a new position that I started in 2020 and like MELI, I am very excited to see the growth story play out even though it is only up 8% in 2021, I see a bright future for SE and have no hesitation in holding until 2026. Last twelve month revenues for SE are $8.4B and its market value is $117B making its Price to Sales ratio of about 14 which is slightly higher than MELI but still below its historical levels.

Let’s look at ETSY next. Etsy is an e-commerce company that is focused on unique and creative goods. Etsy’s business exploded in a good way during the pandemic. They have millions of sellers who shifted their business by making and selling unique masks during the pandemic and their sales grew heavily due to that. But a unique thing happened during that time. Customers who used Etsy to purchase masks for the first time discovered that they can buy some unique gifts for their loved ones during the year and they returned in droves. I know this because their numbers show that and I also experienced this firsthand. Let’s look at their revenues. I also encourage you to look at their repeat sales which you can find here (Slide 24)

ETSY Revenues 

  Q1 (YoY%) Q2 (YoY%) Q3 (YoY%) Q4 (YoY%)
2019 $169m (40%) $181m (37%) $198m (32%) $270m (35%)
2020 $228m (35%) $429m (137%) $452m (128%) $617m (129%)
2021 $551m (142%) $529m (23%) $532m (18%)  

 

If you look at the past two years’ revenues of Etsy, you will notice that their holiday quarter (Q4) is the biggest and then they face some seasonality. They experienced a huge growth during the pandemic due to masks and now their quarterly sales are slowly growing above the 2020 levels. They are guiding for $675m revenues in Q4 2021. My guess is that they will easily beat that number. Due to their success during the pandemic they made a couple of smart acquisitions in other geographies and as they combine those companies like management has shown in the past, we should see continued growth in revenues. Etsy market value is $28B and last twelve months revenues are $2.2B so that’s a Price to Sales ratio of about 13 (which is in the middle of MELI and SE). I am excited to own this one in my kids accounts until 2026. 

Last one in this article. Let’s look at the big gorilla Amazon. Hardly a week goes by when I don’t buy something from Amazon. Amazon had a big change in 2021. Their long term founder and CEO Jeff Bezos stepped down from the CEO to being an Executive Chairman and their new CEO is Andy Jassy and this is the first year of the company under the new CEO. Here is how their revenues have grown over the last couple of years. 

AMZN Revenues 

  Q1 (YoY%) Q2 (YoY%) Q3 (YoY%) Q4 (YoY%)
2019 $59.7B (17%) $63.4B (20%) $70B (24%) $87.4B (21%)
2020 $75.5B (26%) $88.9B (40%) $96.1B (37%) $125.6B (44%)
2021 $108.5B (44%) $113.1B (27%) $110.8B (15%)  

 

The scale at which Amazon operates is mind boggling. Very few companies in the world have a $100B quarter and on top of that there are very few companies that are growing in high double digits at this scale. Amazon is doing both. Compare this to Etsy which is also growing in double digits at a much smaller scale. The reason I picked Amazon for 2021 is because some people have a mental block that a company that has already grown so much cannot grow any further. You can see here that despite growing at close to 40% during the pandemic, AMZN still managed to grow their revenues by high double digits in 2021 on top of 2020 which is just amazing. In stock price terms they have had a slow year, up only about 4% or so so I expect AMZN stock to do well in the coming years. AMZN has a market value of $1.72T and last twelve month sales of $458B, making their Price to Sales ratio of less than 4. 

I plan to write one more review for 2021 and in that article I will total all these returns and compare them with the market performance (S&P 500) and share my thoughts. As always, feel free to share your thoughts and comments.