REDONDO BEACH, CA / ACCESSWIRE / December 9, 2015 / E-commerce surpassed brick-and-mortar retail sales during this year's Black Friday holiday shopping season, according to National Retail Federations' Thanksgiving Weekend Survey, with 103 million Americans shopping online compared to 102 million visiting physical stores to buy gifts. In fact, RetailNext estimated that brick-and-mortar retail sales actually fell by 1.5% on Black Friday, signaling the Internet's ongoing cannibalization of sales.
In this article, we'll take a look at three different micro- and small-cap growth plays to take advantage of the boom in e-commerce.
Powering DIY Shops
CloudCommerce Inc. (OTCQB: CLWD) is a provider of cloud-based e-commerce solutions to small to medium sized businesses (SMBs). With the acquisition of Indaba Group earlier this year, the company consolidated its e-commerce operations to focus on the popular open source Magento e-commerce platform, as well as other popular SMB e-commerce software solutions like Oro Commerce and Enterprise BigCommerce.
According to aheadWorks, Magento is a leading open source e-commerce platform with an estimated 30% market share, with 140 of the top 10,000 websites built on the platform. The platform's Customer Showcase includes e-commerce shops ranging from large multi-national brands like Olympus and Vizio to niche retailers like Munchkin. CloudCommerce has worked with many of these large and small firms to build robust and scalable stores.
Moving forward, the company plans to grow the business by making acquisitions similar to its purchase of Indaba Group that are highly accretive to both its top- and bottom-line financial results. The strategy mirrors that used by many other successful information technology firms, such as PFSweb Inc. (NASDAQ: PFSW) or Perficient Inc. (NASDAQ: PRFT), which have significantly exceeded the growth of the S&P 500 benchmark over time as a result.
Investors may want to keep a close eye on the company moving into the fourth quarter of this year, with its post-acquisition 10-Q expected to show the Indaba Group's consolidated results for the period ended December 31, 2015. In 2014, the company's Q4 10-Q SEC filing was made in early February, although there's no definitive timetable for the filing to be made. The news could create an important catalyst for the stock price, however, early next year.
Hosted E-Commerce
Shopify Inc. (NASDAQ: SHOP) is a small-cap cloud-based commerce platform designed for SMBs that are seeking a one-stop shop. While Magento may provide greater flexibility and lower costs for large enterprises, small businesses that require simple solutions can take advantage of the company's omni-channel commerce solution and growing ecosystem of app developers, theme desiners, and partners that have built over 1,000 add-on apps.
Last quarter, the company reported revenue of $52.8 million with about $10.8 million in free cash flow from operations. Subscription revenue accounted for about 57.3% of the total, while merchant solutions revenue accounted for 42.7% of the total. Monthly recurring revenue reached $9.8 million by the end of September, while gross merchandise volume reached nearly $2 billion for the quarter and continue to grow along with its customer base.
The company's enterprise value to sales ratio could surpass 11x in 2016, but some analysts believe that the premium price relative to its peers may be worth it. With nearly triple-digit top-line growth on a quarterly basis, the company has been posting some solid numbers.
Vertical Markets
CafePress Inc. (NASDAQ: PRSS) is a micro-cap e-commerce platform provider that enables consumers and businesses to shop, create, and sell personalized products like t-shirts and mugs. While the stock has struggled over the past few years, the return of co-founders Fred Durham and Mahees Jain about a year ago has resulted in an ongoing turnaround that could be worth a second look for investors interested in the space.
Over the past year, the company has been successful in improving its gross margins from 36% to 41%, while divesting assets to raise more than $40 million in cash with no debt. The new management team has refocused on optimizing its contribution margin, which could have a positive impact on profitability at the expense of revenue. With the holiday shopping season in full-force, it will be interesting to see how effectively they can execute in the fourth quarter.
Looking Ahead
E-Commerce continues to cannibalize brick-and-mortar retail sales and there are many different ways that investors can take advantage of the trend. From CloudCommerce's focus on building a consulting empire to vertical-market turnaround plays like CafePress, there are no shortage of opportunities for those looking for exposure that's separate from Amazon.com Inc. (NASDAQ: AMZN) and other online e-commerce giants.
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Except for the historical information presented herein, matters discussed in this release contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Emerging Growth LLC is not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice or recommendations to readers of this release. Emerging Growth LLC may from time to time have a position in the securities mentioned herein and may increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice. Emerging Growth LLC may be compensated for its services in the form of cash-based compensation or equity securities in the companies it writes about, or a combination of the two. For full disclosure please visit: http://secfilings.com/Disclaimer.aspx.
SOURCE: Emerging Growth LLC
