The battering Netflix (NASDAQ:NFLX) endured on Thursday could discourage investors from engaging with various internet equities and the related exchange traded funds, but market participants should be careful to not lump all these names together.
Some analysts urge investors to remember that e-commerce equities are different beasts than firms such as Netflix or Meta Platforms (NASDAQ:FB), and that’s good news for ETFs such as the Next Frontier Internet & Ecommerce ETF (FMQQ).
As its name implies, FMQQ focuses on emerging markets equities, meaning that it wasn’t directly affected by the wicked slide experience by Netflix. Interestingly, some analysts are making positive cases for e-commerce equities, even against a challenging backdrop for the broader internet equity space.
“Global eCommerce stocks have de-rated, but we see a disconnect. Supported by our proprietary industry model, we believe the Covid-related bump will not flatten the future eCommerce penetration curve,” according to Morgan Stanley.
The bank is bullish on Amazon (NASDAQ:AMZN), which isn’t an FMQQ holding, but that’s relevant because MercadoLibre (NASDAQ:MELI), arguably the Amazon of Latin America, is a member of the FMQQ portfolio.
“But e-commerce is a different animal, Morgan Stanley said, and that should benefit some of the industry’s biggest players, including Amazon and Argentina-based Mercadolibre,” reports Jesse Pound for CNBC.
Argentina-based MercadoLibre is FMQQ’s second-largest holding at a weight of 7.52%, according to issuer data. For long-term investors, that’s a potentially attractive trait pertaining to FMQQ because Latin America’s e-commerce story isn’t yet as advanced as those found in the U.S. or China, meaning that there’s plenty of room for growth.
“Our forecast for a 16% LatAm eCommerce 2021-26E [compound annual growth rate] in USD terms (and 22% in local currencies) is above the global average of 10% in USD and 11% LC,” adds Morgan Stanley.
The bank rates MercadoLibre, which has been a public company for 15 years, overweight with a price target of $1,860. That implies upside of more than 76% from the April 21 close.
“Founded in 1999, MercadoLibre is the largest online commerce ecosystem in Latin America, serving as an integrated regional platform and as a provider of the necessary digital and technology-based tools that allow businesses and individuals to trade products and services in the region,” according to the company.
For more news, information, and strategy, visit our Emerging Markets Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
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