Forget eBay Inc.: These 3 Stocks Are Better Buys

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Over the last few years, online marketplace eBay Inc. (NASDAQ: EBAY) has performed a somewhat extraordinary feat. As one of the original purveyors of e-commerce, the company has continued to grow its base of active buyers and posted some of its strongest results in years. That's no small accomplishment in a world that is now dominated by online sales, a field that eBay once had almost to itself.

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This year alone, eBay stock has returned an inspiring 23%, nearly double the return of the broader market. As impressive as those returns might be, however, there are other niche e-commerce companies that have produced even more remarkable results and have the potential for greater gains going forward. Investors looking to further benefit from the worldwide trend to online sales should consider PayPal Holdings, Inc. (NASDAQ: PYPL), Mercadolibre, Inc. (NASDAQ: MELI), and Shopify Inc. (NYSE: SHOP).

How would you like to pay for that?

PayPal and eBay have had a shared history for much of their existence. eBay acquired the payments processor shortly after its IPO in 2002, as PayPal was the favored payment method for many of eBay's customers. The two parted ways in July 2015, and PayPal has been busy expanding its presence in the realm of digital payments.

PayPal has entered into partnerships with each of the major credit-card processors, which allows consumers to choose a funding source for each transaction. It has also recently inked agreements that granted PayPal access to both Android and Apple Pay. Each of these agreements was designed to expand the company's reach in the realm of digital payments -- and they appear to be working.

PayPal's first-quarter financial results reported revenue of $2.975 billion, an increase of 17% year over year, and net income of $534 million, an increase of 18% over the prior-year quarter. PayPal's peer-to-peer payment app Venmo is a hit with millennials, processing $6.8 billion in payments in its most recent quarter, up more than 100% over the prior-year quarter. PayPal recently announced that Venmo will soon be a payment option with any merchant that accepts PayPal, allowing it to profit from these transactions. These results are an indication that PayPal is making all the right moves, and an investment in the company will likely pay off.

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Putting the "shop" in online shopping

Shopify may be one of the best-performing e-commerce companies that you've never heard of. The company provides everything a small- and medium-sized business owner needs to set up and run an e-commerce website -- without the hassle that typically comes with it. Users can choose from 100 pre-designed templates and over 1,000 apps that allow them to customize a website for their unique shoppers. The company can also handle a diverse mix of processes, including payments and order processing, while affording access to third-party logistics services and payment-processing services. It can be accessed on a variety of mobile devices, so issues can be addressed on the go, and it provides plans that cater to the size and needs of the business. Fears of competition were turned to a competitive advantage when Amazon.com, Inc. (NASDAQ: AMZN) discontinued a similar service and referred its customers to Shopify.

Shopify has produced year-over-year revenue growth that has exceeded 75% in each of the eight quarters since going public, and gross merchandise volume produced year-over-year growth of 99% per quarter, on average, over the same period. Shopify grew revenue to $127 million in its most recent quarter, an increase of 75% year over year, and its net loss was a lower-than-expected $13.6 million. The company has been foregoing profit in order to continue the rapid expansion of its business. With this kind of results, why would you invest anywhere else?

Latin American e-commerce leader

Amazon.com may be the undisputed e-commerce leader in the U.S. and worldwide, but there are areas where its influence doesn't hold sway. Latin America is one such area, and there are a number of geographic idiosyncrasies that make it tough for an outsider to compete. Many consumers in the region don't have a checking account or credit cards, making e-commerce transactions difficult.

Hometown favorite MercadoLibre, which means "free market," is the e-commerce leader in the region and has been called the "Amazon of Latin America." The company brings together buyers and sellers in a variety of ways and offers tools to ensure that those transactions can be completed. MercadoLibre helps merchants set up and manage an e-commerce website, provides access to reliable shipping, and offers a payment solution that has since expanded beyond its platform and is being deployed by off-site merchants as a payment option. The company has taken a page from Amazon and has recently expanded into logistics and small-business loans.

MercadoLibre has shown impressive growth in a wide variety of operational and financial metrics. In its most recent quarter, revenue increased to $274 million, up 74% over the prior-year quarter, while net income of $48.5 million grew 60% year over year. Registered users grew 20% to 182 million, items sold increased 39% to 53 million, and payment transactions jumped 60% to 44 million, all year over year. With so much going for it, MercadoLibre easily looks like a better buy than eBay. 

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Danny Vena owns shares of Amazon, MercadoLibre, PayPal Holdings, and Shopify. Danny Vena has the following options: long January 2019 $18 calls on eBay and short October 2017 $34 calls on eBay. The Motley Fool owns shares of and recommends Amazon, eBay, MercadoLibre, PayPal Holdings, and Shopify. The Motley Fool has a disclosure policy.