GEM eComm and online marketplaces on track to meet guidance for a strong 2024

Marketplaces and eComm space are having a better year. Internet and eComm have bottomed out and are reporting strong results since the start of the year in line with our expectations. Following two tough years in the industry, e-tailers and online marketplaces are on track to finish the year on a high note. MercadoLibre, Allegro and Hepsiburada have reported progressively better results since September 2023 ahead of estimates. The Chinese mega-tech and internet companies have reported mixed results since the start of the year. We would expect the 2024 full year performance to further confirm that the marketplaces have benefited from an uptick in the usage of social media, digital advertising growth, acceleration in the adoption of online payment methods and expanding online delivery modes.

Hepsiburada on track to report a strong set of results for 2024. Hepsiburada consensus estimates for the full year are probably be too low again. Inflation accounting is little understood by the analyst community, being overly conservative about their projections, which in itself is a source of upside risk to estimates. We would indeed expect the company to surprise for better. There are three other reasons why we think that way. (1) We expect pent-up demand in discretionary lines which has started resurfacing gradually to gather steam in the seasonally strong second half. (2) The company has consistently beaten estimates in the past two years; we would give the benefit of doubt to the management. (3) The management appears lean, focused and committed to profitability where we signs that the company is moving in the right direction.

Hepsiburada remains attractive on most valuation metrics. Hepsiburada trading at compelling valuation comps. Hepsiburada is one of the best stocks to own among its peers across marketplaces and eComm. The US macro indicators are turning softer by day with the most recent IP readings looking particularly weak. The new Fed cycle may well be softer than what the yield curve is currently pricing. Turkish consumer discretionary space looks set to benefit, Hepsiburada included. Keep in mind Hepsiburada sales are tail-end loaded. The valuation is looking attractive especially on sales multiples with risk to EBITDA probably tilted to the upside.