It’s time to buy these e-commerce stocks after the sell-off, Morgan Stanley says

Published Thu, Apr 21 202210:51 AM EDTUpdated Thu, Apr 21 20222:35 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

Concerns about distorted demand have caused some of the pandemic winner stocks to struggle in recent months, but one industry is getting hit too hard and should rebound, according to Morgan Stanley. The investment firm said in a note to clients on Wednesday that e-commerce companies still have strong growth paths, making their shares appear cheap. "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," the note said. The "pull-forward" of demand has become a concern for many digital economy companies that saw a growth surge during the pandemic. Netflix is the latest example, with the stock cratering on Wednesday after the video streaming giant lost subscribers and management said the pandemic had masked a slowdown in user growth. 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 . Those stocks were down roughly 6.5% and 18.9% year to date as of Thursday morning. For Amazon, the expansion of same- and one-day shipping should allow the company to further chip away at in-person shopping. "With AMZN's 'on-demand' offering enabling it to better compete for the ~$1.8tn of offline spend in the U.S. alone on categories including grocery, household products, prescriptions and alcohol, we see the offering as a mechanism to shift the eCommerce goal posts and raise consumer expectations across a wide selection of goods," the firm said. Morgan Stanley has an overweight rating and a price target of $4,200 per share for Amazon, which is 36% above where the stock closed Wednesday. For Mercadolibre, the company's exposure to fast-growing South America should be a welcome sign for investors looking for growth, according to Morgan Stanley's estimates. "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," the firm wrote. The investment firm has an overweight rating and a price target of $1,860 per share for Mercadolibre, which is more than 70% above where the stock closed Wednesday. — CNBC's Michael Bloom contributed to this report.

Workers wearing protective masks move packages on a conveyor at a MercadoLibre Inc. distribution and fulfillment center in Cajamar-SP, Brazil, on Friday, Nov. 27, 2020.

Jonne Roriz | Bloomberg | Getty Images

Concerns about distorted demand have caused some of the pandemic winner stocks to struggle in recent months, but one industry is getting hit too hard and should rebound, according to Morgan Stanley.