This e-commerce stock has the potential to become my top holding

To be clear, an e-commerce stock is already my top holding. More precisely, they are Etsy and Mercadolibre, who are consistently in a head-to-head race for pole position. There have been several changes at the top in recent years.

But it is Zalando (NASDAQ:TSLK), which now has similar potential. Admittedly, the e-commerce stock is far from successful at the moment. But the point is, if it is or should be again, there could be a change at the top here.

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Zalando: E-commerce stocks with top potential

The initial position is actually relatively simple: I have really invested heavily in Zalando’s e-commerce stock recently. With each new low, more money has flowed into these stocks. In the short term, it also sometimes meant that I made a loss in this position. However, I am of the opinion that this is only a temporary phenomenon, more on that in a moment.

If Zalando grows past its all-time high, there should still be potential for this e-commerce stock to more than triple. If that happens and Etsy and Mercadolibre develop a bit weaker, I think: The German online retailer would be my new top holding company.

Of course, I ask myself a few questions: Do I really want Zalando to be or become my best holding company? Is it justified that I have invested so much? At least I can answer that with a resounding yes.

That’s why I’m so convinced!

I am very positive about Zalando’s e-commerce stock. Ultimately, it is not only the intact business model of the online retail market with a functioning ecosystem of nearly 50 million buyers. No, but it is above all the favorable valuation. Now the price-to-sales ratio remains well below 1. This means that there is cheap valuation for long-term growth potential.

If Zalando’s management manages to achieve a turnover of 20 billion euros by 2025, the price-to-sales ratio should be below 0.4. That would be too cheap. Especially if growing net results are added to this.

Surely there should be such potential in online fashion retail. Valuation is cheap, growth is currently flat, but solid relative to the megatrend market. Therefore, it is this e-commerce stock that has the potential to become a top holding in my portfolio. I was very happy to use the increasingly favorable valuations to build a larger position.

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Vincent owns shares in Etsy, Mercadolibre and Zalando. The Motley Fool owns shares in and recommends Etsy, MercadoLibre and Zalando.

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