COVID-19 has resulted in a transition in shopping patterns from brick-and-mortar sales to e-commerce. The adoption of e-commerce has been widespread and across all age groups in the wake of the pandemic. The holiday season will continue to see a tremendous rise in e-commerce sales wherein businesses are likely to increase their capacity of online sales and capture a greater market share.
CBRE Retail Research predicts the upcoming holiday season e-commerce sales growth to more than double year-over-year at a minimum of 40%. The firm also expects the total share of e-commerce sales in November and December to be 32%.
A significant portion of online shopping will depend on e-commerce this year, and shoppers have already started planning ahead. In fact, the 2020 holiday shopping season is likely to be spread over an extensive period of time. It may even begin ahead of the Thanksgiving holiday. Most sellers that used to look forward to Black Friday will now focus on Cyber Monday this year. In fact, Cyber Monday is likely to spill over to December as well.
As e-commerce players have experienced explosive sales growth since the beginning of the pandemic, they have to streamline things ahead of the holiday shopping season to avoid any bottlenecks. This includes merchandise availability, optimal pricing and shipping costs, efficient order fulfilment, and return policies.
The e-commerce momentum will continue for a long term and the holiday season will be a big catalyst. Thus, buying these stocks positions investors for significant profits. Amazon.com, Inc. (AMZN), Alibaba Group Holding Ltd (BABA), Wayfair Inc. (W) and Etsy, Inc. (ETSY) are four top e-commerce players that have prospered during the pandemic, and their bull run is likely to extend.
Amazon.com, Inc. (AMZN)
The global leader in e-commerce, AMZN, has had the greatest year so far, with the pandemic forcing people to stay indoors and shop from the confines of their homes. With the second wave of the virus sweeping in, shoppers are likely to continue this trend.
The company recently opened supply chains in North Dakota, Nebraska, Missouri, Texas, and Kansas to consolidate its supply chain across the United States. The objective is to expand reach to even the most remote locations of the country, sensing its demand potential. Not just established sellers, but SMBs also made record sales in the Amazon Prime Day in October. The company stated that small and midsize businesses earned over $3.5 billion during the shopping event, up 60% from the year-ago period.
Earlier this week, AMZN announced that it had opened three more logistics centers in Brazil to cater to the growing e-commerce demand in South America amid the pandemic. The company has already established units in the states of Minas Gerais, Rio Grande do Sul, and the capital city of Brasilia.
Besides its e-commerce business, AMZN is also positioned to gain from its online Prime Video services as more people are reluctant to venture out for entertainment.
AMZN’s revenue during the third quarter that ended September 2020 increased 37% year-over-year to $96.1 billion. The company’s EPS for the quarter tripled to $12.37 from $4.23. CEO Jeff Bezos stated, “We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season.”
The street estimates revenue for the fourth quarter ending in December 2020 to be $119.5 billion, indicating a 36.6% increase year-over-year. Meanwhile, EPS for the fourth quarter is expected to be $7.08, up 9.4% year-over-year.
AMZN gained 64.3% year-to-date to close at $3,137.39 yesterday. During the past six months, the stock has increased 27.5%.
How does AMZN stack up for the POWR Ratings?
A for Industry Rank
B for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
B for Overall POWR Rating.
It is ranked #5 out of 58 stocks in the Internet industry.
Alibaba Group Holding Ltd (BABA)
BABA, the Chinese conglomerate, provides online and mobile commerce businesses through its subsidiaries. Since its inception in 1999, BABA has emerged as one of the most diverse companies with diverse businesses under its radar. Besides e-commerce, the company also operates in digital marketing, cloud computing, as well as the online video content space.
The Double Eleven Global Festival organized by BABA, which began yesterday, is one of the biggest online shopping events internationally. Spread over eleven days, this mega festival has already generated business worth $74.1 billion for BABA, up 26% from the previous year’s event. According to Forbes, the amount is also ten times what the United States spent online on Black Friday in 2019.
BABA’s revenue for the second quarter that ended September 2020 climbed 30% year-over-year to $22.8 billion. Adjusted EBITDA for the period climbed 28% year-over-year to $7.00 billion. During the quarter, BABA’s annual active consumers in China reached a record high of 756.5 million, indicating an increase of 9.1% from the prior-year period.
Analysts expect revenue for the third quarter ending December 2020 to be $32.6 billion, up 60.8% year-over-year. Meanwhile, EPS is likely to grow at 29.6% per annum for the next five years. On a year-to-date basis, BABA climbed 25.7% to close at $265.65. The stock also gained 32.5% over the past six months.
BABA is rated a “Buy” in our POWR Ratings system, consistent with its strong momentum. It holds a “B” in Trade Grade, Peer Grade, and Industry Rank. It is ranked #15 out of 115 stocks in the China industry.
Wayfair Inc. (W)
W is an online retailer specializing in furniture, home décor, home goods, and seasonal décor amongst others. The e-commerce brands under this business are Wayfair, AllModern, Joss & Main, Birch Lane, and Perigold. In total, W has over 18 million items sourced from over 11,000 global suppliers.
During the third quarter that ended September 2020, the company’s revenue increased 66.5% year-over-year to $3.8 billion. The COVID-19 induced home improvement trend and closure of physical stores, led many buyers to W’s platform. EPS for the quarter was $1.67, compared to a $2.94 loss per share in the same period last year. As of September 2020, the number of active customers in the Direct Retail business climbed to 28.8 million. Also, 71.9% of the total orders placed during the quarter came from repeat customers.
The consensus estimate for revenue in the fourth quarter ending December 2020 is $3.7 billion, up 46.9% year-over-year. Analysts expect EPS for the fourth quarter to surge 127.5% to $0.77.
W rallied 168.8% year-to-date to end yesterday’s session at $251.74. Over the past six months, the stock has surged 29.1%.
Etsy, Inc. (ETSY)
ETSY is an e-commerce website that deals in handmade craft supplies and vintage items. The vintage items are required to be older than 20 years. Most of the popular products on the platform are jewelry, artifacts, bags, accessories, toys, home décor, clothing as well as furniture. ETSY also has a large number of digital products like printables, home-schooling supplies, stickers, party planners, and more. The platform has more than 60 million listed items.
While AMZN and BABA sell standardized products at a global scale, ETSY’s appeal lies in selling differentiated and customized handcrafted goods from local sellers. Since April, artists generated sales of coronavirus masks worth $740 million on ETSY.
Recently, Samsung Electronics has entered into a collaboration with ETSY to feature artwork onto its Frame TV product line. According to the deal, 25 new works of nature-inspired art by five handpicked ETSY artists would be presented on the Frame TV’S QLED Canvas. This alliance with a global consumer electronics leader would inspire more artisans to join ETSY in anticipation of global recognition, thus expanding its reach far and wide.
ETSY’s total revenue during the third quarter that ended September 2020 surged 128.1% year-over-year to $451.5 million. During the quarter, ETSY’s active buyers climbed 55.4% over the prior year quarter to 69.6 million. It is noteworthy that the platform saw maximum purchases by repeat and habitual buyers. Meanwhile, active sellers grew 43% year-over-year to 3.6 million in the third quarter.
ETSY forecasts the upcoming holiday quarter gross merchandise sales, or GMS, to be between $2.7 billion and $3.1 billion, indicating 65% to 85% year-over-year growth. Analysts expect the revenue for the fourth quarter ending December to be 87% year-over-year to $504.9 million. Meanwhile, EPS is likely to climb 132% to $0.58.
On a year-to-date basis, ETSY soared 169.6% to close at $130.59 yesterday. During the past six months, the stock has gained nearly 48%. In September, ETSY was added to the S&P 500 list.
It’s no surprise that ETSY is rated “Strong Buy” in our POWR Ratings system. It also has a “B” for Trade Grade and Peer Grade. It is also ranked #15 out of 58 stocks in the Internet industry.
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AMZN shares were trading at $3,112.55 per share on Thursday afternoon, down $24.84 (-0.79%). Year-to-date, AMZN has gained 68.44%, versus a 10.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More…
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