With millions of Americans locked up inside their homes due to the novel coronavirus, e-commerce has surged to new heights. In fact, according to an Adobe report, the pandemic has stimulated growth in the sector by at least 4 to 6 years. These developments have compelled investors to research the best internet commerce stocks to buy.
Additionally, e-commerce is expanding to areas which previously seemed like a distant reality. For example, online grocery shopping is gaining traction. Delivery services such as Postmates and Grubhub (NYSE:GRUB) have witnessed a significant increase in food orders and on-demand goods. Moreover, smaller retailers are also carving out their market share in new and existing areas.
The shift to online retail is a trend that is expected to stick beyond the pandemic. E-commerce has several built-in advantages over traditional retail, which has become more apparent under lockdown restrictions. Therefore, I expect the industry to grow at a better CAGR than the 14.7% estimated before the pandemic.
Despite the spike in online retail, some stocks have performed better than others. Let’s look at three of the best internet commerce stocks to buy:
Here’s a look into what makes each promising stocks to consider now.
Internet Commerce Stocks to Buy: Amazon (AMZN)
No list is complete without mentioning the e-commerce juggernaut Amazon. Amazon is currently the world’s most valuable company with a market cap of over $1.5 trillion. AMZN stock is generating a 12-month return of 77%, suggesting that the pandemic has done little to slow down its progress
Amazon reported its blow-out second-quarter earnings recently. Earnings per share were at $10.30, demonstrating 97% growth over the prior-year during the same period. Additionally, revenues increased by a whopping 40% to $88.9 billion. Hence, 12-month price targets for AMZN stock are at $3,630, a premium of 15% to its current price.
Critics believe that there is not much growth left for Amazon on the e-commerce side, which is why it is focusing on other segments. However, a recent eMarketer report suggests that the company can still gain more ground in e-commerce. Its online grocery segment will be a key driver for success. Its acquisition of Whole Foods is still in its early stages, but the company has already increased capacity by 160% since March. Additionally, the company is also ramping up its fulfillment capacity, adding 175,000 new workers recently.
Etsy is an online marketplace for customers, artists, art collectors and crafters of handmade items. It sells everything from clothes to customizable products to home décor. Amazon launched a platform called Handmade a few years ago to counter Etsy’s growing presence, but it hasn’t been able to gain much market share since its inception. Amazon has other areas to worry about, and Etsy’s domination in artisan-made goods should continue for the foreseeable future.
Etsy has adapted exceedingly well to the impact of the new virus, blowing past Wallstreet estimates for EPS of 39 cents per share. Instead, Etsy reported EPS of 75 cents. Revenue grew by a colossal 137% from the same period a year-ago. Gross merchandise sales increased 147%. Moreover, ETSY stock’s 12-month returns are at 135%, 58% higher than AMZN stock.
The third-quarter outlook looks strong as well, and the company should end 2020 on a high note. The marketplace has benefited from an influx of unemployed sellers looking for ways to supplement their incomes by opening online stores. Masks and face coverings were the pick of the items, which did exceptionally well in the second quarter. Therefore, the 12-month price targets for ETSY stock are at $153, a premium of 13.5% to its current price.
Contrary to popular opinion, e-commerce is not just about selling products online. Prologis is a real estate investment trust (REIT), which is currently the global leader in the provision of logistics real estate for e-commerce and business-to-business enterprises. Its customers include the largest e-commerce and courier companies in Amazon, FedEx (NYSE:FDX) and Home Depot (NYSE:HD). 12-month returns for PLD stock are at an impressive 30%.
EPS in the second quarter was 54 cents, which was slightly higher than analyst estimates of 47 cents. Also, revenue was $944 million, beating analyst estimates by 5.75%. Revenues took a hit in the second quarter due to the effects of the pandemic. Despite the effects, it was still a solid second quarter. Hence, 12-month price targets for PLD stocks are as high as $121, a premium of 17% to its current price.
Thomas Olinger, the chief financial officer of Prologis, said that “[w]hile the economic impact of COVID-19 remains unknown, the combination of what we see in our proprietary data, the pace of rent collections, and dialogue with our customers gives us a more positive outlook for the back half of the year.”
Accordingly, the company now estimates earnings to fall between $2.06 and $2.18 when previously the range was $1.81 to $1.88.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University. He does not directly own the securities mentioned above.