The novel coronavirus pandemic served as a turning point for the retail sector in 2020. As in-person shopping came to a standstill in March, e-commerce became the primary means to consume goods and services, affecting retail stocks. This led to a major spike in online sales as businesses went virtual. In the U.S. e-commerce revenue amounted to $794.50 billion in 2020 which is up 32.4% from 2019. Although, sales at physical stores have picked up, some companies are yet to regain lost ground.
This hints at a more permanent shift in consumers’ shopping habits. According to experts, the accelerated shift to online shopping is one that will continue long after the pandemic. For investors, this presents a great opportunity to stock up on investments in the sector.
If you are looking a solid play in the e-commerce sector, here are three top online retail stocks to buy now:
Online Retail Stocks to Buy Now: Etsy (ETSY)
The acceleration of online shopping directed investor attention to companies in this space. One major beneficiary of this high-growth trend is Etsy. At the onset of the pandemic, the online arts-and-crafts retailer became a go-to source for handmade masks. Many sellers on the platform made the strategic shift to creating masks to meet this unprecedented demand.
As a result of this growth, Etsy was also able to attract more advertisers which translated to higher revenue levels.
Etsy’s reigning success in 2020 led its share price to nearly quadruple. This valuation qualified the stock for entry into the Nasdaq-100 Index. Jefferies analyst John Colantuoni remains confident in Etsy’s potential and increased the price target to $205 from $168. The analyst called its sales growth as “defying gravity” as revenue doubled to $1.1 billion from 2019.
While one can question Etsy’s growth post-pandemic, I think the company’s innovative line of products and a unique business model will keep demand high.
Another e-commerce platform that has benefited greatly from the pandemic is Shopify. Since making its IPO debut, the retail stock has gained nearly 3,500%. However, this hefty valuation comes as no surprise, given the company’s important role in amplifying small business voices.
With physical store closures in early March, Shopify served as a way for small businesses to create an online footprint. Shares of the company surged by 166% in 2020 as more people turned to online shopping.
In response to this unprecedented level of demand, the company used the opportunity to enhance its services. Recently, Shopify added a buy now, pay later option. While BNPL platforms aren’t a novelty, it does provide customers with greater incentive to shop on the platform.
Shopify is one of the top online retail stocks to buy now because of its prime position in the market. When e-commerce spending surges in a post-pandemic world, it will serve as a major tailwind for the company.
Many would compare Pinterest to a virtual vision board but in recent years, the website became a major e-commerce hub. The image-centric social media platform guides users to products based on their search while also providing similar search results.
In May 2020, Pinterest announced a partnership with Shopify that allows businesses to upload product catalogs on to the app. In turn, Pinterest will generate revenue through ads on its platform.
Pinterest’s unique position in the e-commerce market makes this stock a great play. A vision that doubles as an online catalog, Pinterest was able to record some impressive gains during the pandemic. In its third quarter, monthly users rose to $442 million while the average revenue per user in the U.S. spiked by 31%. The company expects this revenue to increase by 60% in its next quarter. Pinterest’s high revenue potential and unique platform model makes this one of the best online retail stocks to buy now.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.