E-commerce Salvaging Retailers Amid Pandemic: 4 Winners

The retail sector has been one of the biggest casualties of the coronavirus pandemic. Retail sales have been picking up in the past three months following two months of carnage when the economy remained almost paralyzed, but are still slogging. However, e-commerce has been swimming against the tide given that more people are ordering online.

U.S. e-commerce sales grew more than 30% between the first and second quarter of 2020, according to quarterly figures released by the Department of Commerce on Aug 25. This once again reflects the growing dependence of people on e-commerce companies for buying all kinds of necessities.

E-commerce Sales Hit Record High

Online shopping, which till sometime ago accounted for a negligible percentage of total U.S. retail sales, has seen a surge over the past few months. According to the data released by the Commerce Department, consumers spent $211.5 billion online during the second quarter, up 31.8% from the previous quarter. That’s a significant jump from the first quarter, when $160.3 billion was spent on online shopping, reflecting an increase of 2.4% from the fourth quarter of 2019.

E-commerce now accounts for 16.1% of all U.S. sales, up from 11.8% in the first quarter. All major retailers with a strong online presence like Amazon.com, Inc. AMZN, Walmart, Inc. WMT and Target Corporation TGT benefited from the rapid shift to e-commerce during the pandemic.  In fact, Amazon, Target and Walmart reported massive bumps in e-commerce sales in the last quarter.

Also, last month, Shopify Inc. SHOP said that its second-quarter sales doubled as the company benefitted from the pandemic-led lockdown.

E-commerce to Continue Growing Despite Store Opening

Total retail sales continued to decline in the second quarter, shrinking 3.9% from the first quarter of 2020, when total retail sales decelerated 1.3% from the fourth quarter of 2019, according to data from the Census Bureau.

However, e-commerce sales continued to grow. E-commerce till sometime back had a negligible presence but the pandemic has changed the perception of online shopping to a great extent over the past few months. As more states start to lift coronavirus restrictions, consumers are likely to return to shopping at physical stores but a significant portion of online shopping may be here to stay.

According to new data from IBM’s U.S. Retail Index, in the first quarter of 2020, department store sales and those from other “non-essential” retailers declined 25%. This grew to a 75% decline in the second quarter. The report indicates that department stores are expected to decline by more than 60% for the full year. Meanwhile, e-commerce is projected to grow nearly 20% in 2020.

Our Choices

The domestic economy has started reopening but the government is still struggling to contain the spread of the pandemic.  Safety measures like at-home orders and strict social distancing will continue for at least a few more months now. Hence, more people will rely on online delivery, especially grocery and household staples. Given this situation, it might be prudent to invest in the following four e-commerce stocks.

JD.com, Inc. JD through its website www.jd.com and mobile applications offers a selection of authentic products.  It offers computers, mobile handsets and other digital products to home appliances, automobile accessories, clothing and shoes, and luxury goods.

The company’s expected earnings growth rate for the current year is 45.2%. The Zacks Consensus Estimate for current-year earnings has improved 20.8% over the past 30 days. JD.com sports a Zacks Rank #1.

Shopify Inc. provides a multi-tenant, cloud-based, multi-channel commerce platform for small and medium-sized businesses. Shopify’s platform enables merchants to manage products and inventory, process orders and payments, ship orders, build customer relationships and leverage analytics while reporting from one integrated back office.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 298.1% over the past 30 days. Shopify carries a Zacks Rank #2.

Best Buy Co., Inc. BBY is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, heath, security, appliances and related services. 

The company’s expected earnings growth rate for next year is 15.9%. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the past 30 days. Best Buy has a Zacks Rank #2.

Fiverr International Lt. FVRR provides an online marketplace for selling goods and services. The company provides logo, poster and brochure designing, as well as photoshop editing, content marketing, web analytics and translation services.

The company’s expected earnings growth rate for next year is 228.6%. Fiverr has a Zacks Rank #2.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>

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Target Corporation (TGT): Free Stock Analysis Report
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Walmart Inc. (WMT): Free Stock Analysis Report
Best Buy Co., Inc. (BBY): Free Stock Analysis Report
JD.com, Inc. (JD): Free Stock Analysis Report
Shopify Inc. (SHOP): Free Stock Analysis Report
Fiverr International Lt. (FVRR): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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