Zacks Industry Outlook Highlights: Alibaba, Mercadolibre, Autohome, Aspen Group and Trade Desk

For Immediate Release

Chicago, IL - March 07, 2017 - Today, Zacks Equity Research discusses the Industry: Ecommerce, Part 1, including Alibaba (NYSE: BABA - Free Report ), Mercadolibre (NASDAQ: MELI - Free Report ), Autohome (NYSE: ATHM - Free Report ), AspenGroup (OTCBB: ASPU - Free Report ) and The Trade Desk (NASDAQ: TTD - Free Report ).

Industry: Ecommerce, Part 1


Ecommerce -- i.e., the most happening part of the retail industry -- doesn't operate exactly like its brick-and-mortar counterpart. While goods and services do change hands, there's a completely different infrastructure involved, whether it's in the marketplace, logistics or the payments system. That's because each of these things is necessarily driven by technology.

The recent past has, however, seen traditional retailers like Wal-Mart investing increasing amounts in building this technological infrastructure even as Amazon takes an increasing interest in brick-and-mortar operations to drive efficiencies in its delivery system.

Retail ecommerce is also unique because a single company (Amazon) constitutes practically all of it. While new players are emerging, it won't be easy to unseat Amazon simply because of its size, experience, prices and loyalty program. So it's only a company like Wal-Mart, which has similar resources and huge experience, that can hope to truly challenge the ecommerce leader. And that's still a few years off.

The other major point of difference is the fact that unlike traditional retail it's relatively easy for an advertiser or other Internet service provider to also get involved in the retail process and thereby siphon off some of the profits.

As evident, the Internet-supported buying and selling process mainly includes three Zacks categorized sectors, i.e. Internet - Commerce , Internet - Services and Internet - Delivery Services .

Over the past year, the Internet - Commerce segment outperformed the S&P 500 by a wide margin. The sector appreciated 40.7% during the period, compared to the S&P 500's 18.4%. But the growth rate decelerated to 8.0% since President Trump won the election, slower than the S&P 500's 10.8%.

This segment is obviously in the growth phase because revenues are growing strongly (up 86.3% in the last two years). But what's more encouraging is the growth in EPS before non-recurring items (up 240% on a flattish share count). So despite high investments, a significant chunk of cash generated from sales is falling through to the bottom line. What's more, estimates for the segment have also trended up since the third quarter of 2015 and prices have followed suit.

The Internet - Services segment hasn't done quite as well, having grown 15.6% in the past year. And following the same pattern as Internet - Commerce, segment growth has decelerated to 4.1% since the elections.

Latest available data shows a slower revenue growth rate (than Internet - Commerce) of over 35% in the last two years, a lower-margin profile, with EPS growth also much slower at around 44% on a share count that has been lowered consistently. Estimates for the segment have trended up since the first quarter of 2016 and prices have followed suit.

The Internet - Delivery Services segment is somewhere in between the other two, trailing the commerce segment with a growth rate of 12.0%. But the interesting thing here is that the segment was doing better than the S&P 500 until the election. Afterwards, it changed course to grow at a slower rate than the S&P 500.

Take Your Pick

While we generally prefer stocks operating in strong industries at any point of time, a negative sector outlook (in this case driven largely by President Trump's China and immigration policies) doesn't mean that there aren't any good picks at all.

Zacks methodology helps us find the stocks that have upside potential despite the hiccups.

So at the moment, we can recommend Internet - Commerce stocks like Alibaba (NYSE: BABA - Free Report ) and Mercadolibre (NASDAQ: MELI - Free Report ). Note that Alibaba operates in China while Mercadolibre operates in Latin America. They are leading players in their served markets, which are in expansion mode.

While their fortunes are linked to the U.S. as well, they will be relatively less affected by President Trump's adverse policies. So there's plenty going for them. Both stocks carry a Zacks Rank #1 (Strong Buy). You can now see the complete list of today's Zacks #1 Rank stocks here .

As far as Internet - Services stocks are concerned, we like Autohome (NYSE: ATHM - Free Report ), which has a Zacks Rank #1 as well as Aspen Group (OTCBB: ASPU - Free Report ) and The Trade Desk (NASDAQ: TTD - Free Report ).

The stocks in the Internet - Delivery Services segment aren't recommended at this time.

Zacks Industry Rank

Within the Zacks Industry classification, health insurers are broadly grouped in the Medical sector (one of the 16 Zacks sectors).

We rank 265 industries into 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. We put our X industries into two groups: the top half (industries with the best average Zacks Rank) and the bottom half (the industries with the worst average Zacks Rank).

Over the last 10 years, using a one-week rebalance, the top half beat the bottom half by more than twice as much. The Zacks Industry Rank is #177 (bottom 34%). The ranking is available on the Zacks Industry Rank page .

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release.

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Alibaba Group Holding Limited (BABA): Free Stock Analysis Report

MercadoLibre, Inc. (MELI): Free Stock Analysis Report

Autohome Inc. (ATHM): Free Stock Analysis Report

Aspen Group Inc. (ASPU): Free Stock Analysis Report

The Trade Desk Inc. (TTD): 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.

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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