The upcoming holiday season is going to be totally different with the rising number of new coronavirus cases in the United States and Europe, making people concerned. While the Chinese economy has been slowly recovering with the country’s ability to contain the spread of the deadly virus, uncertainties are growing in the United States. This, along with the upcoming presidential election and waning hope of fiscal aid before the election, is keeping the stock market extremely volatile.
While the stock market witnessed a broad sell-off recently amid the surge in coronavirus cases, investors are looking forward to a promising holiday season. As a majority of companies have undergone some digitalization in order to survive the pandemic, shoppers may not need to go in-store to grab deals. Many retailers have started announcing attractive deals and launching innovative products for remote shoppers.
As holiday shopping is expected to be done on a cell phone or a computer this year, Amazon.com, Inc. (AMZN), Alibaba Group Holding Ltd (BABA), and Nike, Inc. (NKE) are well positioned to gain significantly as they are ahead of the curve in terms of offering a pleasant remote shopping experience.
Amazon.com, Inc. (AMZN)
The “everything store” AMZN needs no introduction. Apart from being the world’s largest online retailer, the company’s cloud computing arm, Amazon Web Service (AWS) has been dominating the industry. The prime day held this month for AMZN’s prime members saw sales increase by nearly 60% from last year to $3.5 billion. The stock gained 71.2% year-to-date.
AMZN is scheduled to release its third quarter financial results today after the market closes. The company’s net sales increased 40% year-over-year to $88.9 billion for the second quarter that ended June 2020. Trailing-twelve-month free cash flow increased 27.6% year-over-year to $31.9 billion. Analysts expect AMZN’s revenue to increase 31.8% in 2020 and 18.3% next year. The company’s EPS is expected to grow nearly 40% this year, and at a rate of 36% per annum over the next five years.
On October 16th, the company launched its holiday dash event ‘Shop Now, Save Now’ with a variety of Black Friday-worthy deals dropping daily. In fact, AMZN made it easier allowing consumers to return items until January 31st 2021 for most of the items shipped through December 31st.
How does AMZN stack up for the POWR Ratings?
B for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
A for Industry Rank
B for Overall POWR Rating
The stock is also ranked #4 out of 58 stocks in the Internet industry.
Alibaba Group Holding Ltd (BABA)
BABA has become the leading platform for global wholesale trade operating mainly in China. Unlike its competitor AMZN, BABA’s core business is divided into three groups Alibaba, Taobao, and Tmall. Not only its core business, the company’s financial affiliate, Ant Group Inc., is making headlines as it is preparing for the world’s largest stock market debut at a value of around $34.5 billion.
BABA’s revenue increased 34% year-over-year to $21.7 billion for the fiscal first quarter that ended June 2020. Annual active consumers increased 2.2% sequentially to 742 million during the quarter. Digital media and entertainment revenue increased 9% year-over-year to $990 million, owing to an increase in online games and membership subscriptions. The Cloud Computing revenue also increased 59% year-over-year to $1,7 billion.
The company is expected to release its financial results for the quarter that ended in September on November 5th. Ahead of the earnings release, analysts expect BABA’s revenue to increase 54.7% for the quarter and 51.5% in the subsequent quarter. The company’s EPS is expected to increase by 24.2% in the fiscal year 2021, 27.1% in 2022, and at a rate of 3.7% per annum over the next five years.
BABA unveiled its plans for the 11.11 Global Shopping Festival, or ‘Singles Day,’ and Chinese consumers are looking to spend more on it. It is held on November 11th every year and has been continuing for 12 years now. This year, a new sales window will also be added from November 1st to 3rd and as more than 2 million new products are expected to be introduced. BABA has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. The stock gained 45.2% year-to-date.
BABA’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Peer Grade, Buy & Hold Grade, and Industry Rank. Among the 115 stocks in the China industry, it’s ranked #1. It simply can’t get better than this.
Nike, Inc. (NKE)
NKE is one of the largest global suppliers of athletic apparel and footwear. The company includes Nike, Converse, and Jordan brands. NKE has taken aggressive measures in order to accelerate its digital presence in the wake of the pandemic. It led a series of leadership changes in July as part of the Consumer Direct Acceleration (CDA).
NKE’s digital sales increased 82% year-over-year for the fiscal first quarter that ended August 2020. The company’s direct sales also increased 12% year-over-year to $3.7 billion. EPS for the quarter increased 10% year-over-year to $0.95. Analysts expect NKE’s revenue to increase 2.3% for the second quarter ending November 2020 and 12.2% in the fiscal year 2021. The company’s EPS is expected to increase by 79.4% in the fiscal year 2021 and at a rate of 25.1% per annum over the next five years.
NKE announced the launch of the latest Jordan Brand Holiday 2020 Winter Utility Collection on October 28th ahead of the holiday season. The company is also set to release new products in Kyrie Irving’s signature line next month with the BK Black colorway of the Kyrie 7 releasing on November 23rd. NKE’s earnings per share of $0.95 surpassed the consensus estimate by 102.1% for the first quarter that ended August 2020. The stock has gained 20.5% year-to-date.
It’s no surprise that NKE is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade and Peer Grade and a “B” for Buy & Hold Grade and Industry Rank. In the 34-stock Athletics & Recreation industry, it is ranked #1.
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AMZN shares were trading at $3,195.48 per share on Thursday morning, up $32.70 (+1.03%). Year-to-date, AMZN has gained 72.93%, versus a 3.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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