From being a convenience to a necessity, e-commerce has been dominating the market since the onset of the pandemic. During these trying times, inclination toward e-commerce platforms has been increasing with each passing day as most people try to avoid going out unnecessarily.

E-commerce companies have been rising to the occasion meeting most of consumer expectations and undergoing a quick digital transformation. Not only online retail, but safe digital payment platforms are also on the rise. The bullishness of the e-commerce industry is evident from the 88% year-to-date gain of Amplify Online Retail ETF (IBUY), which is one of the oldest funds dedicated to e-commerce.

While e-commerce received a significant boost thanks to the pandemic, the industry’s growth story is far from over. Even when the brick-and-mortar stores reopen, people will be reluctant to visit them with the fear of getting exposed to the deadly virus. The September market correction had little effect on e-commerce. With a positive outlook on a fiscal stimulus plan and the holiday season just starting, the industry is set to soar.

In spite of the continuing market volatility, e-commerce stocks seem dependable and have been in the headlines for all the right reasons. While e-commerce companies have yet to reveal their financial results for the last completed quarter, the outlook for the industry indicates that Amazon.com, Inc. (AMZN), Alibaba Group Holding Ltd (BABA), PayPal Holdings, Inc. (PYPL), and Etsy, Inc. (ETSY) still has plenty of upside left.

Amazon.com, Inc. (AMZN)

The king of online retailers, AMZN needs no introduction. With the Amazon Prime Day running, the company could generate nearly $10 billion in sales. Even though the Prime day is being held late this year, it is expected to see a rise in the prime membership base due to products being sold at heavily discounted prices over the next couple days.

AMZN also announced new hardware products like a collection of 4th generation Echo smart speakers, new Fire TV Stick video streamers, Eero Wi-Fi routers, and new Ring security cameras. Apart from this, its cloud-computing arm Amazon Web Service (AWS) has also been dominating the industry.

AMZN has been in the news following the report by the House Antitrust Subcommittee on October 6^th, which mentioned the wrongdoing and anticompetitive behavior of AMZN and demanded action to change antitrust laws. This, however, has failed to lower investor enthusiasm about the stock.

The market expects AMZN’s revenue to increase 32% for the quarter that ended September 2020 and 18.3% next year. For the quarter, the company’s EPS is expected to increase 71.4%, 40% next year, and at a rate of over 36.0% per annum over the next five years.

The stock has gained over 103% since hitting its 52-week low of $1,626.03 in mid-March. AMZN’s EPS for the fiscal second quarter that ended June 2020 was $10.3, which surpassed the consensus estimate by 605.5%. Undoubtedly, exerting dominance over the online retail sector and cloud computing among other domains, AMZN looks well positioned for steady and long-term growth.

How does AMZN stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

B for Industry Rank

A for Overall POWR Rating

The stock is also ranked #9 out of 58 stocks in the Internet industry.

Alibaba Group Holding Ltd (BABA)

Often touted as “the Amazon of China,” BABA is mainly divided into three core businesses — Alibaba which is a Business-to-Business (B2B) website, Taobao which is a Consumers-to-Consumers (C2C) website, and Tmall, which is marketplace geared mainly towards China’s middle class, focused on large, multinational brands.

It has been dominating headlines as its cloud-computing arm is expected to turn profitable by March 2021, and its logistics arm Cainio is expected to have positive cash flows from operations over the same time. Its financial affiliate Ant Group Inc. is preparing to go public with the US-China tensions failing to curb the enthusiasm of investors.

The market expects BABA’s revenue to increase 56.7% for the quarter that ended September 2020 and 25.8% next year. The company’s EPS is expected to increase 17.8% for the quarter, 25.2% next year, and at a rate of 3.4% per annum over the next five years.

BABA’s logistic arm Cainio partnered with Atlas Air Worldwide Holdings (AAWW) today, which is further expected to enhance its extensive logistics network. Moreover, the world’s largest art museum, the Louvre, inked a new partnership with Alibaba Group to launch a flagship store on Tmall and a content agreement with Alifish, BABA’s online licensing platform.

For the quarter that ended June 30, 2020, Maggie Wu, Chief Financial Officer of Alibaba Group said, “Our domestic core commerce business has fully recovered to pre-COVID-19 levels across the board, while cloud computing revenue grew 59% year-over-year. Our strong profit growth and cash flow enable us to continue to strengthen our core business and invest for long term growth.” In fact, the stock has gained over 44% year-to-date. BABA has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.

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.

PayPal Holdings, Inc. (PYPL)

With the growth of the e-commerce segment, it is likely that you have come across the technology platform and digital payment company PYPL, again and again while making digital transactions. While PYPL was spun-off as an independent company in 2015, it actually went public in 2002, and was sold to eBay (EBAY), and even had the now famous CEO of Tesla (TSLA) Elon Musk as its CEO for a brief time in 2000. It has come a long way since then and has solidified its footing in the market.

PYPL reported 21.3 million Net New Active Accounts (NNAs) for the quarter that ended June 30, 2020. It has been the strongest quarter for Net New Active Accounts (NNAs) in PayPal’s history. It reported cash flow from operations of $2.4 billion, growing 103%, with free cash flow of $2.2 billion, growing 112% over the same quarter last year. Total payment volume (TPV) for the quarter was $222 billion.

The market expects PYPL’s revenue to increase 23.6% for the quarter that ended September 2020 and 19.3% next year. For the quarter, the company’s EPS is expected to increase over 54%, 22% next year, and at a rate of 23.1% per annum over the next five years.

PYPL’s earnings surprise history looks impressive with the company missing the consensus estimate in just one of the trailing four quarters. The stock has gained more than 132% since hitting its low of $82.07 in mid-March.

It’s no surprise that PYPL is rated a “Strong Buy” in our POWR Ratings system. It also has an “A” in Trade Grade, Buy & Hold Grade, and Peer Grade, and a “B” in Industry Rank. In the 46-stock Consumer Financial Services industry, it’s ranked #5.

Etsy, Inc. (ETSY)

Known as e-commerce with the mission to ‘Keep Commerce Human,’ ETSY was founded in 2005 and went public in April 2015. It is a global online marketplace, where people come together to make, sell, buy, and collect unique items. What makes it distinctive is that it focuses on products uniquely handcrafted to vintage treasures and places emphasis on independent sellers. The company makes the process easy for sellers by requiring just $0.20 to get started as a seller on the platform.

ETSY generated revenue of $429 million, growing at 137% year-over-year, for the quarter that ended June 30, 2020. This can be attributed to the organization’s quick response to invest in the shift from off-line to online shopping, and to emerging categories such as face masks. Over the same period, it reported active buyers of 60.3 million, which increased at 41% year-over-year and active sellers of 3.1 million, which increased at 35% year-over-year. In the second quarter alone, the ETSY’s marketplace witnessed 11.5 million new buyers and 7.2 million reactivated buyers, who hadn’t purchased in a year or more.

The market expects ETSY’s revenue to increase 108% for the quarter that ended September 2020 and 13.7% next year. The company’s EPS is expected to increase 383.3% for the quarter and more than 57% per annum over the next five years.

The stock has gained more than 365% since it hit its 52-week low of $29.95 in mid-March. ETSY made several acquisitions over the years with the recent one being Reverb, a new and used music gear marketplace, in 2019. ETSY has maintained its niche, despite facing competition from big names like AMZN, and is expected to keep gaining.

ETSY’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” in Trade Grade, Buy & Hold Grade, and Peer Grade, and a “B” in Industry Rank. Within the Internet industry, it’s ranked #6 out of 58 stocks.

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AMZN shares were trading at $3,477.01 per share on Tuesday afternoon, up $34.08 (+0.99%). Year-to-date, AMZN has gained 88.17%, versus a 10.58% 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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