AMZN: 2 E-Commerce Stocks to Buy from Increased Spending on Technology

E-commerce became the backbone of the retail industry–and one of the most profitable sectors worldwide–with the onset of the COVID-19 pandemic last year. With the rising integration of technology in virtually all spheres, most retail chains are now investing heavily in technology to strengthen their online presence.

E-commerce giants are also loading up on investments to maintain their market dominance and expand their market reach. According to an industry survey from Euromonitor, almost 17% of goods are expected to be bought online globally in 2021, doubling in just five years. E-commerce sales, which increased 24% in 2020, are expected to rise at a CAGR of 9.5% over the next five years.

Industry giants Amazon.com, Inc. (AMZN) and Best Buy Co., Inc. (BBY) are investing heavily on technology to stay ahead of the emerging competition. So, we think it could be wise to bet on them now.

Amazon.com, Inc. (AMZN)

Founded in 1994, AMZN is the world’s largest online retailer. The company’s products include merchandise and content that it purchases for resale from vendors and products offered by third-party sellers. AMZN also manufactures and sells electronic devices. The company operates primarily through three segments — North America, International and Amazon Web Services (AWS). Also, AMZN’s Prime membership program includes free shipping, access to streaming of various movies and television shows. Though the company is currently battling antitrust allegations, recent news of changes in its leadership structure and operational expansion plans should allow AMZN to retain its crown as the world’s largest e-commerce company.

This week, Amazon Web Services, Inc. (AWS) announced the general availability of Amazon Lookout for Vision, which analyzes images using computer vision and sophisticated machine learning capabilities to spot product or process defects and anomalies in manufactured products. AWS and Bundesliga, Germany’s top professional soccer league, announced three new Bundesliga Match Facts powered by AWS on February 11, 2021 to give fans deeper insights into action on the pitch.

The company’s net sales have increased 43.6% year-over-year to $125.56 billion for the fourth quarter, ended December 31, 2020. Its net product sales increased 40.6% year-over-year to $71.06 billion and its net service sales increased 47.7% year-over-year to $54.50 billion. Its net income was reported at $7.22 billion, up nearly 121% year-over-year. AMZN’s operating income increased 77.2% year-over-year to $6.87 billion.

A consensus EPS estimate of $9.40 for the current quarter, ending March 31, 2021 represents an improvement of 87.6% year-over-year. Moreover, AMZN has surpassed the consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $104.47 billion for the current quarter represents a 38.5% rise on a year-over-year basis.

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The stock has gained 57.3% over the past year to close yesterday’s trading session at $3159.53.

AMZN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has an A grade for Sentiment and B for Growth and Quality. We have also graded AMZN for Stability, Momentum and Value. Click here to access all AMZN’s ratings.

AMZN is ranked #6 of 44 stocks in the Internet industry.

Best Buy Co., Inc. (BBY)

Based in Richfield, Minnesota, BBY is a provider of technology products, services and solutions. The company mainly operates through two segments — Domestic and International. It provides computing and mobile phones, entertainment products and appliances such as refrigerators, blenders and coffee makers, among others. The company offers products and services to the customers that visit its stores to engage with its Geek Squad agents or use its Websites or mobile applications. BBY has operations in the United States, Canada and Mexico.

This week, BBY was ranked #1 on the Barron’s prestigious list of 100 Most Sustainable Companies for the second time. The company appointed Mario J. Marte to its Board of Directors on January 8. He is a leading e-commerce executive. The company paid a regular quarterly cash dividend of $0.55 per common share on January 5.

BBY’s revenue increased 42.9% sequentially to $16.94 billion for the fourth quarter, ended January 30, 2021. Its revenue from its domestic segment increased 11.2% year-over-year to $15.40 billion, and revenue from the international segment increased more than 14% year-over-year to $1.54 billion. Its net earnings increased 9.5% year-over-year to $816 million. And its non-GAAP EPS increased 20% year-over-year to $3.48.

A consensus EPS estimate of $1.1 for the quarter ending April 30, 2021 represents an improvement of 64.2% year-over-year. Further, BBY has surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $9.71 billion for the quarter ending April 30, 2021 represents a 19% rise on a year-over-year basis.

The stock has gained 32.7% over the past year and closed yesterday’s trading session at $113.46.

BBY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

The stock has an A grade for Momentum and B for Value, Sentiment and Quality. We have also graded BBY for Stability and Growth. Click here to access all BBY’s ratings.

BBY is ranked #2 of 22 stocks in the B-rated Specialty – Retailers industry.

The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Note that BBY is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.

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AMZN shares were trading at $3,057.16 per share on Thursday afternoon, down $102.37 (-3.24%). Year-to-date, AMZN has declined -6.13%, versus a 2.26% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...