The COVID-19 pandemic has disrupted the retail landscape, revolutionizing the way companies operate and grow their businesses, as well as how consumers choose to shop and pay.
According to Digital Commerce 360 estimates, consumers spent $861.12 billion online with U.S. merchants in 2020, up 44% year-over-year. Moreover, online spending represented 21.3% of total retail sales for the year. Investors’ bullishness about the e-commerce sector is evident in the Global X E-Commerce ETF’s (EBIZ) 83% gains over the past year.
The trend will likely continue in 2021 as more people settle even more comfortably into the remote lifestyle. Major e-commerce companies have capitalized on the stay-at-home norm through timely deliveries and easy return policies, highlighting the benefits of online shopping in lieu of shopping at brick-and-mortar stores.
Industry leaders Amazon.com, Inc. (AMZN) and eBay Inc. (EBAY) are focusing on bringing personalization to customers shopping online through greater tech and marketing integration. Hence, we think these stocks should be good additions to your portfolio.
Amazon.com, Inc. (AMZN)
Founded in 1994, AMZN is the world’s largest online retailer, with a market cap of $1.7 trillion. The company also provides cloud computing services through Amazon Web Services, and operates a streaming platform, Prime Video, among other ventures.
On February 3, AMZN announced that the founder and CEO Jeff Bezos would be stepping down from his role the coming third quarter, following which Andy Jassy will take over as CEO . Andy Jassy has played a vital role in launching and building AWS, which is the company’s core growth engine. He has been involved in key decisions such as the launch of Amazon Prime and Amazon’s logistics business, and has contributed to the company’s famed culture. Jassy’s close working relationship with Bezos and knowledge of the business equips him with to handle the CEO role.
AMZN’s Amazon Pharmacy, which it launched some time ago, allows users to buy their medications directly with their smartphones and web browsers. The company is also working on drones that will help with last mile deliveries and are expected to make distributions more efficient.
AMZN’s net sales have increased 43.6% year-over-year to $125.56 billion in the fourth quarter ended December 31, 2020. Its operating profit has increased 77.2% from the year-ago value to $6.87 billion, while its net income improved 121% to $7.22 billion over the same period.
Analysts expect AMZN’s revenues to grow 38.5% year-over-year to $104.51 billion in the current quarter, ending March 31, 2021. A consensus EPS estimate of $9.51 for the current quarter represents an 89.8% improvement from its year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 59% over the past year.
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.
AMZN has a grade of B for Growth and Quality and an A for Sentiment. In the 65-stock Internet Industry, it is ranked #7.
In total, we rate AMZN on eight different levels. Beyond what we stated above, we have also given AMZN grades for Industry, Stability, Value, and Momentum. Get all AMZN’s ratings here.
eBay Inc. (EBAY)
Based in San Jose, Cal., EBAY is one of the most popular online marketplaces that facilitates consumer-to-consumer and business-to-consumer sales. It operates through two platforms – Marketplace and Classified – that enable users to list, buy, sell, and pay for items through various online, mobile, and offline channels.
In December, EBAY delivered a last-minute Christmas sneaker surprise in partnership with NBA champion Anthony Davis. Through this event, customers could win one of 500 pairs of the most coveted sneakers. This boosted the company’s sales substantially, making the marketplace one of the largest channels to buy and sell sneakers.
Also in December, EBAY introduced a low-cost way for sellers to securely ship trading cards priced $20 or less, beginning this month. This development should allow the company to meet the needs of sellers and grow its online platform.
EBAY’s net revenues have increased 28.3% year-over-year to $2.87 billion in the fourth quarter ended December 31, 2020. The company’s annual active buyers increased 7% year-over-year to 185 million, while its gross merchandise volume grew 21% on an as-reported basis to $26.6 billion. Its income from operations has increased 41.6% from a year-ago value to $677 million, while its EPS improved 78.3% to $1.23 over this period.
Analysts expect EBAY’s revenues to grow 25% year-over-year to $2.97 billion in the current quarter, ending March 31, 2021. A consensus EPS estimate of $1.07 for the current quarter represents a 55.1% improvement from the year-ago value. The stock has gained 71.9% over the past year.
It is no surprise that EBAY has an overall rating of B, which equates to Buy in our POWR Ratings system. EBAY has a Quality Grade of A. It is currently ranked #10 out of 65 stocks in the same industry.
Click here to see the additional POWR Ratings for EBAY (Industry, Stability, Value, Growth, Momentum and Sentiment).
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AMZN shares fell $6.58 (-0.20%) in after-hours trading Wednesday. Year-to-date, AMZN has gained 0.91%, versus a 4.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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