2 E-Commerce Stocks to Buy on the Dip

NASDAQ: AMZN | Amazon.com, Inc. News, Ratings, and Charts

AMZN – E-commerce stocks have witnessed a dip in price lately because investors are rotating away from tech-oriented growth stocks to undervalued outdoor stocks due to a pickup in economic activity facilitated by mass COVID-19 vaccinations. However, we think the convenience of shopping online and continuing remote lifestyle patterns in the post-pandemic world should allow e-commerce industry leaders like Amazon (AMZN) and Overstock (OSTK) to regain their momentum soon, making the current dip an ideal opportunity to buy these stocks. Read on.

The global lockdown and  social distancing protocols accelerated traffic on online shopping platforms. However, the ongoing mass coronavirus vaccinations and gradual reopening of the global economy have shifted investors’ focus slightly back to brick-and-mortar retail companies because physical shopping is expected to witness a gradual recovery.

But make no mistake, while in-store shopping is expected to gain some momentum in the post-vaccine world, the convenience and cost effectiveness of online shopping should allow the e-commerce space to more than retain its shine. Moreover, rising per capita income and spending, as the unemployment rate falls and $1,400 fiscal stimulus checks are distributed, should allow e-commerce chains to generate better revenues and earnings.

Thus, we think the recent dip in e-commerce stocks like Amazon.com, Inc. (AMZN) and Overstock.com, Inc. (OSTK) offers an attractive entry opportunity.

Amazon.com, Inc. (AMZN)

AMZN has retained the title of the largest e-commerce company in the world for quite some time. It has garnered market share through its aggressive pricing policies and focus on consumer satisfaction. The company’s cloud computing platform, Amazon Web Services, (AWS) is one of the biggest platforms in the digital computing space globally. Even though AMZN is currently battling antitrust allegations, based on its market dominance and a  forthcoming  CEO transition, the company is expected to retain its title as the world’s largest online retailer. The stock has gained 56.2% over the past year and is currently trading 12.9% below its 52-week high of $3,552.25, offering an attractive entry point.

AMZN’s cloud computing segment AWS announced the general availability of Amazon Lookout for Vision on February 24, 2021. It is a new service that analyzes images using computer vision and sophisticated machine learning capabilities to spot product or process defects and anomalies in manufactured products. AMZN acquired Selz in January 2021, which is a Sydney-based e-commerce platform that makes tools that enable businesses to more easily launch their own online stores.

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. AMZN’s operating income increased 77.2% year-over-year to $6.87 billion. Its net income came in at $7.22 billion, up nearly 121% year-over-year. EPS increased 117.8% year-over-year to $14.09.

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.

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 #7 of 68 stocks in the Internet industry.

Overstock.com, Inc. (OSTK)

Headquartered in Midvale, Utah, OSTK operates as an online retailer and technology company. The company operates mainly through three segments — Retail, tZERO Group, Inc. (tZERO) and Medici Ventures (MVI). The company’s e-commerce website sells a broad range of new home products at low prices, including furniture, décor, rugs and home improvement. OSTK’s online shopping site also features a marketplace that provides  customers access to products from third-party sellers. The stock has gained 796.8% over the past year and is currently trading 47.7% below its 52-week high of $128.50.

On February 4, 2021, OSTK’s tZERO announced a technology integration with Tokensoft’s subsidiary, Tokensoft Transfer Agent, to support issuers using Tokensoft’s digitization and transfer agent services. tZERO also signed a technology integration agreement with Vertalo on February 3, 2021, which is a digital transfer agent that enables the issuance and management of compliant digital securities and connects broker-dealers, issuers, custodians, and exchanges through its B2B SaaS platform. tZERO also announced its partnership with Prime Trust on January 27, 2021.

The company’s total net revenue has increased 84.4% year-over-year to $684. 02 million for the fourth quarter, ended December 31, 2020. The company reported net income of $12.59 million for the quarter compared to a net loss of $26.98 million a year ago. OSTK’s gross profit came in at $153.04 million, which represents an improvement of nearly 100% year-over-year. Its EPS came in at $0.26 compared to a loss per share of $0.73 for the fourth quarter of 2019.

The consensus EPS estimate of $2.07 for the fiscal 2022 represents an improvement of 350% year-over-year. Moreover, OSTK has surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $595.97 million for the current quarter ending March 31, 2021 represents a 69.5% rise on a year-over-year basis.

OSTK’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 a grade of B for Growth and Quality. We have also graded OSTK for Sentiment, Stability, Momentum and Value. Click here to access all OSTK’s ratings.

OSTK is ranked #11 in the same industry.

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

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AMZN shares rose $3.26 (+0.10%) in after-hours trading Monday. Year-to-date, AMZN has declined -3.40%, versus a 4.20% 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...


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