With rising internet penetration and accessible online platforms, the retail sector has pivoted sharply toward e-commerce, as consumers increasingly choose online shopping to avoid holiday crowds.

Against this backdrop, investors may want to consider e-commerce powerhouses like Amazon.com, Inc. (AMZN), Shopify Inc. (SHOP), and Etsy, Inc. (ETSY) for their potential this holiday season.

High-speed internet, social media, and generative AI have become powerful tools for holiday shoppers. Many consumers now turn to these platforms to discover and purchase products, boosting e-commerce traffic. E-commerce giants are capitalizing on this trend with early ad campaigns, especially on social media, targeting Gen Z through engaging content on TikTok, YouTube, and Instagram.

Despite a shorter holiday season, strong household finances are fueling cautious yet steady spending. The National Retail Federation (NRF) projects total holiday spending to reach between $979.50 billion and $989 billion, an increase from $955.60 billion in 2023. U.S. e-commerce holiday sales are expected to grow by 8% to 9% year-over-year, more than double the forecasted overall holiday sales growth of 2.5% to 3.5%.

Furthermore, handcrafted goods and dropshipping are reshaping holiday shopping, catering to consumers’ demand for unique items while expanding e-commerce variety. With these trends, U.S. online retail sales are expected to reach $1.20 trillion this year, marking a $108 billion (9.8%) increase from last year.

Considering these conducive trends, let’s examine the fundamentals of the three above-mentioned e-commerce stocks.

Amazon.com, Inc. (AMZN)

AMZN engages in the retail sale of consumer products and subscriptions through online and physical stores in North America and internationally. It operates through three segments: North America, International, and Amazon Web Services (AWS). The company’s products offered through its stores include merchandise and content purchased for resale; and products offered by third-party sellers.

On October 31, 2024, AMZN’s AWS and Lumen announced a partnership to enhance U.S. network operations using AWS’s generative AI technology and Lumen’s fiber network, supporting scalable, AI-driven services and autonomous network capabilities.

On November 4, 2024, AWS launched the Generative AI Partner Innovation Alliance to expand the reach of its Generative AI Innovation Center. This alliance will connect customers globally with partners to help develop and deploy generative AI solutions.

In terms of the trailing-12-month net income margin, AMZN’s 8.04% is 80.1% higher than the 4.46% industry average. Likewise, its 11.25% trailing-12-month Capex / Sales is 292.2% higher than the 2.87% industry average. Moreover, the stock’s 1.16x trailing-12-month asset turnover ratio is 16.3% higher than the 1x industry average.

AMZN’s total net sales for the fiscal third quarter, which ended on September 30, 2024, were $143.08 billion. The company’s operating income was $11.19 billion. Additionally, the company’s net income and EPS were $9.88 billion and $0.94, respectively.

Street expects AMZN’s EPS and revenue for the quarter ending  December 31, 2024, to increase 46.9% and 10.1% year-over-year to $1.47 and $187.14 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 49.3% to close the last trading session at $212.83.

AMZN’s POWR Ratings reflect its robust fundamentals. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

AMZN has an A grade for Sentiment and a B for Growth, Momentum, and Quality. It is ranked #12 out of 52 stocks in the B-rated Internet industry. Beyond what we have stated above, we also have given AMZN grades for Value and Stability. Get all the AMZN’s ratings here.

Shopify Inc. (SHOP)

SHOP is a commerce company that provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia-Pacific, Australia, China, and Latin America. The company’s platform enables merchants to display, manage, market, and sell their products through various sales channels and manage products and inventory, process orders, and payments.

In terms of its trailing-12-month Return on Total Capital, SHOP’s 7.34% is 151.1% higher than the 2.92% industry average. Likewise, its 16.84% trailing-12-month net income margin is 386.7% higher than the 3.46% industry average. Its 0.72x trailing-12-month asset turnover ratio is 17.2% higher than the 0.61x industry average.

SHOP’s revenues for the third quarter, which ended on September 30, 2024, increased 26.1% year-over-year to $2.16 billion. Its gross profit rose 24.1% over the prior-year quarter to $1.12 billion. SHOP’s net income and free cash flow were $828 million and $421 million, reflecting year-over-year increases of 15.3% and 52.5%, respectively.

For the quarter ending December 31, 2024, SHOP’s EPS and revenue are expected to increase 24.3% and 27.1% year-over-year to $0.42 and $2.73 billion, respectively. SHOP surpassed the consensus revenue estimates in each of the trailing four quarters. Over the past year, SHOP’s stock has gained 76.9% to close the last trading session at $110.29.

SHOP’s POWR Ratings reflect this optimistic outlook. It has an A grade for Momentum and a B for Sentiment. SHOP is ranked #13 out of 26 stocks in the  Internet – Services industry. To access the additional grades of SHOP for Growth, Value, Stability, and Quality, click here.

Etsy, Inc. (ETSY)

ETSY and its subsidiaries operate two-sided online marketplaces that connect buyers and sellers in the United States, the United Kingdom, Germany, Canada, Australia, and France. Its primary marketplace is Etsy.com, which connects artisans and entrepreneurs with various consumers.

In terms of the trailing-12-month net income margin, ETSY’s 9.17% is 105.4% higher than the 4.46% industry average. Likewise, its 13.16% trailing-12-month EBIT margin is 63.3% higher than the 8.06% industry average. Moreover, the stock’s 1.14x trailing-12-month asset turnover ratio is 15% higher than the 1x industry average.

For the fiscal third quarter that ended September 30, 2024, ETSY’s revenue grew 4.1% year-over-year to $662.41 million. Its gross profit increased 6.5% year-over-year to $476.77 million. The company’s adjusted EBITDA came in at $183.59 million, increasing marginally year-over-year. Additionally, ETSY’s net income was reported to be $57.37 million.

Analysts expect ETSY’s EPS for the quarter ending December 31, 2024, to increase 24.3% year-over-year to $1.51. Its revenue for the same quarter is expected to grow 2.4% year-over-year to $862.71 million. Over the past month, the stock has gained 4.4% to close the last trading session at $51.86.

ETSY’s strong prospects are reflected in its POWR Ratings. It has an A grade for Quality and a B for Momentum. It is ranked #33 in the Internet industry. To see ETSY’s grades for Growth, Value, Stability, and Sentiment, click here.

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AMZN shares were trading at $211.48 per share on Thursday afternoon, down $2.62 (-1.22%). Year-to-date, AMZN has gained 39.19%, versus a 26.01% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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