E-commerce businesses thrived last year as consumer behavior changed drastically in response to lockdowns and social distancing restrictions. Most brick-and-mortar businesses adapted to changing shopping preferences by launching online platforms to facilitate remote purchases. The benefits of online shopping contributed to high e-commerce sales in the first quarter ended March 31. E-commerce sales in the United States increased 39% year-over-year to $196.66 billion in the quarter. Online sales accounted for 19.5% of total retail sales in the most recent quarter, up 360 basis points from the same period last year.
While brick-and-mortar sales have been accelerating lately on pent-up demand for physical shopping, e-commerce shopping is likely to stick as a habit as people gradually adjust to partially remote lifestyles. Statista projects U.S. e-commerce sales will witness a steady upward trajectory over the next four years to hit $563.4 billion by 2025.
Given this backdrop, Wall Street analysts expect the e-commerce industry to generate sustainable growth in 2021, driving up the share prices of established companies Alibaba Group Holding Limited (BABA), JD.com, Inc. (JD), Stamps.com Inc. (STMP) by more than 40%.
Alibaba Group Holding Limited (BABA)
Based in China, BABA is a global player that provides technology infrastructure and the marketing reach to help merchants and other businesses engage with their users and customers and promote efficiency. The company operates through four segments: core commerce, cloud computing, digital media and entertainment, and innovation initiatives and others.
On June 10, Cainiao Smart Logistics Network, the logistics arm of BABA, announced a strategic partnership with the Hainan province in China to support the development of the Hainan global smart supply chain pilot zone. The partnership should allow BABA to increase its operational and supply chain efficiency domestically.
On June 8, Alibaba Cloud launched Project AsiaForward with an initial $1 billion of funding to support technology startups in the Asia Pacific region over the next three years. The company aims to fund multiple data and innovation centers in this region, thereby strengthening its foothold in the continent.
BABA’s revenues increased 64% year-over-year to RMB187.40 billion ($28.60 billion), in its fiscal fourth quarter ended March 31. Its non-GAAP net income stood at RMB 26.22 billion ($4 billion), up 18% from the same period last year. The company’s non-GAAP earnings per ADS increased 12% year-over-year to RMB10.32($1.58). Its cash and cash equivalents were reported at RMB 356.47 billion ($54.41 billion) representing a 3% rise year-over-year.
A $176.77 billion consensus revenue estimate of for the next year indicates a 20.8% improvement from the prior year. Analysts expect the company’s EPS to increase 22.2% year-over-year to $12.06 in the next year. BABA surpassed the Street’s EPS estimates in three of the trailing four quarters.
However, increased regulatory scrutiny of BABA over the past year and a consequent RMB18.20 billion ($2.84 billion) fine has caused the stock to decline 3.2% over this period.
Of the 26 Wall Street analysts that rated BABA, 25 rated it Buy, while one rated it Hold. The $301.60 median price target indicates a potential 43.6% upside from its last closing price of $210.06. The 12-month price targets range from a low of $270 to a high of $350.
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JD.com, Inc. (JD)
JD is a Fortune Global 500 company that operates as an e-commerce company with technology driven retail infrastructure. It operates in two segments, JD Retail and new businesses. The company offers a wide range of necessity and luxury items and has opened its technology and infrastructure to partners, brands and other sectors to promote productivity and innovation. The company reported 499.80 million active customer accounts as of March 31, 2021.
On May 28, JD subsidiary JD Logistics made its debut on the Hong Kong stock exchange. The company plans to use the proceeds from its IPO to upgrade and expand its logistics network and develop advanced technologies to attract potential customers. This should help JD expand its market reach across China and internationally, thereby facilitating its growth.
On March 22, JD acquired a 51% equity stake in Dada Group (DADA) with a $800 million investment to acquire the company’s recently issued shares in addition to its existing holdings. The investment and omni-channel collaboration with DADA should promote JD’s product diversification and expansion of its on-demand retail and delivery services.
JD’s net revenues for the fiscal first quarter ended March 31 was RMB203.20 billion ($31 billion) representing a 39% increase from the same period last year. Its net income attributable to ordinary shareholders grew 227.3% from its year-ago value to RMB3.60 billion ($600 million). The company’s net income per ADS increased 212.5% year-over-year to RMB2.25 ($0.34).
The Street expects JD’s revenues to rise 22.1% year-over-year to $182.38 billion in its fiscal year 2022. A $2.49 consensus EPS estimate for the next year indicates a 56.6% improvement versus this year. Also, JD has an impressive earnings surprise history; it surpassed Street EPS estimates in each of the trailing four quarters.
Shares of JD have gained 19% over the past year, and 4% over the past month.
Of the 13 Wall Street analysts that rated JD, 12 rated it Buy, while one rated it Hold. The $99.54 median price target indicates a potential 40.5% upside from its last closing price of $70.84. The 12-month price targets range from a low of $80 to a high of $115.
Stamps.com Inc. (STMP)
STMP is a leading provider of Internet-based mailing and shipping solutions in the United States and Europe. It operates in two segments, Stamps.com and Metapack. The company offers solutions to help businesses carry out hassle-free shipping operations under the brand names Stamps.com, Endicia®, ShipStation®, ShipEngine®, ShippingEasy®, ShipWorks®, GlobalPost and Metapack™.
On May 26, STMP’s wholly owned subsidiary Metapack added global location technology what3words to its delivery management platform to enable its customers to get parcels delivered to any location on time. In April, STMP’s wholly owned subsidiary GlobalPost launched its HS code lookup tool, which is expected to facilitate the smooth delivery packages into the buyer’s hands and avoid delays with customs and unnecessary fees and taxes. These additions should attract more customers by improving customer delivery experiences.
On March 2, STMP doubled its share repurchase program to $120 million from $60 million in February in response to increased market volatility.
STMP’s total revenues increased 25% year-over-year to $189.10 million in the fiscal first quarter ended March 31. Its income from operations grew 83.4% from the year-ago value to $44.32 million, while its net income improved 108% year-over-year to $34.24 million over the period. The company’s EPS increased 91.2% year-over-year to $1.74.
A $887.36 million consensus revenue estimate for the next year represents a 13.1% improvement year-over-year. Analysts expect the company’s EPS to increase by 17.3% year-over-year to $8.93 in its fiscal year 2022. Also, STMP surpassed the Street’s EPS estimates in each of the trailing four quarters. STMP gained 11% over the past year, and 13.9% over the past month.
Both Wall Street analysts that rated STMP rated it Buy. The $311.50 median price target indicates a potential 56.3% upside from its last closing price of $199.36. The 12-month price targets range from a low of $245 to a high of $378.
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BABA shares were trading at $208.67 per share on Wednesday afternoon, down $1.39 (-0.66%). Year-to-date, BABA has declined -10.34%, versus a 12.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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