The e-commerce revolution has been one of the biggest by-products of the COVID-19 pandemic. Heavy dependence on online shopping has become the norm and will likely continue to be so. In fact, the sector’s growth witnessed in the recent past may be just the tip of the iceberg. Oberlo believes that global e-commerce sales will grow from $4.2 trillion in 2020 to $6.5 trillion by 2023.
Soon, new trends will begin shaping the future of this industry. The e-commerce boom will fuel the entry of more players from different segments into this space and new consumer behavior will be the defining factor. While the boom will unleash immense opportunities, there will also be major challenges. For instance, quick fulfillment and strategic and effective return/replacement policies will likely become a differentiating factor. Also, because client acquisition costs are mounting, retaining existing clientele will become a top priority.
For maximum profits, we think it would be wise to add more e-commerce stocks at this juncture. However, investors must be mindful regarding which stocks to add and which stocks to avoid. Factors such as the quality of merchandise being sold, the niche in which a company is operating, the logistics network, membership policies, and operational efficiency make a huge difference.
Our analysis suggests that one should buy eBay Inc. (EBAY) and Farfetch Limited (FTCH) due to their growth potential. But it is best to avoid Baozun Inc. (BZUN), and Blue Apron Holdings, Inc. (APRN) in the near-term owing to their operational issues.
Stocks to Buy:
eBay Inc. (EBAY)
EBAY is a leading marketplace and classifieds platform that connects buyers and sellers globally. ebay.com and the eBay suite of mobile apps are part of its Marketplace platform. Meanwhile, its Classifieds segment consists of brands like Mobile.de, Kijiji, Gumtree, eBay Kleinanzeigen, and Marktplaats that offer their services to locals.
EBAY has stated that it is exploring a potential sale of its online marketplace in South Korea as a part of large-scale reorganization. The company indicated that it is doing so to consider options for “maximizing value for its shareholders and creating future growth opportunities for the business.”
During the third quarter ended September 2020, EBAY’s revenue surged 25.1% year-over-year to $2.6 billion. Its EPS for the quarter climbed to $0.85 from $0.52 posted in the same period last year. Gross merchandise volume (GMV) climbed 22% to $25 billion. And its annual active buyers rose 5% to 183 million global active buyers.
The Street estimates EBAY’s revenue for the quarter ended December 31, 2020 to be $2.7 billion, representing a 3.1% decrease year-over-year. Meanwhile, its EPS is likely to increase 25.8% to $0.83.
EBAY has gained 64.5% over the past year to close yesterday’s trading session at $56.44. The stock has climbed 2% during the past six months.
How does EBAY stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating
The stock is ranked #5 of 69 stocks in the Internet industry.
Farfetch Limited (FTCH)
FTCH is an online marketplace that sells luxury goods in the Americas, the Middle East, Africa, Europe, and the Asia Pacific. Digital Platform, Brand Platform, and In-Store are the three segments in which FTCH operates. The company manages Farfetch.com, an online marketplace, as well as Farfetch app for retailers and brands.
British jeweler David Morris has chosen FTCH to launch its latest high jewelry collection. The brand can showcase its collection on FTCH’s platform through a direct to consumer see-now buy-now format.
FTCH’s revenue during the third quarter ended September 30, 2020 climbed 71% year-over-year to $438 million. Its gross merchandise value and digital platform GMV climbed 62% and 60%, respectively, to $798 million and $674 million. Its loss per share narrowed to $0.30 from $1.58 posted in the same period last year. During the third quarter, FTCH announced a global partnership with Alibaba and Richemont to boost the digitization of the luxury industry. Both companies intend to invest $1.1 billion in FTCH’s parent company for its China joint venture.
Analysts expect revenue for the quarter ended December 31, 2020 to rise 35.1% year-over-year to $516.5 million. Its loss per share for the quarter is likely to expand to $0.34.
FTCH ended yesterday’s trading session at $60.65, surging 391.9% over the past year. Over the past six months, the stock has rallied 153.3%.
FTCH POWR Ratings reflect this promising outlook. It has an overall rating of Buy with an A for Trade Grade and Industry Rank, and a B for Buy & Hold and Peer Grade. It is currently ranked #23 of 69 stocks in the Internet Industry.
Stocks to avoid:
Baozun Inc. (BZUN)
BZUN offers e-commerce solutions to brand partners operating in the People’s Republic of China. The company enables other brands to sell their goods directly to consumers online. BZUN also offers services to assist with company’s e-commerce operations. Its portal sells everything from electronics and baby care to home furnishing and grooming products.
BZUN and iClick Interactive Asia Group Limited (NASDAQ: ICLK) jointly announced an agreement to collaborate on delivering a holistic e-commerce service model, covering areas such as system development, IT services, digital marketing, store operation, customer services and warehousing and fulfillment services. iClick is an independent online marketing and enterprise data solutions provider in China. During the third quarter, BZUN’s climbed 21.7% year-over-year to RMB 1.8 billion, led by a 22% rise in the Services revenue. Its earnings per ADS rose to RMB 1.09 from RMB 0.66 posted in the prior year period. The company’s total gross merchandise volume (GMV) climbed 19.4% year-over-year to RMB 10.9 million.
After Chinese regulators recently imposed more stringent regulations on Alibaba.com (BABA), BZUN has also come under pressure. Hence, it is advisable to be cautious with this stock for now.
The consensus revenue estimate for the quarter ended December 31, 2020 is $527.2 million, representing a 32.5% year-over-year increase. Its EPS is expected to grow 42.1% to $0.54.
BZUN ended yesterday’s trading session at $42.03, climbing 33.8% over the past year. Over the past six months, the stock jumped 10.5%.
BZUN’s dismal prospects are also apparent in its POWR Ratings. It has an overall rating of Sell, with a C for Trade Grade and Peer Grade. It is currently ranked #44 of 103 stocks in the China Industry.
Blue Apron Holdings, Inc. (APRN)
APRN is a direct-to-consumer platform that delivers original recipes and fresh and seasonal ingredients. The Blue Apron Market provides cooking tools, utensils, pantry items and other products, while its Blue Apron Wine is a direct-to-consumer wine delivery service. The company’s customer base comprises college students, singles, young couples, and the elderly.
APRN’s net revenue for the third quarter climbed 13% year-over-year to $112.3 million. Its average revenue per customer was $314, while its orders per customer was 5.4. Its average order value rose 1.7% year-over-year to $58.56. The company’s sales were negatively impacted by nearly $2 million in customer credits issued after a voluntary recall of onions supplied to the company. APRN also experiences relatively high seasonal fluctuations in its business.
Despite revenue growth, APRN failed to post a profit for the quarter due to a rise in labor and packaging costs. Its loss per share narrowed to $0.96 from $1.99 posted in the same period last year.
Analysts expect revenue for the quarter ended December 31, 2020 to grow 17.2% year-over-year to $110.5 million. Meanwhile, its loss per share is likely to contract 63.3% to $0.61.
APRN ended yesterday’s trading session at $9.56, soaring 164.8% over the past year. During the past six months, the stock declined 20.2%.
APRN’s POWR Ratings are consistent with this bleak outlook. APRN is rated Sell with a C for Trade Grade, an F for Buy & Hold Grade and a D for Peer Grade. It is currently ranked #51 of 69 stocks in the Internet Industry.
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EBAY shares were trading at $56.21 per share on Friday afternoon, down $0.23 (-0.41%). Year-to-date, EBAY has gained 11.86%, versus a -0.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...
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