It was not long ago when JCPenney, Sears and Pier1 were popular brick-and-mortar stores in every major city and suburb in the United States.  Times have clearly changed.

Though it appeared as though the new age mall rats in the Generation Z age cohort had the potential to infuse new life into traditional retail stores, the coronavirus pandemic brought this slightly renewed momentum to a halt.  It is now quite clear most brick-and-mortar stores will either have to completely pivot to the digital realm or at least win part of the online market share in order to remain in business.

As more and more retail stores close, the likes of Wayfair, Overstock and eBay will capture an even larger piece of the consumer pie.

Overstock (OSTK)

Brick-and-mortar businesses operating in traditional retail stores are clearly struggling to compete with online merchants.  Making matters worse is the fact that some e-tailers are undercutting prices with discount brand names.  OSTK is one such company.

Though it appeared as though OSTK might shift toward the blockchain, the company is now hitting its stride selling discount items as well as designer accessories, apparel and just about everything else under the sun. Overstock is now the majority owner of a capital market dubbed tZero that provides cryptocurrency trading opportunities.  However, the company’s primary business is web-based sales of merchandise.  OSTK also provides a digital dividend to its shareholders.  This payout ratio is surprisingly high, hovering around 9%.

OSTK’s real-time website personalization is making the online shopping experience that much more dynamic.  In fact, OSTK even provides this personalization service for its promotional emails. If OSTK continues to enhance its online offerings and absorb that many more customers from failed brick-and-mortar stores, the stock could return to its 52-week high of $29.75.

Wayfair (W)

Home goods and furniture are now being purchased directly from online merchants rather than from stores in malls and local shopping plazas.  Wayfair is one of the more popular home goods and furniture e-tailers, especially amongst the all-important shopaholic female demographic.

W dipped down to $23.52 as the coronavirus made its way across the globe.  Once investors made sense of the situation, it was quite apparent that W was a solid investment.  The stock now trades at $159.18.  The POWR Ratings show W’s current price tag is justified.  The stock has an overall rating of B meaning it qualifies as a solid “Buy.”  W has an A Peer Grade along with an A Trade Grade and an overall rank of 4 out of 33 stocks in the Specialty Retailers segment.

Analyst estimates for W quarterly earnings are on the rise.  In total, W has more than 21 million active customers.  This figure represents nearly a 30% increase from the year prior.  If even more brick-and-mortar businesses close in the weeks and months to come, W just might approach its 52-week high of $197.06 by year’s end.

eBay (EBAY)

Online marketplaces have never been more important simply because the majority of traditional stores have temporarily or permanently closed as a result of the pandemic.  Even if the economy fully reopens in the next 60 days, EBAY will have boosted its customer base as that many more people gave its online marketplace a try.

EBAY bears are quick to point out the e-tailer has never truly realized its potential.  EBAY hovered around the $30 to $35 level from 2015 to the spring of 2020.  Thanks to COVID-19, EBAY is now on the rise.  The stock is trending toward its 52-week high of $42.54.

The POWR Ratings have EBAY as a Strong Buy (A) with As in every single POWR component.  The POWR Ratings also have the stock rated fifth of 52 stocks in the Internet category.  In hindsight, EBAY’s $4 billion sale of StubHub was timed just right considering it will be some time before fans are allowed back into sports arenas across North America and beyond. EBAY just might break through the $45 level in the weeks ahead.

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OSTK shares were unchanged in premarket trading Monday. Year-to-date, OSTK has gained 149.65%, versus a -7.67% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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