For investors in 2020, there’s no denying that when it came to retail equities, online was the place to be. Much of that scenario is attributable to the novel coronavirus pandemic, but the fact is, e-commerce was booming prior to Covid-19. The good news is, there still plenty of online retail stocks to buy now.
November and December are usually prime time for retail sales of any variety. Data confirm the online move is happening in force this year.
“U.S. online sales could surge 33% year-over-year to a record $189 billion this November and December, according to a forecast from Adobe Analytics. That’s on par with the recent 37% online year-over-year growth shown in the U.S. Department of Commerce E-Commerce Report for Q3, far outstripping the 7% overall increase in retail sales,” notes ProShares Global Investment Strategist Simeon Hyman.
Adding to the case for e-commerce investing is that as the space evolves, so are its investment options, meaning investors don’t have to rely on the likes of Amazon (AMZN) and Shopify (SHOP) – names that many investors are priced out of.
Here are some online retail stocks to buy now that could flourish in 2021.
Call me biased as a dog owner, but Chewy (CHWY) certainly merits a place in the online retail equities conversation. A year-to-date gain of almost 233% reiterates that pet parents are quite fond of their furry friends. That showing by CHWY stock says there’s certainly a place in the e-commerce space for products that aren’t consumed or enjoyed by humans.
Last year, pet owners spent $95.7 billion on their pets, according to American Pet Products Association (APPA). That number will likely be far higher for 2020. One of the few positive things to come of the novel coronavirus pandemic is that pet adoptions surged. Pets are great ways for owners to destress and fight loneliness caused by shelter-in-place directives.
At 6.51x sales, Chewy isn’t cheap, but it’s a name worth paying up for because pet ownership is rising, as is treatment of “pets as people.” Additionally, Chewy offers investors a recession-proof business model and one that’s still in the early innings of online retail growth.
With all that increased pet ownership due to the pandemic, Chewy’s Connect With a Vet telehealth platform could be a credible catalyst for growth in 2021.
Don’t laugh. Telemedicine for people is taking off. Why not for pets?
Like so many internet stocks, a case can be made that Pinterest (PINS) is richly valued, so much so that the shares either need to pull back or the company needs to boost average revenue per user (ARPU). Up 270% this year, PINS stock trades at nearly 32x sales, which is by no means cheap, but that doesn’t mean investors should be fearful of this name.
Despite the aforementioned year-to-date gain and the frothy multiples, Pinterest is worth considering because it’s still a relatively new e-commerce player. It was born as more of a social media play, but rather than remaining content to provide a non-politically charged alternative to Facebook (FB) or Twitter (TWTR), Pinterest is finding ways to monetize its user base.
While users don’t spend as much time on Pinterest as they do on Facebook or Twitter, PINS users are devoted and feature favorable demographic traits – higher educations and incomes – making the company an ideal social commerce investment.
Social commerce is easy to understand. It’s simply the marriage of e-commerce and social media and the market is booming. The global social commerce market is expected to post compound annual growth of 31.4% from 2020 through 2027.
This year Etsy (ETSY) gained plenty of momentum as a pandemic play as fashionable masks became one of the platform’s hottest items. Up more than four-fold year-to-date and trading at 17.17x sales, Etsy needs to prove to investors it’s more than just a play on stylish masks. After all, customers are only going to buy so many masks and, hopefully, at some point in the back half of 2021, mask requirements will be a thing of the past.
Fortunately, Etsy is showing the investment community it’s got other growth levers to pull. Etsy is carving out a niche for itself in the e-commerce as the place consumers go for higher end, hard-to-find or customizable products that aren’t usually showcased on Amazon. Those traits draw in devoted, more affluent customers.
Other factors to like: Etsy is cash flow positive and it was recently added to the Nasdaq Next Generation 100 Index, the proving ground for stocks on the cusp of joining the more widely followed Nasdaq-100 Index. If ETSY stock joins the latter benchmark, those headlines would result in significant upside for the name.
Farfetch (FTCH) isn’t yet garnering the attention of some of the other online retail stocks highlighted here, but it probably should be by virtue of a more than six-fold return in 2020. One of the true success stories of the U.K. e-commerce scene, London-based Farfetch taps into an important online retail arena: luxury goods, an area where many traditional online retailers struggle.
Those struggles are relatively easy to explain and largely boil down to consumer behavior. Put simply, for all its heft and deep bench of product offerings, shoppers don’t think of Amazon as the place for couture, pricey handbags and the like.
That means big opportunity for Farfetch because the company is dedicated to satisfying those high-end cravings. The long-term case for FTCH stock is strong because luxury goods represent 12% of the online retail market today. That’s decent, but that percentage is expected to swell past 30% by the start of the next decade.
Additionally, Farfetch has some demographic tailwinds, notably Gen Z’s penchant for expensive fashion and accessories. That could open the door to social commerce opportunities down the road as more influencers tout deals they got on Farfetch.
Often referred to as the the “Amazon of Africa,” Jumia (JMIA) stands as one of the better avenues for investors looking to tap into online retail expansion in markets that aren’t the U.S. or China. That’s relevant for adventurous investors because the bulk of the investable universe of ex-U.S. ecommerce names revolves around China.
Africa is often referred to as the “final investment frontier,” and while the continent is often overlooked relative to emerging Asian economies, there’s ample opportunity here when it comes to Jumia’s burgeoning footprint.
Evaluate enough analysis pertaining to emerging markets e-commerce investments, and you’ll find the thesis frequently revolves around two factors: rising middle class incomes and increased internet access. Among developing and frontier markets, Africa is only scratching the surface of its middle class and internet access rise, underscoring a compelling long-term case for JMIA stock.
Looking to 2021, catalysts for Jumia include ongoing margin improvement and the company’s ability to push into African countries where it currently doesn’t do business.
On the date of publication, Todd Shriber did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
|For more news you can use to help guide your financial life, visit our Insights page.|