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3 Stocks to Watch as Businesses Embrace Automation Bigtime

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Change is constant and necessary for survival in the ever-evolving environment. In this e-age, cutting edge technologies are shaping every facet of ecosystem from economies to businesses.

The pace of technological adoption varied among different sections of the economy and businesses. However, the COVID-19 pandemic gave this a further push to become a life boat of sustenance for the small and medium-sized business, which were slow in the run.

These businesses traditionally operated from their brick-and-mortar stores and suffered massive losses when people were forced to stay indoors. At this juncture, it was of paramount importance to embrace modern commerce technology, which could help them compete in any retail environment and engage directly with their customers from anywhere.

As a result, since last year, investment in technological overhaul to fully transform processes to the online platforms shot up for businesses. And enabling this transition are the companies that provide a completely digitalized operating system of tools and capabilities.

Rising Spend on Growing Automation

Per recent American Express Co. (AXP - Free Report) report, automation is the fastest anticipated growth area among the U.S. businesses surveyed. While many businesses have already been digitizing over the past few years, the pandemic helped accelerate this trend more broadly.

The GBSI found that of the six surveyed countries, U.S. businesses have the highest level of automation across most business functions including purchasing / procurement, payroll, paying suppliers, supplier analysis and with syncing payments to the existing ledger. In fact, nearly half of U.S. businesses surveyed is mostly or fully automating the making (48%) and receiving (51%) of payments from business customers. In addition, there is more opportunity ahead as nearly half (46%) of the businesses plan to automate or further automate each of these functions over the next 12 months.

On the whole, going by the study, spending on technology by U.S. businesses rose 4.1%, on average, between first-quarter 2020 and the same period in 2021, equating to an estimated $25 billion. Nearly a quarter (22%) of the U.S. businesses polled is increasing online presence that comes as one of their top three strategic goals.

Over the next 12 months, U.S. businesses under the survey cite increasing profitability (34%), securing new businesses or winning customers (32%) and remaining competitive (31%) are among their priority agenda.

Stocks to Watch

Below we mention the companies, which handhold businesses and provide them with all the necessary tools and platforms for business transition. All stocks presently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shopify Inc. (SHOP - Free Report) provides a multi-tenant, cloud-based, multi-channel commerce platform for small and medium-sized businesses (SMBs). It is well poised to benefit from growth in the number of merchants as more join its cloud-based platform.

In the latest quarterly release, its revenues shot up 110% while Subscription Solutions revenues soared 71% year over year as more merchants connected to its platform.

The company’s focus on developing Shopify Fulfillment Network, its all-in-one mobile shopping assistant named Shop, should attract more merchants to its platform.

Shopify’s balance sheet strength boosts its liquidity position minus any debt obligations.

The company’s growth in 2021 may temper a bit due to the rollout of vaccines, which shifts higher consumer spending to services and offline shopping toward the back half of the year. But the revolution of online transition will continue even after the pandemic subsides. This long-term change provides ample growth opportunity for the company.

In six month’s time, the stock has gained 16.7% compared with its industry’s growth of 20.6%
 

Zacks Investment ResearchImage Source: Zacks Investment Research

Wix.com Ltd.’s (WIX - Free Report) offers web development, design, solutions and apps via an online platform that enables businesses, organizations, professionals and individuals to create a solid digital presence. Its user-friendly applications and cloud-based platform lure in merchants.

Management anticipates registered users to increase as the company expands shipping partners and add features. Its product innovations and partnership deals will expand the user base that will eventually drive the top line in the long haul.

The company is on course to acquire Rise.ai, which is expected to enhance its offerings on the WixeCommerce platform.

Management is upbeat about its potential and believes that Wix is becoming the main engine of the Internet and that in the next five-seven years, 50% of anything newly accomplished on the internet will be done on Wix.

In the first quarter, the company’s Collections were $351 million, up 41% year over year. Over the years down the line, it expects future collections from the existing cohorts to be $14.2 billion.

Its balance sheet is also solid with favorable dent. Its positive net-cash balance provides the flexibility required to pursue any growth strategy, whether by way of acquisitions or otherwise.

In six month’s time, the stock has gained 1.1% compared with its industry’s growth of 15.8%
 

Zacks Investment ResearchImage Source: Zacks Investment Research

Lightspeed POS Inc. (LSPD - Free Report) is a leading provider of software, solutions and support systems to the small and medium-sized retailers and restaurateurs.

The company delivered strong results for the last reported quarter and the year with small-time and mid-sized businesses increasingly adopting the company's cloud-based commerce platform to enable their omnichannel strategies. Its fiscal 2021 revenues surged 84%.

In the current fiscal year, the company announced three landmark acquisitions, namely Vend, ShopKeep and Upserve and launched a series of new offerings, such as Lightspeed Capital, E-commerce for Restaurants and Order Ahead. These strategies will likely contribute to growth.

The company’s main focus is on digitizing restaurants and retailers, bulk of which still doesn’t have a full-fledged digital operating platform. Lightspeed’s niche position on its operating landscape promises to be a lever in the years ahead.  

Though the company is yet to reap profits since it is still in formative stages, this should not intimidate investors as its fundamentals bode well for the long haul has a clear long term growth path ahead

In six month’s time, the stock has gained 18% against its  industry’s decline of 9.5%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Bottomline

Several businesses are walking the route of innovation from the physical to the digital. This trend will fuel demand for products and services of the above-mentioned companies. These stocks are sure long-term investment options.

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In-Depth Zacks Research for the Tickers Above


Choose a ticker to receive a FREE report - normally $25 each:


American Express Company (AXP) - free report >>

Shopify Inc. (SHOP) - free report >>

Wix.com Ltd. (WIX) - free report >>

Lightspeed POS Inc. (LSPD) - free report >>