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Top 5 Online Retailers Set to Thrive This Holiday Season

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We are in the middle of the festive season. Recently, several economic data have shown that the fundamentals of the economy remain rock solid despite the Fed keeping the benchmark lending rate at a 22-years high. The U.S. economy grew at an astonishing 4.9% in third-quarter 2023.

Consequently, the holiday retail sales are likely to remain strong this year. Within retail sales, e-commerce or online retail sales are likely to gain the most. Mastercard SpendingPulse has estimated holiday retail sales (excluding automotive) between Nov 1 and Dec 24, to increase 3.7% year over year. E-commerce and online sales are likely to grow 6.7% and 2.9%, respectively.

Research firm Deloitte has estimated that the total holiday retail sales in 2023 will be in the range of $1.54 to $1.56 trillion during the November to January timeframe. This marks a year-over-year improvement of 3.5% to 4.6% in 2023. Deloitte also forecast that within the total holiday retail sales, e-commerce sales will account for $278 billion to $284 billion. This marks a year-over-year improvement of 10.3% to 12.8%.

Reuters reported that online sales are likely to grow 4.8% year over year during the holiday season of 2023. Bain & Company forecasts nominal U.S. retail sales to grow 3% year over year in November and December, reaching nearly $915 billion, with 90% of the growth coming from non-store (e-commerce and mail-order) sales.

The industry body — National Retail Federation — has estimated that the U.S. holiday retail sales in November and December to rise by 3% to 4% year over year, translating to between $957.3 billion and $966.6 billion.

Positives of Ecommerce

Internet - Commerce continues to evolve as the technologies driving it advance. On the one side are increasingly powerful and capable user devices. On the other are sophisticated, AI-enabled software platforms facilitating transactions more capable of delivering user satisfaction.

Differentiation comes from better technology for improved showcasing, easier navigation and payment, speedier delivery and returns, brand building, comparison shopping, loyalty, etc., as well as more shipping options, which generally tip the scales in favor of larger players.

Within the Retail sector, the Zacks-defined Internet-Commerce industry is currently in the top 17% of the Zacks Industry Rank. Year to date, the industry has provided 47.3% returns. Since it is ranked in the top half of Zacks Ranked Industries, we expect the e-commerce industry to outperform the market over the next 3 to 6 months.

Our Top Picks

We have narrowed our search to five e-commerce stocks with strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows the price performance of our five picks in the past month.

Zacks Investment Research
Image Source: Zacks Investment Research

Amazon.com Inc. (AMZN - Free Report) has been benefiting from a strengthening AWS services portfolio and its growing adoption rate has contributed well. Ultrafast delivery services and an expanding content portfolio are positives for AMZN. The strengthening relationship with third-party sellers is also encouraging. Its advertising business is also making a robust contribution. Improving Alexa skills along with robust smart home product offerings are tailwinds for AMZN.

Amazon has an expected revenue and earnings growth rate of 11.7% and 31.9%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.3% over the last seven days. The stock price of AMZN has advanced 10.6% in the past month.

Booking Holdings Inc. (BKNG - Free Report) has been benefiting from strength in the overall travel demand environment, particularly in global leisure travel demand. This, in turn, lowered cancellation rates. Strong momentum across merchant as well as advertising and other businesses boosted BKNG’s top-line growth.

Strong growth in rental car and airline ticket units is another positive. Strength across room nights and gross bookings, owing to BKNG’s favorable demand environment, bolstered its results. Further, strengthening alternative accommodation business and flight capabilities were major positives.

Booking Holdings has an expected revenue and earnings growth rate of 11.1% and 18.6%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 2.6% over the last 30 days. The stock price of BKNG has surged 11.8% in the past month.

Wayfair Inc.’s (W - Free Report) prospects are driven by its wide product range and brand offerings which include the likes of Wayfair, Joss & Main, AllModern, Birch Lane, Perigold and Wayfair Professional. W’s focus on infusing and leveraging advanced technology including generative AI into its business model has boosted the efficiency of its operations.

W’s robust storefront tools and systems, operations software, and strong advertising tools like campaign management and bidding algorithms for online advertising, have been helping it in expanding its reach to target customers.

Wayfair has an expected revenue and earnings growth rate of 4.3% and more than100%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved more than 100% over the last 30 days. The stock price of W has climbed 17.3% in the past month.

Tripadvisor Inc. (TRIP - Free Report) has benefitted from strong momentum across the Viator and TheFork segments. Also, Tripadvisor Core gained from strength in experiences and dining in the last reported quarter. Further, growing momentum across TRIP-branded display and platform was a plus.

TRIP’s deepening focus toward delivering a generative AI-driven travel booking experience is likely to aid its customer momentum in the near term. The strength in Tripadvisor Plus subscription offerings is another positive.

Tripadvisor has an expected revenue and earnings growth rate of 9.9% and 45.2%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 7.3% over the last 30 days. The stock price of TRIP has jumped 30.7% in the past month.

Rover Group Inc. (ROVR - Free Report) operates an online marketplace for pet care worldwide. ROVR connects pet parents with pet providers who offer overnight services, including boarding and in-home pet sitting, as well as daytime services, such as doggy daycare, dog walking, drop-in visits, grooming, and training.

Rover Group has an expected revenue and earnings growth rate of 22.9% and more than 100%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved more than 100% over the last 30 days. The stock price of ROVR has soared 32.6% in the past month.

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