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5 Factors to Consider Before Investing in E-commerce Stocks

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E-commerce is gaining momentum on the back of increasing penetration of Internet.

With delivery services getting faster, the online sales has gained rapid traction in 2018. Per a report from e-marketer (October), U.S. online sales reached $526.69 million in 2018. It is expected to witness year-over-year growth of 15.1% in 2019.

The following trends should be taken into account while considering investment in the e-commerce market in 2019:

Growing Proliferation of M-commerce

M-commerce continues to gain traction due to the increasing proliferation of smartphones as well as the convenience it provides.

The emergence of m-commerce has enabled the e-commerce companies to reach out to customers faster and seamlessly, expanding their customer base in turn. This is especially true for the emerging countries, wherein a significant portion of the consumers avail online shopping services via smartphones.

Per a study by 451 Research, m-commerce transactions are expected to exceed e-commerce transactions on a worldwide basis in 2019.

Usage of Artificial Intelligence

Infusion of Artificial Intelligence (AI) techniques into e-commerce services remains a major positive. Shopping and making bill payments with the help of voice commands have seen remarkable growth this year. This is evident from the booming smart speaker market which relies on virtual assistants embedded with AI techniques. Two such devices namely Amazon’s (AMZN - Free Report) Echo and Google Home which are well equipped to assist customers in doing online shopping has witnessed rapid adoption in 2018.

Further, AI backed Chatbots are taking e-commerce to the next level by providing customer service support online via textual conversation mode. The e-commerce companies are able to offer enhanced customer experience via chatbots, which in turn is driving growth of their businesses.

Social media giant, Facebook’s new chatbot tools are already in use by some retailers in handling payments directly within the app, without forcing users to process their transaction on another site.

Augmented Reality Coming Mainstream

Adoption of Augmented Reality (AR) technology by online retailers like Amazon, Alibaba (BABA - Free Report) and IKEA to name a few is aiding the companies in providing better product visibility to customers before the sale, in turn enriching their shopping experience.

Amazon’s AR View app enables the shoppers to understand how a product will look in their homes before finally purchasing it.

Further, Alibaba announced its AR infused shopping app called Taobao Buy that will offer 3D images of a product which can be used to view the product virtually in the house before buying.

Similarly, IKEA, a Swedish furniture retailer, introduced a news app called IKEA Place. The app enables customers to view and place a furniture virtually at their home using AR.

Several Industries Adopting E-commerce Route

The ease of shopping via e-commerce has brought about a tectonic change in customer preference. In fact, people worldwide have started preferring online shopping over the brick-and-mortar stores.

This trend has compelled big retailers like Walmart (WMT - Free Report) , Target and others to leverage the power of e-commerce techniques in order to penetrate the retail space further. Moreover, in a bid to counter Amazon’s strengthening fast delivery services, these retailers have also started offering similar services to the customers.

Additionally, payment companies like PayPal and Square are witnessing growing adoption of their services and products thanks to the increasing number of online transactions.

Moreover, many pharmacy retailers are trying to come online in order to ensure proper medication on time for the patients by utilizing the technical advancement in e-commerce space.

Also, companies like Expedia, Booking Holdings and TripAdvisor have been benefiting from the ease of online travel booking.

Consolidation in the Space to Continue

In 2018, the majority buyout of Flipkart by Walmart in India created ripples across the e-commerce space. The move enabled Walmart to foray into the booming e-commerce space of India. Moreover, this is in sync with the company’s strong advances to rapidly penetrate the e-commerce sector.

Further, Amazon in order to expand its addressable market, which primarily caters to grocery shopping, merchandise and home product shopping and bill payments, announced the acquisition of PillPack. This is expected to bolster its presence in the online pharmacy space.

Consolidations are expected to continue in the e-commerce space in 2019 as retailers try to break-into this fast growing space. Moreover, established e-commerce providers, particularly Amazon, is looking for strategic buyouts to expand its presence in other sectors like banking and healthcare.

Key Picks

Here we present four stocks that are well-poised to benefit from the above mentioned trends. Moreover, these stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

TripAdvisor, Inc. (TRIP - Free Report) is an online travel research company that provides a platform for users to share reviews, ratings and opinions on hotels, destinations and restaurants. The company flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, over the last 60 days, the Zacks Consensus Estimate for 2018 earnings has improved 20.1% to $1.73. Further, consensus mark for sales is pegged at $1.61 billion, reflecting year-over-year growth of 3.8%.

TripAdvisor, Inc. Price and Consensus

 

TripAdvisor, Inc. Price and Consensus | TripAdvisor, Inc. Quote

Stamps.com Inc. (STMP - Free Report) is a provider of Internet-based postage services. The company carries a Zacks Rank #2. Notably, the Zacks Consensus Estimate for 2018 earnings has improved 3.3% to $11.03 over the last 60 days. Further, consensus mark for sales is pegged at $569.61 million, reflecting year-over-year growth of 21.5%.

Stamps.com Inc. Price and Consensus

 

Stamps.com Inc. Price and Consensus | Stamps.com Inc. Quote

Etsy, Inc. (ETSY - Free Report) offers online and offline marketplaces to buy and sell goods. The stock has a Zacks Rank #2. Over the past 60 days, the Zacks Consensus Estimate for 2018 earnings have surged 95.3% to 84 cents. Consensus mark for sales is pegged at $598.3 million, reflecting year-over-year growth 35.6%.

Etsy, Inc. Price and Consensus

 

Etsy, Inc. Price and Consensus | Etsy, Inc. Quote

Walmart Inc. is the largest brick-and-mortar retailer of U.S. which is investing heavily in e-commerce initiatives.  Currently, the company carries a Zacks Rank #2.

Notably, over the last 60 days, the Zacks Consensus Estimate for 2018 earnings has improved 0.4% to $4.81. Further, consensus mark for sales is pegged at $514.62 million, reflecting year-over-year growth of 2.85%.

Walmart Inc. Price and Consensus

 

Walmart Inc. Price and Consensus | Walmart Inc. Quote

In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?

These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >



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