12 Best Internet Retail Stocks to Buy
In this article, we discuss the 12 best internet retail stocks to buy. To skip our analysis of the e-commerce and online retail industry, go directly to the 5 Best Internet Retail Stocks to Buy.
In recent years, e-commerce has evolved into a crucial component of the global retail landscape. The internet's advent has brought about significant transformations in the buying and selling of goods, mirroring broader shifts toward digitalization in contemporary society. With the widespread adoption of the internet, consumers worldwide are reaping the benefits of seamless online transactions. The surge in global internet access, surpassing five billion users, has led to a continual rise in the number of individuals engaging in online purchases.
A notable trend in the realm of e-commerce is the remarkable prevalence of mobile device usage. In 2023, smartphones constituted more than 70% of all retail website visits globally, subsequently generating the majority of online orders when compared to desktops and tablets. The swift adoption of mobile devices, particularly in regions with limited digital infrastructure, indicates that mobile integration will persistently influence the future shopping experience. Notably, mobile commerce (m-commerce) has gained significant popularity in Asia, with countries like China and South Korea generating over two-thirds of their total online sales through mobile devices.
During the pandemic, e-commerce sales experienced significant growth as consumers avoided physical stores, leading to a surge in sales for certain products. Home improvement projects and electronic gadgets, in particular, saw increased spending as travel and entertainment options were limited. Throughout the pandemic, retailers faced challenges such as shortages and supply chain disruptions as they tried to meet the heightened demand. However, the situation has now shifted, with concerns about inflation and potential recessions influencing consumer behavior and resulting in excess inventory for some retailers. Following the aforementioned surge, numerous retail and consumer packaged goods companies experienced a notable deceleration in the growth of online sales in 2022. However, despite a return of consumers to physical stores, e-commerce is anticipated to represent 41% of global retail sales by 2027, marking a substantial rise from its 2017 share of merely 18%, as indicated by research from the Boston Consulting Group (BCG).
The strong performance of internet retail stocks, including those of Amazon.com, Inc. (NASDAQ:AMZN), Alibaba Group Holding Ltd – ADR (NYSE:BABA), and Walmart Inc. (NYSE:WMT), can serve as a motivating factor for investors considering investments in the retail sector today. These companies are often regarded as some of the best retail stocks to buy at present.
A close-up of a customer's hands selecting beauty products from an online retailer.
Our Methodology
In the process of compiling our selection of the best internet retail stocks, we initially identified companies involved in online retail and e-commerce. From this pool, we selected the stocks with the highest hedge fund investor participation in Q3 2023, designating them as the top internet retail stocks to buy.
Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
12. Etsy, Inc. (NASDAQ:ETSY)
Number of Hedge Fund Holders: 36
Etsy, Inc. (NASDAQ:ETSY), headquartered in Brooklyn, New York, operates two-sided online marketplaces connecting millions of creative buyers and sellers worldwide. Its primary marketplace, Etsy, focuses on unique and creative goods, and the company also oversees Reverb, Depop, and Elo7. Etsy’s marketplaces have 8.8 million active sellers and over 97 million active buyers.
On November 1, Etsy, Inc. (NASDAQ:ETSY) reported its financial results for Q3 2023. The company’s revenue increased by 7% year-over-year to $636 million, and it posted a net income of $88 million. The normalized earnings per share stood at $1.08, exceeding consensus estimates by $0.12. Following the earnings release, Goldman Sachs analyst Alexandra Steiger lowered the price target for Etsy, Inc. (NASDAQ:ETSY) shares to $84 from $96 while maintaining an ‘Outperform’ rating. The target price represents a potential upside of 19.74% based on the share price on November 17.
As of Q3 2023, shares of Etsy, Inc. (NASDAQ:ETSY) were held by 36 prominent hedge funds, totaling a collective valuation of $705.36 million. Brian Bares’ Bares Capital Management emerged as the leading hedge fund shareholder for the quarter.
Much like Amazon.com, Inc. (NASDAQ:AMZN), Alibaba Group Holding Ltd – ADR (NYSE:BABA), and Walmart Inc. (NYSE:WMT), Etsy, Inc. (NASDAQ:ETSY) ranks as one of the best retail stocks to buy.
11. eBay Inc. (NASDAQ:EBAY)
Number of Hedge Fund Holders: 37
eBay Inc. (NASDAQ:EBAY) is an American multinational e-commerce company based in San Jose, California, that facilitates customer-to-customer and retail sales through online marketplaces in 190 markets worldwide.
eBay Inc. (NASDAQ:EBAY) reported third-quarter 2023 earnings results on November 7. GAAP net income was $1.3 billion, or $2.46 per share, compared to a loss of $69 million, or $0.13 per share, last year. In addition, the company's adjusted EPS from continuing operations rose 3% to $1.03 per share. Both revenue and earnings beat expectations.
Out of the 910 hedge funds in Insider Monkey’s database, 49 hedge funds reported owning stakes in eBay Inc. (NASDAQ:EBAY), up from 44 hedge funds in the previous quarter. The biggest stakeholder of eBay Inc. (NASDAQ:EBAY) during this period was Natixis Global Asset Management’s Harris Associates which had a $201 million stake in the company.
10. JD.com, Inc. (NASDAQ:JD)
Number of Hedge Fund Holders: 53
JD.Com, Inc. (NASDAQ:JD), also known as Jingdong, internationally known as Joybuy and formerly called 360buy, is a Chinese e-commerce company headquartered in Beijing that engages in the sale of electronics products and general merchandise, including audio and video products, as well as books.
On November 15, JD.Com, Inc. (NASDAQ:JD) released its financial and operational results for Q3 2023. It generated a revenue of $34 billion and a net income of $1.1 billion. It recorded a normalized EPS of $0.92, which exceeded consensus estimates by $0.12. Following the earnings release, Benchmark analyst Fawne Jiang reiterated a ‘Buy’ rating for JD.Com, Inc. (NASDAQ:JD) shares with an unchanged price target of $67.
As of September 30, JD.Com, Inc. (NASDAQ:JD) shares were owned by 53 of the 910 hedge funds tracked by Insider Monkey, with the total shares owned by these hedge funds valued at $1.5 billion. Tiger Global Management LLC was the largest hedge fund shareholder with ownership of 9.9 million shares valued at $287 million.
9. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 55
Sea Limited (NYSE:SE), headquartered in Singapore, is a prominent consumer internet company in Southeast Asia and Taiwan, operating three core businesses: Shopee (an e-commerce platform), Garena (a global games developer and publisher), and SeaMoney (a digital payments and financial services provider).
On November 14, Sea Limited (NYSE:SE) disclosed its quarterly results for Q3 2023. The company reported a 5% year-on-year increase in total revenues, reaching $3.3 billion, along with a substantial 75% year-on-year reduction in net loss to $144 million. However, the normalized EPS for the quarter stood at $0.04, missing consensus estimates by $0.05.
As of Q3 2023, data from Insider Monkey’s tracking of 910 hedge funds indicated that 55 hedge funds were bullish on Sea Limited (NYSE:SE), holding shares valued at $2.2 billion. Tiger Global Management LLC emerged as the leading hedge fund with ownership of 11.7 million shares, valued at $514 million.
8. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 58
Target Corporation (NYSE:TGT), an American retail corporation headquartered in Minneapolis, Minnesota, operates a chain of discount department stores and hypermarkets. The majority of its e-commerce net sales are generated within the United States. Target.com, the company's online platform, offers a diverse range of products that span various categories, including Hobby & Leisure, Fashion, and Electronics.
Target Corporation (NYSE:TGT) has gained recognition for its consistent dividend growth, having increased dividends for 52 consecutive years. As of January 27, the stock offers a quarterly dividend of $1.10 per share, equating to a dividend yield of 3.09%.
During the third quarter of 2023, the number of hedge funds with stakes in Target Corporation (NYSE:TGT) increased from 45 to 58, according to data tracked by Insider Monkey. The collective value of these stakes surpasses $1.3 billion.
In its fourth quarter 2023 investor letter, ClearBridge Large Cap Growth Strategy stated the following regarding Target Corporation (NYSE:TGT):
“Other meaningful moves during the quarter included additions to cyclical growers we consider early cycle consumer plays: Target Corporation (NYSE:TGT), a position initiated in the third quarter, and Estee Lauder. As earnings start to recover, these stocks and semiconductors tend to be among the first to move. We may be a little early and could see some choppiness in stock prices as job growth and consumer spending cool due to the lagged effects of Fed tightening, but we believe we’re closer to the bottom in terms of economic activity and that both companies, as well as Union Pacific, are well-positioned to benefit as consumer sentiment improves and the economy begins to recover.”
7. PDD Holdings Inc. (NASDAQ:PDD)
Number of Hedge Fund Holders: 66
PDD Holdings Inc. (NASDAQ:PDD), based in Shanghai, China, is a multinational commerce group that owns and operates various businesses. The company has developed a network encompassing sourcing, logistics, and fulfillment capabilities to support its diverse portfolio of businesses. Among its notable platforms, Pinduoduo stands out as a mobile-only marketplace facilitating connections between millions of agricultural producers and consumers throughout China.
In December of 2023, Morgan Stanley identified PDD Holdings Inc. (NASDAQ:PDD) as its top Chinese pick for 2024. The firm foresees that the company's business model, coupled with shifts in consumer behavior in China, will contribute to an expansion in market share.
As of the end of the third quarter of 2023, 66 hedge funds out of the 910 funds tracked by Insider Monkey held stakes in PDD Holdings Inc. (NASDAQ:PDD). The largest hedge fund stakeholder in PDD Holdings Inc. (NASDAQ:PDD) was Lei Zhang's Hillhouse Capital Management, which possesses a significant $721 million stake in the company.
6. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 69
Shopify Inc. (NYSE:SHOP) stands as a leading provider of internet infrastructure for commerce, delivering tools that empower businesses to initiate, expand, market, and oversee retail operations across any scale. Utilized by millions of businesses in 175 countries, Shopify's platform and services play a pivotal role in supporting a diverse range of enterprises.
In its third-quarter earnings report, Shopify Inc. (NYSE:SHOP) witnessed a notable 25% surge in total revenue, reaching $1.7 billion compared to the previous year. Monthly recurring revenue experienced robust growth, with a 32% increase, reaching $141 million, driven by sustained growth across all of Shopify’s subscription plans. Moreover, the company reported an operating income of $122 million, reflecting a significant improvement from the $346 million loss reported a year ago.
As of Q3 2023, 69 out of the 910 hedge funds tracked by Insider Monkey held shares of Shopify Inc. (NYSE:SHOP), with a combined value of $3.9 billion. Cathie Wood’s hedge fund reported owning a stake worth $379.54 million by the end of the quarter.
Here is what Baron Global Advantage Fund has to say about Shopify Inc. (NYSE:SHOP) in its Q3 2023 investor letter:
“Shopify Inc. is a cloud-based software provider for multi-channel commerce. Shares gave back some of their strong performance from the first half of 2023, declining 15.5% on the back of rising concerns related to the health of the consumer and the expansion of TikTok and Temu into the U.S. While we are cognizant of these near-term risks, we believe that Shopify will continue to benefit from its position as the commerce operating system for its merchants. Rather than replacing Shopify, various selling channels, including TikTok, are managed within the platform, which should enable Shopify to maintain its competitive advantage over the long term. During the quarter, Shopify announced an agreement with Amazon that will allow merchants to offer Buy with Prime within the Shopify ecosystem, enabling Shopify to act as the payments provider for these transactions and alleviating a key concern. Lastly, the company also reported strong financial results, including 17% year-over-year gross merchandise volume growth, 31% revenue growth, and consensus-beating non-GAAP operating income that outpaced estimates by over $90 million. We remain shareholders due to Shopify’s strong competitive positioning, innovative culture, and long runway for growth, as it still holds less than a 2% share of the global commerce market.”
Shopify Inc. (NYSE:SHOP) joins the ranks of Amazon.com, Inc. (NASDAQ:AMZN), Alibaba Group Holding Ltd – ADR (NYSE:BABA), and Walmart Inc. (NYSE:WMT) as one of the best retail stocks to invest in.
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Disclosure. None. 12 Best Internet Retail Stocks to Buy. is originally published on Insider Monkey.
