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3 Stocks to Buy After Record Online Holiday Season Sales

Christopher Vargas

Consumer spending once again flexed its muscle as Mastercard MA reported that online sales reached a record level. E-commerce sales in the 2019 holiday season made up 14.6% of total retail sales. The record rise in e-commerce likely helped drive overall holiday retail sales up, excluding autos, 3.4%.

Retailers have scrambled to develop better digital marketplaces to offer shoppers a more convenient alternative, especially during the holiday shopping season.

Let’s take a look at a few stocks that investors can use to capitalize on the strong holiday season.

Target TGT is a solid pick to consider as it has actively expanded its digital channel in recent years to better adapt its business to the contemporary market. It also inked a deal with Disney DIS over the summer that likely boosted its holiday sales. Target opened up mini Disney themed shops within some of its stores and also launched a Disney “digital experience” in the Target app to boost its digital traffic.

Target has leveraged its vast brick and mortar footprint, which is comprised of roughly 1,900 stores, to fuel its omnichannel services. The retailer uses its brick and mortar locations to fulfill its online orders and provide same day delivery through Shipt. It also rolled out Drive Up, which allows consumers to order their items online then drive up to the store and have the selected items brought out to them.

Overall, 2019 has been a banner year for Target as its shares have nearly doubled and dwarfed the 27% rise in the S&P 500. Some might think that TGT impressive climb may have inflated the stock’s valuation but in reality, its forward multiple of 20X its forward earnings still hovers below the industry average of 23X forward earnings.

Our Q4 consensus estimates call for sales to rise 4.2%, which would be an improvement from the flat sales growth it saw in Q4 of 2018. On the earnings front, estimates anticipate a jump of over 11%. Target’s earnings estimates have been revised higher recently, helping earn TGT stock a Zacks Rank #1 (Strong Buy).

WalmartWMT is another solid retailer to consider as it has also leveraged its massive brick and mortar footprint to better expand its digital presence. The world’s largest retailer is coming off a quarter where it saw its e-commerce sales rise over 41%, which was the highest increase in its current fiscal year. The company’s Sam’s Club locations saw a 32% hike in digital sales while e-commerce sales in Mexico climbed 65%.

Walmart CEO, Doug McMillon, credited the impressive growth in its digital realm to the company’s grocery delivery and same-day pickup services. McMillon believes that these services will remain key catalysts in the continued growth of the digital channel.

Walmart shares have risen 30% in 2019 and it has surpassed our estimates over the past four quarters with an average EPS surprise of 6.8%. Our Q4 consensus estimates call for Walmart’s sales to pop 2.8% and for earnings to grow 2.1%. The projected rise in sales would outpace the 1.9% jump it saw in the year ago quarter. In addition, Walmart currently pays out a dividend with a 1.77% yield and sports a Zacks Rank #3 (Hold).

AmazonAMZN is an obvious pick when considering that the US Census Bureau reported that e-commerce sales rose from 4% of total retail sales in Q2 2009 to 10.7% of total sales in Q2 of 2019. In addition, CBRE projected e-commerce to make up over 15% of total retail sales in 2022.

The continued growth in the digital channel makes the e-commerce titan a strong long-term investment. Amazon raised the ante this year as the company rolled out its one-day delivery for Prime members, which has helped it boost its top-line in its recent quarter.

This new fulfilment initiative raises the standard in the digital channel and has kept retailers on their toes. The company is on track to deliver about 3.5 billion packages globally in 2019 and a recent report from Morgan Stanley MS predicts that figure to rise to 6.5 billion packages by 2022.

The capital-intensive investments the company has made to make its one-day shipping possible are expected to pay off and help the company keep its lead in the digital realm. The expenditures have weighed on the company’s profits but Amazon has raised prices by 3% on its storing-and-shipping service for third-party sellers, which it believes can eventually offset the losses.

Our fiscal 2019 estimates call for earnings to rise a moderate 1.8% and for sales to climb nearly 20%. Online sales are forecasted to rise 14.7% in fiscal 2019, which would outpace the 13% climb the company saw in the previous fiscal year. Amazon currently sports a Zacks Rank #3 (Hold) with a Style Score grade of A for Growth.

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The Walt Disney Company (DIS) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Morgan Stanley (MS) : Free Stock Analysis Report
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
Target Corporation (TGT) : Free Stock Analysis Report
 
Mastercard Incorporated (MA) : Free Stock Analysis Report
 
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