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E-commerce War Heats Up With Facebook Shops: 4 Stocks to Buy

Ritujay Ghosh

Facebook, Inc. FB on May 19 rolled out Facebook Shops. The new feature is aimed at businesses which can display and sell their products on the social media platform, said the company’s Chief Executive Mark Zuckerberg.

The new service will allow users to browse and buy products directly from a business’ Facebook page or Instagram profile. Although the coronavirus pandemic has hit retail sales over the past couple of months, e-commerce has gained traction with more people staying indoors and shopping online.

Facebook Strengthens E-commerce Presence

Facebook said that the new service will be free and allow businesses to set up product listings on their Facebook Page, Instagram profile, Stories or in ads. The social media platform will also allow businesses to sell products to customers through the chat features of WhatsApp, Messenger and Instagram Direct in the future.

Zuckerberg, who was personally involved in the development of the feature, said that Shops and other e-commerce products could help Facebook drive more ad sales in the future. Both Facebook and Instagram already supported a degree of e-commerce. Facebook has its Marketplace and is planning to make a bigger push through its Libra cryptocurrency initiative. Also, Instagram allows users to buy products featured in posts and ads.

The launch of the new feature by Facebook is in bid to ramp up its efforts to support small businesses during the coronavirus pandemic. Small businesses make up the majority of Facebook’s more than eight million advertisers.

E-commerce Sales Soar During Pandemic

Millions of people have been staying indoors following the coronavirus outbreak as governments have locked down borders and closed businesses. This has compelled people to shop online. Online retail sales have been gaining traction for some time now which received further boost amid the coronavirus pandemic.

U.S. e-commerce sales jumped 49% in April according to new data from Adobe’s Digital Economy Index from the baseline period in early March before shelter-in-place restrictions went into effect. Although retail sales hit a new low in April, consumers are willing to spend on products that will help them manage the COVID-19 crisis.

Online sales witnessed an 8.4% month-over-month increase. U.S. online grocery sales grew 22% in 2019 and, propelled by high demand from nationwide COVID-19 lockdowns, stand to surge about 40% this year, according to the Coresight Research U.S. Online Grocery Survey 2020. E-commerce accounted for roughly 2.6% of U.S. food and beverage retail sales in 2019, but the projected growth in online grocery activity would raise that to 3.5% or nearly $38 billion in 2020.

Our Choices

The domestic economy has started reopening but the government is still struggling to contain the spread of the pandemic. Safety measures like at-home orders and strict social distancing will continue for at least a few more months now. Hence, e-commerce is likely to gain traction as more people will prefer shopping online. Given this situation, it might be prudent to invest in retail stocks that have a strong online presence.

Etsy, Inc. ETSY provides online and offline marketplaces to buy and sell goods. The company's products include art, home and living, mobile accessories, jewelry, wedding, and others.

The company’s expected earnings growth rate for the current year is 38.2%. The Zacks Consensus Estimate for current-year earnings has improved 43.8% over the past 60 days.  Etsy has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

eBay Inc. EBAY operates as an online shopping site that allows visitors to browse through available products listed for sale or auction through each company's online storefront.

The company’s expected earnings growth rate for the current year is 9.5%. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past 60 days. eBay carries a Zacks Rank #2.

Alibaba Group Holding Limited BABA is one of the leading e-commerce giants in China. Over the last few years, the company has transformed itself from being a traditional e-commerce company to a conglomerate that has businesses ranging from logistics and food delivery to cloud computing.

The company’s expected earnings growth rate for the current year is 28%. The company’s shares have gained 3.7% in the past 30 days.  Alibaba has a Zacks Rank #2.

The Kroger Co. KR operates in the thin-margin grocery industry. It acquired meal kit company Home Chef and partnered with British online grocery delivery firm Ocado that reinforces its position in the online ordering, automated fulfillment and home delivery space.

The company’s expected earnings growth rate for the current year is 12.3%. The Zacks Consensus Estimate for current-year earnings has improved 5.1% over the past 60 days.  Kroger holds a Zacks Rank #2.

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