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Online Grocery Delivery Demand to Prevail: 4 Stocks to Watch

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·7 min read
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The COVID-19 pandemic made essential goods delivery services like grocery and medicine all the more vital amid social-distancing and home-isolation measures. Last year, when the coronavirus had struck, people were compelled to alter their shopping patterns and remain confined to their residences. Hence, a dramatic shift in demand from in-store to online grocery purchase was seen.

More than a year now since the pandemic had hit the economy, we still believe that online grocery shopping is here to stay even after the risk of infection subsides. Expedited delivery services like doorstep delivery, curbside pickup or buy online and pick up at store will play a key role in gaining a significant market share. Excitingly, customers will prefer online grocery shopping owing to its easy ordering method, contactless and attractive payment schemes, and a safe and convenient delivery system. Also, despite reopening the restaurants, most people may continue to choose eating at home, given rising health consciousness.

No doubt, to make the most of this trend, retailers need to focus on meal kits for dinner and explore more breakfast options as well as concentrate on product packaging and increase product visibility on online platforms. Undeniably, retailers need to make investments to enhance their online platform and upgrade fulfillment center. In fact, players should come up with innovative and cost-efficient technology-driven options to lure customers and resonate well with their demand.

Markedly, the online grocery delivery market has been experiencing solid growth over time. To cash in on the evolving trends, bigwigs like Amazon AMZN, Walmart WMT and Target TGT strongly emphasized on boosting their delivery capabilities with same-day deliveries to offer a seamless shopping experience. Several companies also made strategic agreements including tie-ups with the online delivery platforms DoorDash DASH and Instacart. Moreover, companies like Lyft LYFT and Uber Technologies UBER have been offering on-demand delivery services for essential items. We note that Samokat, Russia’s major grocery-delivery service by orders, looks to tap the booming U.S. market, according to Bloomberg.

Zacks Investment Research
Zacks Investment Research

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Let’s take a look at the following stocks, which appear well positioned on the back of their concerted efforts. Also, these companies will continue to grab greater share in the thriving grocery delivery services market.

4 Stocks Stealing the Show

Target: This general merchandise retailer is making constant efforts to improvise shopping methods and techniques through miscellaneous channels, and these have been yielding results for a while now. Notably, same-day services (Order Pick Up, Drive Up and Shipt) soared above 90% during the first quarter of fiscal 2021. Sales fulfilled by Shipt were up nearly 86% year over year while the same through Drive-Up surged 123%. Order Pickup rose 52% in the first quarter of fiscal 2021. The company also plans to increase the number of fresh, refrigerated and frozen food items under Drive Up and Order Pickup options, nationwide. Management also informed that adult beverages will be available through pick-up and drive-up in more than 1,200 stores and for same-day delivery in excess of 600 stores across the country. Its Essentials and Food & Beverage category is performing well too.

Markedly, Target has a trailing four-quarter earnings surprise of 62.1%, on average. The consensus mark for its current fiscal-year earnings has moved 36.6% north in the past 60 days. An expected long-term earnings growth rate of 13.3% also demonstrates strength. Remarkably, this presently Zacks Rank #1 (Strong Buy) stock has rallied 102.9% over the course of a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Walmart: This currently Zacks Rank #2 (Buy) company has been gaining from its efforts to boost customers’ shopping experience for sometime now. This omni-channel player is benefiting from higher demand across categories and strength in e-commerce. Management remains encouraged about the improving trends in store transactions and the grocery market share. Strikingly, Walmart is making aggressive efforts to expand in the booming online grocery space, which has been a major contributor to e-commerce sales so far. Notably, the company remains committed to enrich consumer experiences by providing convenient shopping techniques and effortless grocery deliveries. Walmart took robust strides to reinforce its delivery arm, apparent from its investment in DroneUp; partnership with HomeValet; on-demand drone delivery in the United States with Flytrex and Zipline; and a pilot with Cruise to test autonomous grocery delivery through self-driven all-electric cars.

Walmart has a trailing four-quarter earnings surprise of 17.8%, on average. Further, the consensus mark for the company’s current fiscal-year earnings rose 9.8% over the past 60 days. Shares of the company have gained 18.3% in a year. A long-term earnings growth rate of 5.5% appears laudable.

Amazon: The currently Zacks Rank #3 (Hold) stock has a vast global presence, solid Prime membership and robust portfolio. Further, the company is continuously gaining traction from increased online shopping trend. The company has been expanding its grocery delivery capabilities, such as AmazonFresh Pickup and Amazon Go Grocery stores over a period of time. Moreover, the company has been strengthening its last-mile delivery for sometime now. In fact, its Whole Foods Market acquisition helped it fortify its footprint in the physical grocery supermarket space. Further, the company is constantly expanding its grocery business by introducing Amazon Fresh grocery stores, and enhancing delivery and payment schemes including Key In-Garage Grocery Delivery and free, contactless payment. The Key In-Garage Delivery allows Prime members to avail of secure in-garage delivery of grocery orders free from Whole Foods Market and Amazon Fresh. Further, the company is continuously adding Amazon One, a quick and contactless payment option, at the Whole Foods Market stores.

We note that Amazon has a trailing four-quarter earnings surprise of 180.8%, on average. Further, the consensus mark for the company’s current fiscal-year earnings has been revised 8.3% upward over the past 60 days. Shares of the company have improved 19% in the past year. An expected long-term earnings growth rate of 28% further speaks volumes for the company.

Albertsons Companies ACI: This food and drug company offering grocery products, general merchandise, health and beauty care products plus pharmacy among others is consistently strengthening its grocery delivery capabilities. Recently, the company announced its partnership with DoorDash to boost its on-demand grocery delivery services. Through this collaboration, customers can get products delivered from about 2,000 Albertsons banner stores in the country. This includes Safeway, Vons, Jewel-Osco and more from the DoorDash marketplace app.

In addition, the Albertsons-DoorDash alliance launched a digital gaming experience for its clients. This will allow them to play and score savings on the future orders. We note that Albertsons remains committed toward digital transformation. Encouragingly, it registered digital sales growth of nearly 258% in fiscal 2020. Markedly, the stock has jumped 24.3% in the past year. Moreover, it delivered an earnings surprise of 50.2% in the last four quarters, on average. This presently Zacks #3 Ranked stock has a long-term earnings growth rate of 12%.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Target Corporation (TGT) : Free Stock Analysis Report

Walmart Inc. (WMT) : Free Stock Analysis Report

Albertsons Companies, Inc. (ACI) : Free Stock Analysis Report

Lyft, Inc. (LYFT) : Free Stock Analysis Report

Uber Technologies, Inc. (UBER) : Free Stock Analysis Report

DoorDash, Inc. (DASH) : Free Stock Analysis Report

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