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Online Sales Set to Hit Record High This Year: 5 Winners

Ritujay Ghosh
·5 min read

The pandemic has changed the way people were shopping so long. E-commerce, which occupied a small portion of total retail sales, is fast dominating the space. Per a new report released by FTI Consulting, U.S. online retail sales will experience a $71 billion windfall in 2020 as a direct result of the impact of COVID-19 on consumers’ shopping habits.

The coronavirus pandemic has been hurting all industries with businesses and stores remaining closed for more than two months. However, as more people are staying indoors on fears of the coronavirus spreading, online retail sales have been gaining popularity.

E-Commerce Sales to Grow

According a new report by FTI Consulting, U.S. online retail sales is expected to reach $748 billion in 2020 compared with $598 billion in 2019 and its pre-pandemic 2020 forecast of $677 billion. This implies a 25% increase over 2019, the strongest growth for online retail sales since 2006, when the channel was still in its infancy.

The forecast projects online market share of total retail sales to increase 350 basis points in 2020, more than double its annual market share gains in recent years. Months of stay-at-home orders and closure of non-essential businesses have altered consumer habits and the shopping landscape, with online grocery and home-related spending seeing a significant increase in sales. At the same time, travel-related spending, away-from-home dining and apparel shopping have lagged as most Americans continue to stay close to home.

E-commerce Dominance to Continue

The forecast projects online retail sales to now reach $1 trillion by 2023, a year earlier than last year’s projections. Total online market share is projected to reach 27% by 2025 and 33% by 2030 compared to 19.2% in 2020. While Amazon.com, Inc. AMZN remains the dominant player in the online retail space, the COVID-19 pandemic has enabled large omnichannel retailers to boost their online sales, particularly with the use of curbside pickup, and to increase market share. 

E-commerce till sometime back had a negligible presence but the pandemic has changed the perception of online shopping to a great extent over the past few months. As more states start to lift coronavirus restrictions, consumers are likely to return to shopping at physical stores but a significant portion of online shopping may be here to stay.

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, more people will rely on online delivery, especially grocery and household staples. Given this situation, it might be prudent to invest in the following four e-commerce stocks.

JD.com, Inc. JD through its website www.jd.com and mobile applications offers a selection of authentic products.  It offers computers, mobile handsets and other digital products to home appliances, automobile accessories, clothing and shoes, and luxury goods.

The company’s expected earnings growth rate for the current year is 45.2%. The Zacks Consensus Estimate for current-year earnings has improved 20.8% over the past 60 days. JD.com sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Target Corporation TGT has evolved from just being a pure brick & mortar retailer to an omni-channel entity. The company has been investing in technologies, improving websites and mobile apps, and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players.

The company’s expected earnings growth rate for next year is 12.4%. The Zacks Consensus Estimate for current-year earnings has improved 41.9% over the past 60 days.  Target sports a Zacks Rank #1.

Best Buy Co., Inc. BBY is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, health, security, appliances and related services. 

The company’s expected earnings growth rate for next year is 17.3%. The Zacks Consensus Estimate for current-year earnings has improved 26% over the past 60 days. Best Buy has a Zacks Rank #1.

The Kroger Co. KR operates supermarkets, multi-department stores, marketplace stores and price impact warehouse stores. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; and the multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products, and toys.

The company’s expected earnings growth rate for the current year is 49.1%. The Zacks Consensus Estimate for current-year earnings has improved 15.5% over the past 60 days. Kroger has a Zacks Rank #2 (Buy).

Walmart Inc. WMT has evolved from just being a traditional brick-and-mortar retailer into an omnichannel player. In this regard, acquisitions of Bonobos, Moosejaw and Parcel, partnership with JD.com and Lord and Taylor, and investment in the online e-commerce platform Flipkart are noteworthy.

The company’s expected earnings growth rate for the current year is 8.5%. The Zacks Consensus Estimate for current-year earnings has improved 8.4% over the past 60 days. Walmart has a Zacks Rank #2.

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Target Corporation (TGT) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
The Kroger Co. (KR) : Free Stock Analysis Report
JD.com, Inc. (JD) : Free Stock Analysis Report
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