With a successful vaccine beginning to be distributed in the coming weeks, traditional brick-and-mortar retail will see a major rebound in the year ahead. However, experienced investors rightfully question whether these traditional businesses can return to their pre-pandemic sales levels now that the public has become more comfortable shopping online during the pandemic.
Internet retail stocks should continue their domination moving forward, and weakness will be a buying opportunity.
Below, we highlight four “Strong Buy” rated internet e-tailers that should perform well in the year ahead: Etsy (ETSY), Farfetch Limited (FTCH), Overstock.com (OSTK), and U.S. Auto Parts Network (PRTS).
It wasn’t long ago when ETSY was an overlooked DIY e-tailer that connected arts and crafts specialists with consumers. ETSY has exploded in popularity during the pandemic, partially because mask-makers sold their product on the platform. Around three-quarters of ETSY revenue stems from marketplace sales. The rest of ETSY’s revenue stems from services that support sellers.
The POWR Ratings show ETSY has "A" grades in the Industry Rank, Trade Grade, and Buy & Hold Grade components. The stock is ranked 12th of 59 stocks in the Internet category. Of the dozen analysts who have studied ETSY, 11 recommend it as a “Buy” and one recommends selling.
The pressing question is whether ETSY can maintain its momentum after the pandemic ends, likely at some point in 2021. The stock will likely continue its bull run as picky online shoppers continue to favor personalized gifts, the likes of which are sold on ETSY. There really is something special about buying/receiving a handmade, personalized item from an ETSY seller. Add in the fact that 10% of ETSY buyers are either new or reactivated and investors have even more reason to load up on this stock.
Farfetch Limited (FTCH)
As time progresses, more and more people are becoming comfortable shopping for clothing, watches, accessories, jewelry, coats, and bags on the web. These are some of the products FTCH sells on its popular website. The London-based e-tailer has "A" grades in the Peer Grade, Buy & Hold Grade, Trade Grade, and Industry Rank POWR Rating components. FTCH is ranked 13th of 59 Internet stocks.
Of the 11 analysts who have studied FTCH, 10 consider it a “Buy”, one considers it a “Hold” and none recommend selling. FTCH has taken off like a rocket since late October. The only potential stumbling block is the fact that FTCH sells luxury fashion, meaning it is more expensive than offerings on other e-tailer sites.
If the current economic trough extends through the first couple of quarters of next year or longer, there are a chance consumers will bypass FTCH in favor of cheaper alternatives. However, FTCH deserves credit for shrinking its EBITDA from $36 million all the way down to $10 million, making it clear the company is approaching profitability. The future clearly looks bright for FTCH.
Recessions are the perfect time to invest in web-based closeout e-tailers that sell discount merchandise, home décor, goods, electronics, kitchenware, clothing, sporting goods, and more. Though OSTK is not a POWR Ratings superstar, it has an "A" Industry Rank component. The top analysts paint a rosy picture for OSTK’s future, setting an average price target of $106.75, meaning there is nearly 80% upside.
OSTK has retreated since breaking through $120 this summer. However, the stock appears to have a floor around $52. Though OSTK's blockchain assets have not helped the company ramp up sales or profitability, the October launch of its tZERO Markets platform appears to have set the stage for a revenue spike in the quarter's head.
Keep a close eye on OSTK and seize the opportunity to establish a position if it dips in the days and weeks ahead.
Though most people are not yet aware of PRTS, the company is quickly making a name for itself as one of the top e-commerce automotive specialists. PRTS provides aftermarket parts and accessories for improved performance.
PRTS is a POWR Ratings stud with an "A" grade in the Trade Grade component along with "B" grades in the Industry Rank, Peer Grade, and Buy & Hold Grade components. Check out the PRTS chart and you will find it appears to have a floor at $9.50. PRTS is currently trading at its 52-week high. If the stock dips even slightly in the days ahead, investors should not hesitate to establish a position.
It is quite possible PRTS blossoms into an absolute behemoth in the years ahead. There is also a chance another e-tailer or an automaker will attempt to buy the company. There is simply no denying PRTS' growth potential.
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ETSY shares fell $1.52 (-0.95%) in premarket trading Thursday. Year-to-date, ETSY has gained 256.73%, versus a 15.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.4 E-Commerce Stocks to Watch Amid Coronavirus Surge appeared first on StockNews.com