No group of companies have benefited more from the COVID-19 pandemic than e-commerce companies, and there may still be ground left to gain.
The sector experienced a massive surge in business amid the pandemic as consumers shifted to online shopping in order to limit physical trips to traditional retail stores. In the second quarter of 2020, online shopping surged 44% compared to the prior year and represented more than 20% of all retail sales, according to data from the department of commerce.
But with this week's news of a successful COVID-19 vaccine being developed by Pfizer and BioNtech, a return to normal is likely over the next six to nine months, according to Stifel.
In a note on Monday, the Wall Street firm said it expects the next three quarter to be rough for e-commerce stocks "as investors begin to asses the sustainability of underlying trends amplified by COVID-19 and the approaching difficult comps starting in 2Q 2021."
But Stifel remains "incredibly optimistic" on these 6 e-commerce stocks despite a six-to-nine month headwind ahead, according to the note.
"Amazon has been a primary beneficiary of the pandemic given the increased penetration of e-commerce , helped by higher online grocery and consumables spend, and the continued dislocation in offline retail. Under a recovery scenario, we see Amazon continuing to benefit from these developments," Stifel said.
Prime users are continuing to shop at a greater frequency, and Stifel argues this trend is likely to remain in place given how sticky Amazon's Prime ecosystem is.
On top of that, Amazon's deep investments into the cloud will likely continue to bear fruit in 2021 given that the company highlighted an increase in the backlog of multiyear deals on its third quarter earnings call.
"Despite our expectations for decelerating volume growth, we believe management is focused on improving the core marketplace business and is developing new experiences to support growth and retain some of the new and reactivated customers brought to the platform in recent months. eBay has recently announced new initiatives in authentication and the development of a platform for refurbished items with some exclusive brand partnerships," Stifel said.
Stifel expects initiatives from eBay's new CEO, improvements to the buyer/seller experience, and the business opportunity from managed payments to support better-than-expected volume and revenue growth in the coming quarters, according to the note.
"We expect near-term volatility in shares as the company enters 2021, and expect a sizable deceleration in GMS growth under a vaccine scenario in the coming quarters. 2021 presents challenging comps in 2Q and 2H, compounded by a decline in facemask sales as the health crisis hopefully subsides," Stifel said.
Despite a challenging setup in 2021, "we believe Etsy will continue to benefit from the meaningful increase in awareness and engagement brought on by the pandemic," Stifel said.
"We would be buyers of extended weakness and believe ongoing investments in product improvements will support retention, though note that it will likely take many quarters for this dynamic to be fully realized," Stifel concluded.
"Netflix's business has benefited from the pandemic in several ways: some subscriber pull-forward effect, competitive consolidation, and content spend efficiencies. Thematic de-risking could lead to further near-term consolidation in shares, while risk such as the subscriber digestion period and price increase implementation will likely remain on the radar. We are comfortable with the long-term growth opportunity and could see an opportunity in Netflix shares should sentiment swing too far in the negative direction in the coming months/quarters," Stifel said.
"From $100, we see room for a three-year double," Stifel said.
"Peloton has been one of the marquee beneficiaries of pandemic-related shifts in consumer behavior and discretionary spending. The immediate reaction in Peloton shares on the Pfizer vaccine news makes sense, with shares down -20%," Stifel noted.
"However, here is why we continue to recommend shares: we view the fitness industry as forever changed. Yes, consumers may gradually return to gyms, yoga centers, and other fitness-related clubs. But many former members may never opt to renew their expensive gym passes. The fitness industry has been disrupted and consumers are finding more economical, time-efficient ways to meet their fitness needs— enter Peloton," Stifel explained.
"Moving into 2021 we think measured product launches and increasing international traction will carry estimates higher over time," Stifel said
"Wayfair has benefited from increased spending on home categories as the pandemic has sparked housing turnover, increased nesting and forced a high degree of work/learn from home," Stifel explained, adding that it faces a tougher road ahead of all the other names.
"Facing difficult compares in 2021, and having to produce heightened results against a backdrop of waning benefits from the short term factors of work/learn from home, the surge in housing turnover, and return primarily of offline (and online) competition could prove challenging. Our below consensus 2021 estimates still produce six 2019 holiday quarters. We do believe Wayfair will permanently benefit to some degree from the pandemic given the acceleration in the home category online," Stifel said.
Article courtesy of Business Insider here