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5 Internet-Commerce Stocks to Buy for Sparkling Returns in 2H
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The Internet-Commerce is flourishing in 2024, buoyed by the convenience of online shopping particularly true of Gen-Z. Many of these buyers have grown up on the Internet and are accustomed to a high level of digitization.
In the United States, ecommerce sales grew 8.6% in the first quarter of 2024, up 8.6% year over year and 2.1% sequentially. At present, ecommerce accounts for around 15.9% of total U.S. retail sales. This segment is expected to take away big slices of the total retail pie in 2024.
Internet - Commerce continues to evolve as the technologies driving it progress. On the one hand are increasingly powerful and capable user devices. On the other hand, there are sophisticated, AI-enabled software platforms facilitating transactions more capable of delivering user satisfaction.
Differentiation comes from better technology for improved showcasing, easier navigation and payment, speedier delivery and returns, brand building, comparison shopping, loyalty, etc., as well as more shipping options, which generally tip the scales in favor of larger players. Artificial intelligence, as used by big online retailers already decides how competitive a player is. Therefore, harnessing big data has become imperative for survival.
Another notable trend is a subscription format for repeat-use items. This makes it easier for the consumer to order and for the retailer to plan. Retailers usually offer some kind of discount to consumers choosing this option, which makes it all the more attractive. The trend is expected to expand going forward as both tangible and intangible commodities and low-value and high-value items are increasingly sold 'as-a-service.'
A trend that Gen-Z is popularizing is social commerce. Social commerce means the ability to discover, research, buy and checkout on a social media platform, often and increasingly more so, through influencers. Brands usually have store fronts on these platforms where influencers also discuss their products, thus driving traffic to them.
According to The Future of Commerce — a website on ecommerce trends — 96.9 million Americans shop directly on social media. Since 83% of the Gen Z start their shopping on social media, it is clear where this trend is headed. According to this report, social commerce will account for $2.9 trillion in the near future.
Within the Retail sector, the Zacks-defined Internet-Commerce industry is currently in the top 19% of the Zacks Industry Rank. In the past year, the industry has provided 35.2% returns. Year to date, it has advanced 22%. Since the industry is ranked in the top half of Zacks Ranked Industries, we expect the e-commerce industry to outperform the market over the next 3 to 6 months.
Our Top Picks
We have narrowed our search to five Internet Commerce stocks with strong potential for the rest of 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Amazon.com Inc. (AMZN - Free Report) is gaining on solid Prime momentum owing to ultrafast delivery services and a strong content portfolio. A deepening focus on generative AI is a major plus. Strengthening relationships with third-party sellers is a positive for AMZN.
The strong adoption rate of AWS is aiding AMZN’s cloud dominance. Improving Alexa skills along with robust smart home offerings are tailwinds. The advertising business is also pretty robust. AMZN enjoys a strong global presence and solid momentum among small and medium businesses. Growing capabilities in grocery, pharmacy, healthcare and autonomous driving are its other positives.
Zacks Rank #2 Amazon.com has an expected revenue and earnings growth rate of 11% and 57.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 60 days.
Groupon Inc. (GRPN - Free Report) is benefiting from growing momentum across local and travel categories, particularly in the North America region. Increasing gift orders on the back of its v1.0 offering and growing focus on enhancing GRPN’s sorting and ranking algorithms to generate giftable deal feeds, is a positive.
Solid demand across GRPN’s enterprise customers is a plus. Groupon’s growing efforts to improve deal recommendation and quality assurance on the back of AI are contributing well to its top-line growth. GRPN’s cost reduction initiatives, such as the cloud cost optimization and ERP simplification projects, are acting as a tailwind.
Zacks Rank #1 Groupon has an expected revenue and earnings growth rate of 2.3% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 60 days.
Chewy Inc. (CHWY - Free Report) is engaged in the pure-play e-commerce business in the United States. CHWY provides pet food and treats, pet supplies and pet medications, and other pet-health products, as well as pet services for dogs, cats, fish, birds, small pets, horses, and reptiles through its www.chewy.com retail Website, as well as its mobile applications.
Zacks Rank #1 CHWY has expected revenue and earnings growth rates of 5.5% and 39.1%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 30 days.
Carvana Co. (CVNA - Free Report) logistics network, auction capabilities and reconditioning operations have benefited from the acquisition of ADESA's U.S. operations. By leveraging ADESA's existing infrastructure and resources, CVNA can scale its refurbishment processes, enhancing the quality and quantity of vehicles prepared for resale. Carvana expects a sequential increase in its year-over-year growth rate of retail unit sales in second-quarter 2024.
To drive significant adjusted EBITDA per unit, CVNA is focusing on enhancing operational efficiency. CVNA expects a sequential rise in adjusted EBITDA in second-quarter 2024. Along with reduced retail reconditioning and inbound transport costs, expanded customer sourcing, and additional revenue streams from value-added services are driving retail GPU gains.
Zacks Rank #1 Carvana has an expected revenue growth rate of 15.2% for the current year. Although its earnings growth rate is negative for the current year, it is more than 100% for next year. The Zacks Consensus Estimate for current-year earnings has improved 70% over the last 30 days.
Wayfair Inc. (W - Free Report) is benefiting from growing momentum across active customers, owing to lower costs and increasing customer and supplier loyalties. Strengthening market share, driven by broad availability and fast delivery of products, is a plus.
W’s strong momentum across repeat customers is a tailwind. A solid momentum in mobile app orders is contributing well. Strength in W’s fulfilment solutions and supplier advertising is a major positive.
Zacks Rank #2 Wayfair has an expected revenue and earnings growth rate of 1.2% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.6% over the last 60 days.
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5 Internet-Commerce Stocks to Buy for Sparkling Returns in 2H
The Internet-Commerce is flourishing in 2024, buoyed by the convenience of online shopping particularly true of Gen-Z. Many of these buyers have grown up on the Internet and are accustomed to a high level of digitization.
In the United States, ecommerce sales grew 8.6% in the first quarter of 2024, up 8.6% year over year and 2.1% sequentially. At present, ecommerce accounts for around 15.9% of total U.S. retail sales. This segment is expected to take away big slices of the total retail pie in 2024.
Internet - Commerce continues to evolve as the technologies driving it progress. On the one hand are increasingly powerful and capable user devices. On the other hand, there are sophisticated, AI-enabled software platforms facilitating transactions more capable of delivering user satisfaction.
Differentiation comes from better technology for improved showcasing, easier navigation and payment, speedier delivery and returns, brand building, comparison shopping, loyalty, etc., as well as more shipping options, which generally tip the scales in favor of larger players. Artificial intelligence, as used by big online retailers already decides how competitive a player is. Therefore, harnessing big data has become imperative for survival.
Another notable trend is a subscription format for repeat-use items. This makes it easier for the consumer to order and for the retailer to plan. Retailers usually offer some kind of discount to consumers choosing this option, which makes it all the more attractive. The trend is expected to expand going forward as both tangible and intangible commodities and low-value and high-value items are increasingly sold 'as-a-service.'
A trend that Gen-Z is popularizing is social commerce. Social commerce means the ability to discover, research, buy and checkout on a social media platform, often and increasingly more so, through influencers. Brands usually have store fronts on these platforms where influencers also discuss their products, thus driving traffic to them.
According to The Future of Commerce — a website on ecommerce trends — 96.9 million Americans shop directly on social media. Since 83% of the Gen Z start their shopping on social media, it is clear where this trend is headed. According to this report, social commerce will account for $2.9 trillion in the near future.
Within the Retail sector, the Zacks-defined Internet-Commerce industry is currently in the top 19% of the Zacks Industry Rank. In the past year, the industry has provided 35.2% returns. Year to date, it has advanced 22%. Since the industry is ranked in the top half of Zacks Ranked Industries, we expect the e-commerce industry to outperform the market over the next 3 to 6 months.
Our Top Picks
We have narrowed our search to five Internet Commerce stocks with strong potential for the rest of 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Amazon.com Inc. (AMZN - Free Report) is gaining on solid Prime momentum owing to ultrafast delivery services and a strong content portfolio. A deepening focus on generative AI is a major plus. Strengthening relationships with third-party sellers is a positive for AMZN.
The strong adoption rate of AWS is aiding AMZN’s cloud dominance. Improving Alexa skills along with robust smart home offerings are tailwinds. The advertising business is also pretty robust. AMZN enjoys a strong global presence and solid momentum among small and medium businesses. Growing capabilities in grocery, pharmacy, healthcare and autonomous driving are its other positives.
Zacks Rank #2 Amazon.com has an expected revenue and earnings growth rate of 11% and 57.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 60 days.
Groupon Inc. (GRPN - Free Report) is benefiting from growing momentum across local and travel categories, particularly in the North America region. Increasing gift orders on the back of its v1.0 offering and growing focus on enhancing GRPN’s sorting and ranking algorithms to generate giftable deal feeds, is a positive.
Solid demand across GRPN’s enterprise customers is a plus. Groupon’s growing efforts to improve deal recommendation and quality assurance on the back of AI are contributing well to its top-line growth. GRPN’s cost reduction initiatives, such as the cloud cost optimization and ERP simplification projects, are acting as a tailwind.
Zacks Rank #1 Groupon has an expected revenue and earnings growth rate of 2.3% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 60 days.
Chewy Inc. (CHWY - Free Report) is engaged in the pure-play e-commerce business in the United States. CHWY provides pet food and treats, pet supplies and pet medications, and other pet-health products, as well as pet services for dogs, cats, fish, birds, small pets, horses, and reptiles through its www.chewy.com retail Website, as well as its mobile applications.
Zacks Rank #1 CHWY has expected revenue and earnings growth rates of 5.5% and 39.1%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last 30 days.
Carvana Co. (CVNA - Free Report) logistics network, auction capabilities and reconditioning operations have benefited from the acquisition of ADESA's U.S. operations. By leveraging ADESA's existing infrastructure and resources, CVNA can scale its refurbishment processes, enhancing the quality and quantity of vehicles prepared for resale. Carvana expects a sequential increase in its year-over-year growth rate of retail unit sales in second-quarter 2024.
To drive significant adjusted EBITDA per unit, CVNA is focusing on enhancing operational efficiency. CVNA expects a sequential rise in adjusted EBITDA in second-quarter 2024. Along with reduced retail reconditioning and inbound transport costs, expanded customer sourcing, and additional revenue streams from value-added services are driving retail GPU gains.
Zacks Rank #1 Carvana has an expected revenue growth rate of 15.2% for the current year. Although its earnings growth rate is negative for the current year, it is more than 100% for next year. The Zacks Consensus Estimate for current-year earnings has improved 70% over the last 30 days.
Wayfair Inc. (W - Free Report) is benefiting from growing momentum across active customers, owing to lower costs and increasing customer and supplier loyalties. Strengthening market share, driven by broad availability and fast delivery of products, is a plus.
W’s strong momentum across repeat customers is a tailwind. A solid momentum in mobile app orders is contributing well. Strength in W’s fulfilment solutions and supplier advertising is a major positive.
Zacks Rank #2 Wayfair has an expected revenue and earnings growth rate of 1.2% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.6% over the last 60 days.