These e-commerce stocks could make excellent investments.
The global economy has been steadily transitioning online for decades, but the pandemic facilitated that transition in many ways. While physical stores and workplaces were completely shut down, e-commerce businesses boomed. Global e-commerce retail sales rose by 25.7% to $4.2 trillion in 2020, according to market research company eMarketer. By 2025, eMarketer estimates that global e-commerce retail sales will reach $7.4 trillion and will account for 24.5% of all retail sales. Several e-commerce stocks are well-positioned to capitalize on this long-term growth trend. Here are eight top e-commerce stocks to buy, according to Bank of America.
Amazon.com Inc. (ticker: AMZN)
It wouldn’t be a true list of e-commerce stocks without Amazon. Bank of America estimates that Amazon will record about $473 billion in retail e-commerce sales in 2021, more than five times as much as any other U.S. company. Amazon has expanded into advertising, entertainment and cloud computing, but its core e-commerce business is still going strong. The company faces difficult year-over-year sales comparisons in the next couple of quarters, but analyst Justin Post says Amazon is still his preferred stock pick in the e-commerce space. Bank of America has a “buy” rating and a $4,250 price target for AMZN stock.
JD.com Inc. (JD)
Chinese tech stocks face a wave of regulatory and geopolitical pressures these days. However, analyst Eddie Leung says JD’s long-term outlook is bullish. JD is investing in supply chain management improvements, ramping up omnichannel distribution and expanding its physical product offerings. Post says JD’s revenue growth should outpace the e-commerce industry as a whole in the long term given the company’s positioning in the massive, high-growth Chinese market. Bank of America has a “buy” rating and a $104 price target for JD stock.
Alibaba Group Holding Ltd. (BABA)
Alibaba’s 35% year-over-year sales growth in 2020 highlighted its continued dominance in the Chinese e-commerce sector. However, the stock is down more than 20% year to date on concerns about big tech antitrust crackdowns in China, increased regulatory scrutiny of Chinese companies in the U.S. and a downturn in Alibaba’s profitability as it invests in new initiatives. Leung says Alibaba is focusing on investments that will expand its user base and increase usage of its platforms, and he expects Alibaba to remain the market leader in cloud services and e-commerce in China. Bank of America has a “buy” rating and a $285 price target for BABA stock.
Pinduoduo Inc. (PDD)
Pinduoduo is the second-largest Chinese e-commerce platform by active buyers. Analyst Joyce Ju says Pinduoduo and other Chinese tech stocks face regulatory risks in the near term, but the bullish long-term outlook for e-commerce growth is the more important trend for Pinduoduo investors. Ju says Pinduoduo’s exposure to smaller Chinese cities, its team purchase model and its social media presence differentiate it from other Chinese e-commerce leaders. Pinduoduo’s sales nearly doubled in 2020 — a much higher growth rate than both Alibaba and JD.com. Bank of America has a “buy” rating and a $143 price target for PDD stock.
Walmart Inc. (WMT)
The top e-commerce companies are all either innovative tech startups that have disrupted the traditional retail space or legacy brick-and-mortar retailers that had the foresight and flexibility to invest in transitioning their businesses online. Discount retailer Walmart is the best example of the latter. Walmart has now become the second-largest U.S. e-commerce retailer by sales. Analyst Robert Ohmes says Walmart has several bullish catalysts ahead, including a strong back to school season and visibility on alternative revenue streams such as advertising and health care. Bank of America has a “buy” rating and a $185 price target for WMT stock.
Home Depot Inc. (HD)
Home improvement stocks such as Home Depot have been top performers within the retail sector throughout the health crisis. A surge in home improvement projects and a booming housing market have supercharged Home Depot’s sales growth, and online sales have been particularly strong. Last quarter, Home Depot reported 27% online sales growth. Analyst Elizabeth Suzuki says Home Depot investors should expect sales growth to decline from unsustainable levels in the near term, but longer-term trends in home improvement are still favorable. Bank of America has a “buy” rating and a $391 price target for HD stock.
Target Corp. (TGT)
Target has invested heavily in its online sales business, particularly in grocery pickup and delivery. In the most recent quarter, Target’s comparable-store sales were up 18%, but its digital comparable sales grew 50%. Drive-up sales grew 123%, sales through Shipt were up 86% and in-store pickup sales grew 52% in the quarter. Ohmes says Target’s impressive growth numbers are a testament to the company’s strong execution of its omnichannel strategy. He expects same-day services to continue to drive long-term sales growth for Target. Bank of America has a “buy” rating and a $300 price target for TGT stock.
Best Buy Co. Inc. (BBY)
The fact that Best Buy is thriving while consumer electronics stores such as Circuit City and Radio Shack went bankrupt speaks volumes about Best Buy’s willingness to adapt and embrace e-commerce. Best Buy said 33.2% of its $3.6 billion in U.S. revenue last quarter came from online sales. Analyst Curtis Nagle says Best Buy is a strong omnichannel growth stock within the retail sector that has a strong balance sheet, a 2.5% dividend and a valuation that leaves room for future upside. Bank of America has a “buy” rating and a $145 price target for BBY stock.
Top e-commerce stocks to buy:
— Amazon.com Inc. (AMZN)
— JD.com Inc. (JD)
— Alibaba Group Holding Ltd. (BABA)
— Pinduoduo Inc. (PDD)
— Walmart Inc. (WMT)
— Home Depot Inc. (HD)
— Target Corp. (TGT)
— Best Buy Co. Inc. (BBY)
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