5 E-Trading Stocks to Buy for Shiny Returns in 2H – July 11, 2024

E-commerce is set to boom in 2024, buoyed by the convenience of online shopping, especially among Generation Z. Many of these shoppers grew up online and have become accustomed to high levels of digitization.

In the United States, e-commerce sales grew 8.6% in the first quarter of 2024, up 8.6% year over year and 2.1% sequentially. E-commerce now accounts for about 15.9% of total U.S. retail sales. This segment is expected to take a large slice of the total retail pie in 2024.

Internet – Commerce continues to evolve with the technology that powers it. On the one hand, there are increasingly powerful and efficient user devices. On the other hand, there are advanced AI-enabled software platforms that facilitate transactions and are able to provide user satisfaction.

Differentiation comes from better technology, which provides better presentation, easier navigation and payments, faster delivery and returns, branding, comparison shopping, loyalty, etc., and more shipping options, which generally tip the scales in favor of the larger players. Artificial intelligence, used by large online retailers, already determines the competitiveness of the player. Therefore, the use of big data has become a necessity for survival.

Another trend that is notable is the subscription format for reusable items. This makes it easier for consumers to order and easier for retailers to plan. Retailers usually offer some sort of discount to consumers who choose this option, making it even more attractive. This trend is expected to grow in the future as both tangible and intangible goods, and low- and high-value items, are increasingly sold “as a service.”

A trend that Gen-Z is popularizing is social commerce. Social commerce refers to the ability to discover, research, buy, and transact on a social media platform, often and increasingly through influencers. Brands typically have storefronts on these platforms where influencers also discuss their products, thus driving traffic to them.

According to The Future of Commerce, a website that tracks e-commerce trends, 96.9 million Americans shop directly on social media. With 83% of Gen Zers starting to shop on social media, it’s clear where this trend is headed. According to the 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. Over the past year, the industry has delivered 35.2% returns. Year-to-date, it is up 22%. As an industry in the top 10 of the Zacks Ranked Industries, we expect the E-commerce industry to outperform the market over the next 3 to 6 months.

Our top picks

We’ve narrowed our search to five e-commerce stocks with strong potential for the rest of 2024. These stocks have seen positive earnings estimate revisions in the past 60 days. Each of our picks has either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price distribution of our five picks for a given year.

Zacks Investment Research
Image Source: Zacks Investment Research Inc. (AMZN Free Report) gains solid momentum Prime with ultra-fast delivery services and strong content portfolio. Deepening focus on generative AI is a big plus. Strengthening relationships with third-party sellers is positive for AMZN.

AWS’s high adoption rate is helping AMZN’s cloud dominance. Improving Alexa skills, along with a solid smart home offering, are driving tailwinds. The ad business is also pretty solid. AMZN enjoys a strong global presence and solid momentum among small and medium-sized businesses. Growing opportunities in food, pharmacy, healthcare, and autonomous driving are other strengths.

Zacks Rank #2 has expected revenue and earnings growth rates of 11% and 57.9%, respectively, for the current year. The Zacks Consensus Estimate for current year earnings has improved by 0.9% over the past 60 days.

Groupon Inc. (GRP Free Report) is benefiting from growing momentum in the local and travel categories, particularly in the North American region. The increase in gift orders with v1.0 and the increasing focus on improving GRPN’s sorting and ranking algorithms to generate gift offer feeds are positives.

Solid demand from GRPN’s corporate clients is a plus. Groupon’s growing efforts to improve deal recommendations and quality assurance through AI are driving revenue growth. GRPN’s cost-cutting initiatives, such as cloud cost optimization and ERP simplification projects, are acting as a tailwind.

Zacks Rank #1 Groupon has expected revenue and earnings growth rates of 2.3% and over 100%, respectively, for the current year. The Zacks Consensus Estimate for current year earnings has improved by over 100% over the past 60 days.

Chewy Inc. (CHWY Free Report) is a pure play e-commerce business in the United States. CHWY provides pet food and treats, pet supplies and pet medications, and other animal health products and services for dogs, cats, fish, birds, small pets, horses, and reptiles through its retail website as well as mobile applications.

Zacks Rank #1 CHWY is expecting its revenues and earnings to grow by 5.5% and 39.1%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current year earnings has improved by 1.1% over the past 30 days.

Carvana Co. (CVNA Free Report) Carvana’s logistics network, auction capabilities and remanufacturing operations benefited from the acquisition of ADESA’s U.S. operations. By leveraging ADESA’s existing infrastructure and resources, CVNA can scale its remanufacturing processes, increasing the quality and quantity of vehicles prepared for resale. Carvana expects sequential annualized retail sales growth in the second quarter of 2024.

To achieve significant adjusted EBITDA per unit, CVNA is focused on driving operational efficiencies. CVNA expects sequential growth in adjusted EBITDA in the second quarter of 2024. In addition to reduced retail renewal and inbound transportation costs, expanded customer acquisition and additional revenue streams from value-added services are driving GPU retail earnings.

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 will be above 100% for the next year. The Zacks Consensus Estimate for current year earnings has improved by 70% over the past 30 days.

Home (IN Free Report) is benefiting from growing momentum among active customers, driven by lower costs and growing customer and supplier loyalty. Gaining market share, driven by wide availability and fast product delivery, is a plus.

W’s strong momentum among regular customers is a tailwind. Solid momentum in mobile app orders is contributing well. The strength of W’s fulfillment solutions and vendor advertising is a major positive.

Zacks Rank #2 Wayfair has expected revenue and earnings growth rates of 1.2% and over 100%, respectively, for the current year. The Zacks Consensus Estimate for current year earnings has improved by 5.6% over the past 60 days.