3 Unstoppable E-Commerce Stocks to Add to Your Portfolio in 2021: Chewy, Etsy, and Farfetch
December 30, 2020 at 08:53 AM EST
Without a doubt, 2020 has proved to be one of the best years for e-commerce stocks. While some consumers were already patronizing the e-commerce retail space before the pandemic, since then doing so has proved to be a necessity for many more. As the work-and-learn from home trend is likely here to stay, it is wise we believe to buy e-commerce stocks Chewy (CHWY), Etsy (ETSY), and Farfetch (FTCH). They have all carved out market niches for themselves and still have plenty of upside to deliver.
2020 has been a historic year for e-commerce companies. While COVID-19 has created worldwide economic chaos, e-commerce stocks hit unprecedented heights this year because of their ability to help people survive and even thrive in their work and entertainment without leaving their homes.
The heady performance of online shopping companies can be seen in the Amplify Online Retail ETF’s (IBUY) 120.5% gains over the past year, as compared to S&P 500’s 15% returns.
Even though the demand for e-commerce retailers were accelerated by the strict lockdown measures and closure of traditional brick-and-mortar stores the coronavirus pandemic wrought, the trend is likely here to stay even after the pandemic. According to a study conducted by the Grand View Research, the global e-commerce market size is expected to grow at a CAGR of 14.7% from 2020 to 2027.
As a result of the fundamental changes brought about by the ongoing digital transformation, it is a good time to invest in quality e-commerce stocks such as Chewy, Inc. (CHWY), Etsy, Inc. (ETSY), and Farfetch Limited (FTCH), which we believe have plenty of upside going into 2021.
Chewy, Inc. (CHWY)
An online seller of branded and private-label pet food and grooming supplies, CHWY is headquartered in Dania Beach, Florida. The company’s brands include A Pet Hub, A&E Cage Company, and ABO Gear, to name a few. CHWY offers an Autoship subscription program, which allows its customers to schedule their orders, so they never run out of pet food, supplies and medication. As a result of growing demand, CHWY broke its $100 per share on December 17.
The company’s net sales have climbed 45% year-over-year to $1.9 billion for the third quarter ended October 31, 2020. Autoship customer sales increased 42.5% year-over-year to $1.2 billion. Its gross profit has increased 55.8% year-over-year to $454.6 million, yielding a gross margin of 25.5%, which has expanded 180 basis points year-over-year. Its active customers have increased 39.8% year-over-year to 17.8 million.
Analysts expect CHWY’s revenue to increase 44.4% for the current quarter ending January 31, 2021, 45.7% in 2021, and 24.7% in 2022. The company’s EPS is expected to increase 39.7% in 2021, 76.3% in 2022, and at a rate of 132.1% per annum over the next five years. CHWY has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters.
In early December, CHWY announced that its CEO, Sumit Singh, had been named to the Bloomberg Businessweek’s 2020 ‘Bloomberg 50’ List. On November 12, it announced that it is expanding its Pharmacy (Rx) business to offer compounded medications that are customized to the specific needs of the pets. It also plans to offer it as a service to veterinarians in the future. The company launched a new telehealth service, ‘Connect with a Vet,’ in October. The stock has gained 217.6% over the past year and closed yesterday’s trading session at $90.92.
How does CHWY stack up for the POWR Ratings?
A for Trade Grade
A for Peer Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #10 of 37 stocks in the Consumer Goods industry.
Etsy, Inc. (ETSY)
Founded in 2005, ETSY is a global marketplace for unique and creative goods. Offering roughly 66 million items in its various retail categories to buyers, the company operates as a marketplace, both online and offline. Its online marketplaces include Etsy.com and Reverb.com. ETSY also offers a range of seller services and tools that help entrepreneurs start, grow, and manage their businesses.
ETSY’s top line has increased nearly 128% year-over-year to $451.5 million for the third quarter ended September 30, 2020. Its gross merchandise sales (GMS) increased 119.4% year-over-year to $2.6 billion. And its number of active buyers increased 55.4% year-over-year to 69.6 million. Net income increased 520% year-over-year to $91.8 million, yielding EPS of $0.70, which increased 483.3% year-over-year.
Analysts expect ETSY’s revenue to increase 97.3% this year, 68.4% for the quarter ending March 2021, and 12.3% next year. The company’s EPS is expected to increase 177.6% this year, 310% for the quarter ending March 2021, and at a rate of 57.1% per annum over the next five years. ETSY’s earnings surprise history looks impressive, with the company missing the consensus estimate in just one of the trailing four quarters.
The company extended its annual Cyber Week Sales Event to 10days, this year, which continued until December 2. On November 9, ETSY announced that it has joined forces with Roller Rabbit, which is an iconic lifestyle brand known for its ready-to-wear and feel-good sleepwear. They launched a limited-edition tablescape and entertaining line featuring the Roller Rabbit x Etsy collection. The stock has rallied 293.5% over the past year to close yesterday’s trading session at $177.01.
ETSY’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Peer Grade, and Industry Rank, and a “B” for Buy & Hold Grade. Among the 61 stocks in the Internet industry, it is ranked #10.
Farfetch Limited (FTCH)
Headquartered in London, FTCH is ranked #1 in the global online luxury fashion platform sector. The company operates through three segments — Digital Platform, Brand Platform, and In-Store. Uniting various independent fashion boutiques, FTCH offers clothing, shoes, bags, accessories, jewelry, and beauty products for men, women, and children. The company’s platform is accessible through its website, iPhone Operating System (iOS), and android application.
For the third quarter ended September 30, 2020, FTCH’s revenue climbed 71.3% year-over-year to $437.7 million. Gross profit increased 81.5% year-over-year to $209 million. And gross merchandise value(GMV) and digital platform GMV increased 62.2% year-over-year, and 60.4% year-over-year, respectively, to record highs of $797.8 million and $674 million, respectively. Its brand platform revenue increased 79.2% year-over-year to $112.3 million.
Analysts expect FTCH’s revenue to increase 60% this year, 34.6% for the quarter ending March 2021, and 33.2% next year. The company’s EPS is expected to increase 55.9% next year. Over the past year, the stock has rallied 508.7% to close yesterday’s trading session at $62.82. It is currently trading 4.2% below its 52-week high of $65.54, which it hit on December 22.
In mid-November, the company announced the launch of FARFETCH ‘Second Life’ in the United States. The program will enable consumers in the U.S. to trade in their designer handbags for credit to be used towards future purchases through the company’s platform. On November 5, FTCH announced a global strategic partnership with Alibaba Group Holding Ltd (BABA) and Richemont to provide luxury brands with enhanced access to the China market as well as to accelerate the digitization of the global luxury industry.
It is no surprise then that FTCH is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. In the Internet industry, it is ranked #12.
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CHWY shares were trading at $93.93 per share on Wednesday afternoon, up $3.01 (+3.31%). Year-to-date, CHWY has gained 223.90%, versus a 17.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.3 Unstoppable E-Commerce Stocks to Add to Your Portfolio in 2021: Chewy, Etsy, and Farfetch appeared first on StockNews.com