Market Overview

5 E-Commerce Stocks To Watch

5 E-Commerce Stocks To Watch

The e-commerce space is seeing explosive growth as consumers gravitate toward online buying, shifting their allegiance from physical stores to virtual offerings. The seamless shopping experience offered by this channel fits modern buyers' M.O. well, rendering brick-and-motor stores a dying breed.

Against this backdrop, D.A. Davidson initiated coverage of e-commerce stocks, Inc. (NASDAQ: AMZN), Etsy Inc (NASDAQ: ETSY),, Inc. (NASDAQ: OSTK), Park City Group, Inc. (NASDAQ: PCYG) and Shopify Inc (US) (NYSE: SHOP).

Rating/Price Target

  • Amazon: Buy/$1,300.
  • Etsy: Buy/$19.
  • Overstock: Buy/$28.
  • Park City: Buy/$15.
  • Shopify: Neutral/$95.

Commenting on the prospects facing the retail sector, DA Davidson analyst Tom Forte said the future of retail is made concise in the acronym "SIMPL" (Social, International, Mobile, Payments and Logistics).

The analyst pointed to the Consumer Internet of Things, co-opetition with Amazon, augmented realty/virtual realty, stores, artificial intelligence and machine learning as the emerging trends in retail.

Amazon: The King Of Bricks And Clicks

D.A. Davidson is of the view that Amazon stands to take further share in the retail sector, particularly given that it has embraced physical stores with its Whole Foods Market, Inc. buy. The company's expansion into the apparel and grocery categories and its international expansion, especially in India, will help to disrupt the legacy retail sector even more, the firm added.

The firm sees these, combined with the company's Amazon Web Services unit, as able to help sustain its profitable revenue growth well into the future. The firm expects a high rate of sales growth and margin expansion over the next three-year period, with revenues expected to grow at a compounded annual growth rate, or CAGR, of 18.7 percent between 2017 and 2020.

Etsy Has The Best Business Model In E-Commerce Space

Pointing to Etsy's Marketplace model and a growing list of Seller Services such as advertising, payments and logistics, the firm said it believes the company's business model is best in class. The firm estimates 16-percent revenue growth on a CAGR basis between 2017 and 2020.

See also: Physical Retail Isn't Dying: Here's How To Play It

It's Increasingly Difficult To Overlook Overstock

With the recent surge in bitcoin, D.A. Davidson said it is increasingly difficult to overlook Overstock and its stock. The firm noted that the company operates a profitable e-commerce business, which generates over $1 billion in annual sales, with an attractive portfolio of FinTech investments through its Medici Ventures subsidiary.

The firm expects Overstock's revenues to grow at a CAGR of 4,2 percent between 2017 and 2020, with revenue growth led by sales in the home category, which accounted for 79 percent of sales in 2016.

Meanwhile, the firm believes the company could be an acquisition target, if more and more retailers pursue a bricks-and-clicks model. The firm also expressed confidence that Overstock can effectively compete against Amazon, helped by its cost prudence and low pricing facilitated by its Club O loyalty program.

Park City Group Is Well Positioned

The firm believes Park City Group is well positioned to capitalize on the increasing need for food safety compliance. The firm indicated that the company has created a network effect with both food retailers and their suppliers, attracting additional customers for its ReposiTrak service.

The firm also noted that the company has a strong financial operating model, characterized by impressive customer retention rates and favorable high-margin flow through on incremental revenue.

Over the next three years, the firm expects the company to grow its revenue at a CAGR of 27.5 percent. Supporting the bull thesis on the company, the firm said the need for food safety will intensify in the future.

Shopify Makes Selling Online Easy For All

D.A. Davidson said Shopify enables small- to medium-sized enterprises and also large businesses to sell merchandise online. The firm also delved on the benefits of the company's Merchant Solutions, Shopify Capital and ShopifyPlus enterprise solutions.

However, the firm said, "At current valuations, we believe the share price reflects our favorable view of the company and its longterm growth prospect."

The firm expects the company's revenues to grow at a CAGR of 38.2 percent between 2017 and 2020.

Related Link: The One Factor That Could Slow Down E-Commerce Growth

Latest Ratings for AMZN

Nov 2020China RenaissanceUpgradesHoldBuy
Nov 2020CitigroupMaintainsBuy
Oct 2020BenchmarkMaintainsBuy

View More Analyst Ratings for AMZN
View the Latest Analyst Ratings


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