3 Cyber Monday Stocks to Watch
Cyber Monday online sales have increased in double-digits annually for the previous 6 out of 7 years. Last year consumers spent $1.46 billion, making Cyber Monday the heaviest online spending day in history. Based on 450 billion website visits, Adobe Digital Index predicts that Cyber Monday 2013 will once again break all records, with over $2 billion spent online; Black Friday too will break records at $1.6 billion spent. Record-breaking holiday sales will bode well for many retailers who've seen a slightly sluggish year. We already identified some stocks that could benefit from increased revenues on Black Friday (see Black Friday Stocks to Watch), now we look at companies in different sectors that stand to benefit from Cyber Monday.
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Air Freight/Courier: While shopping online from the comfort of one's home its easy to forget the nitty-gritty detail of actually receiving one's packages. Shipping companies like FedEx (NYSE:FDX) and UPS (NYSE:UPS) will likely reach new peaks this season; UPS expects a 10% increase in pick-up volume on Cyber Monday while FedEx expects an 11% increase.
Electronics/Video Games: An insight report by the National Retail Federation Foundation shows that CDs, DVDs, Videos and Video Games are the gifts most bought by consumers in the holiday season after clothing. According to comScore Video Game Consoles and Accessories were among the top five categories of growth last year in the holiday season with sales up 18% since the same period in the year before. While Best Buy (NYSE: BBY) sells large numbers of games and consoles we'd like to actually focus your attention on a specialty gaming store that might be under the radar; its stock price has seen an increase of 138% since the beginning of the year.
Discount Stores: Over 31% of Cyber Monday shopping last year focused on Clothing. Discount Stores like Wal-Mart (NYSE: WMT), Costco (NASDAQ: COST) and Target (NYSE: TGT) that sell clothes as well as Electronics--the two most shopped category--are in a great position to exploit Cyber Monday. An IBM survey showed that Wal-Mart was one of the most searched for retailers by online shoppers last year; Wal-Mart management reported that Cyber Monday 2012 was walmart.com's highest one-day sales performance of all time.
3 Cyber Monday Stocks to Watch
FedEx Corporation (NYSE: FDX)
FedEx has a comparatively healthy gross margin of 25.6% versus its peers (the average is 10.8%) which suggests that it has a differentiated strategy with pricing advantages. Further, FedEx's bottom-line operating performance is better than its peers' (pre-tax margins of 5.6% compared to peer average 4.4%) suggesting relatively tight control on operating costs. In other words FedEx has a differentiated product portfolio as well as tight control on operating costs compared to its competition which is why its on our Cyber Monday Stocks list.
Our analysis shows that GameStop has room for significant improvement. The company's lagging revenues and earnings imply a lack of strategic focus and/or ability to execute. If GameStop is able to change this then it can turn things around for itself. The market too seems to be looking at the company as a long-term strategic bet since it gives the stock an about peer average Price/EBITDA ratio of 8.6 (Note: We use Price/EBITDA instead of PE due to negative earnings) even though the company's revenues growth has been below the peer average in the last few years (-0.7% vs. 9.7% respectively for the past three years).
In our analysis, Wal-Mart's average net profit margins of 3.6% and relatively high asset efficiency give it some operating leverage (asset turns of 2.3x compared to peer median of 1.8x). We put Wal-Mart on our Cyber Monday Stocks list because the company's relative returns also suggest sustainable outperformance. The company's return on assets is above the average for its peers both in the current period (8.5% vs. 7% for peers) and also over the past five years (8.4% vs. 6% for peers).
Want more information on these Cyber Monday stocks? Our summary snapshots rate these companies based on their fundamental analysis so you can find out how they compare to their peers in terms of growth expectations, leverage and liquidity and several other factors.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.