Online Retail Stocks To Watch As Inflation Eases
Our theme of E-Commerce Stocks, which is comprised of U.S.-based e-commerce companies as well as logistics and payment players, has declined by almost 53% year-to-date, underperforming the Nasdaq-100, which remains down by 32% over the same period. While the theme has been impacted by a host of factors including the easing of Covid-19 and the sheltering at home trend, surging inflation, and the Federal Reserve’s continuous rate hikes, there have been some positive developments in recent weeks as well. Firstly, Black Friday – which is seen as the start of the holiday shopping period – was relatively strong. Per Adobe Analytics, U.S. consumers spent a record $9.1 billion online this Black Friday, marking an increase of about 2.3% versus last year. Moreover, inflation has also eased a bit, with the November number coming in at 7.11%, compared to 7.75% in October and 8.2% in September. The Fed has also slowed the pace of its rate hikes, announcing a 0.5% hike last week, after four straight 0.75% hikes at its most recent meetings.
Although the economic situation could remain mixed, as the Fed continues with its rate hikes, things are likely to look up. The secular shift from physical commerce to e-commerce is likely to continue over the long run. For perspective, in 2022 the share of e-commerce in the U.S. retail market is expected to stand at about 15%, up from just a little over 5% a decade ago. Moreover, valuations are also looking attractive following the big sell-off. For instance, e-commerce bellwether Amazon (NASDAQ:AMZN) stock now trades at a mere 1.5x projected 2023 revenues, despite a relatively strong performance of its cloud unit and a potential for a turnaround in the e-commerce business. Similarly, eBay (NASDAQ:EBAY) stock also trades at just about 2.3x forward revenues. Within our theme, Carvana stock (NASDAQ:CVNA) has been the weakest performer, declining by over 95% year-to-date. On the other side, logistics player UPS stock (NYSE:UPS) has fared a bit better, declining by just about 17%.
| Returns | Dec 2022 MTD [1] |
2022 YTD [1] |
2017-22 Total [2] |
| UPS Return | -6% | -17% | 56% |
| S&P 500 Return | -6% | -20% | 71% |
| Trefis Multi-Strategy Portfolio | -7% | -23% | 209% |
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[1] Month-to-date and year-to-date as of 12/20/2022
[2] Cumulative total returns since the end of 2016
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