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5 Stocks that Make Great Buys Ahead of Cyber Monday

Zacks

Black Friday surely offers attractive shopping deals but Cyber Monday offers a galore of appealing alternatives. Bargain hunters are expected to take to the Internet on Cyber Monday (Nov 28), which is anticipated to be the largest online shopping day in history!

This year, online retailers have scaled new highs while their traditional brick-and-mortar counterparts have been quite a disappointment. Online retailers remain the sweet spot of growth in the retail space, courtesy of lower-priced goods, free shipping and product availability. Banking on such optimism, investing in such retailers is sure to boost returns. The Cyber Monday shopping spree has also created immense opportunities for shipping and logistics companies.

Cyber Monday Likely to be Biggest Ever

Cyber Monday, the online equivalent of Black Friday, is expected to be the largest online shopping fiesta of all times, according to Adobe Digital Insights (ADI). Online sales volumes are expected at around $3.36 billion, up almost $30 million, or 9.4%, from year-ago level. Online sales during Cyber Monday in the last decade increased at a 16.8% compounded annual growth rate, while that pace has accelerated to 24.7% over the last five years.


The upcoming holiday season is set to be the largest online shopping affair to date, with expected year-over-year growth of 11% and $91.6 billion in total sales. Visa also projects an 18% rise in online spending as compared to the 16% increase last year.

The National Retail Federation, in the meantime, said that 36% of consumers plan to shop online on Cyber Monday, up from 34% in 2015. The federation expects online holiday sales in November and December to rise 7% to 10% to as much as $117 billion from a year ago.

The Great Divide: Online Retail vs Traditional Retail

Online sales have also been surpassing traditional retail sales for quiet sometime now. Sales at online retailers rose 1.5% in October, with the past 12-month average being 13%. However, the same cannot be said about brick-and-mortar stores. Sales at departmental stores slipped 0.7% last month and were down more than 7% in the past 12 months.

Year to date through October, the EQM Online Retail Index posted a return of 6.49%, while the S&P Retail Select Industry TR Index had a negative return of 1.46%. The top-performing names in the EQM Online Index include Shopify SHOP, GrubHub GRUB and Etsy ETSY.

Amazon.com, Inc. AMZN, one of the major players in the online-based business, posted 29% year-over-year sales growth in its most recent quarter. Amazon’s Cyber Monday page is flooded with Deal of the Day listings and more, while Wal-Mart Stores Inc. WMT is calling it “cyber week” since the deals will be available for a week starting Nov 25. In order to catch up with Amazon, the omni-channel retailer has almost tripled its online collection to 23 million products from 8 million last year.

Why Consumers Are More Likely to Shop Online

Consumers are looking at convenience factors more than ever this year. Lower-priced goods, free shipping and product availability are the primary reasons as to why consumers are more likely to opt for shopping online during this holiday season. Best of all, customers can place orders from the comfort of their homes or at work.

Solid wage growth and upbeat hiring are also giving Americans the wherewithal to spend online. The U.S Department of Labor said that the average hourly earnings increased by 10 cents or 0.4% to $25.92 in October, which was preceded by an increase of 8 cents in September. Wage growth increased 2.8% year on year, the highest since Jul 2009. The unemployment rate, meanwhile, declined 0.1 percentage point last month to 4.9% (read more: 4 Stocks to Buy on Strongest Wage Growth Since Recession).

5 Solid Picks

With this year’s Cyber Monday poised to be a record setter, investing in fundamentally sound online retailers is likely to prove prudent. The growth trajectory for online sales, in fact, is so compelling that it is expected to touch $440 billion next year, a jump from $395 billion anticipated this year, according to “U.S. Online Sales Forecast: Omni-Channel Retailing Challenged by Its Success,” a report from FTI Consulting. Lest we forget, the rise in demand for online products will bring along a massive volume spike in deliveries, which should bode well for logistic companies as well.

We have, thus, selected five stocks from the aforementioned areas that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). These stocks could be big winners this Cyber Monday.

Groupon, Inc. GRPN operates online local commerce marketplaces that connect merchants to consumers by offering goods and services at a discount in North America. The company has a Zacks Rank #2. Groupon’s expected growth rate for the next quarter and year are 23.33% and 44%, respectively. The Zacks Consensus Estimate for its current year earnings rose 13.6% in the last 60 days.

Mercadolibre, Inc. MELI hosts online commerce platforms in Latin America, but, has a real estate classified platform that covers various areas in Florida. The stock sports a Zacks Rank #1. Mercadolibre’s expected growth rate for the next quarter and year are 16.18% and 40.3%, respectively. The Zacks Consensus Estimate for its current year earnings increased 0.4% in the last 60 days.

Stamps.com Inc. STMP provides Internet-based postage services in the U.S. The company’s expected growth rate for the current quarter and year are 69.91% and 93.1%, respectively. The Zacks Consensus Estimate for its current year earnings rose 19.8% in the last 60 days. The company has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Target Corp. TGT operates as a general merchandise retailer. However, it has invested heavily in its digital operations and has made its website a viable competitor to the established online players. The company has a Zacks Rank #2. Target’s expected growth rate for the current quarter and year are 8.63% and 11.20%, respectively. The Zacks Consensus Estimate for its current year earnings advanced 5.3% in the last 60 days.

FedEx Corporation FDX provides transportation, e-commerce, and business services. The company expects about 10% growth in holiday season shipping volume. The stock carries a Zacks Rank #2. FedEx’s expected growth rate for the current quarter and year are 12.75% and 12.30%, respectively. The Zacks Consensus Estimate for its current year earnings increased 0.2% in the last 60 days.

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