Holiday spending isn’t too hot and isn’t too cold so far this year, at least when it comes to online shopping.
From Nov. 1 to Nov. 21, consumers spent $64.59 billion online, up 0.1% from a year earlier, according to technology company Adobe.
But Morningstar expects things to heat up for holiday spending that includes offline purchases too. The research firm predicts modified retail sales will rise 3.2% in the fourth quarter from a year earlier, a rise smaller than the 14.1% increase in 2021.
Modified retail sales represent Morningstar’s measure of goods that are subject to holiday shopping. This metric excludes automobiles, fuel, building materials and groceries.
So which e-commerce companies might benefit from the strong spending? Morningstar cites four.
Morningstar analyst Dan Romanoff assigns the company a wide moat (competitive advantage) and puts fair value for the stock at $150, 60% above recent trades at $94.
“We continue to believe [Amazon will benefit from] long-term growth driven by e-commerce proliferation, [Amazon Web Services], and advertising,” he wrote in a commentary. AWS is Amazon’s cloud technology service
“But the near term is clouded by a variety of macroeconomic issues, including currency headwinds, high inflation, soaring energy costs, and deceleration in AWS,” Romanoff said.
Morningstar analyst Sean Dunlop gives the company a narrow moat and puts fair value for the stock at $60. That's about a third above recent trades at $45.49.
“With divestitures of Stubhub, eBay Classifieds, and eBay Korea largely in the rearview mirror, eBay's business looks remarkably similar to its genesis,” he wrote in a commentary.
That’s “a lively e-commerce platform connecting hundreds of millions of buyers and sellers worldwide, with an emphasis on used, liquidation, and refurbished goods. The firm's strategic pivot strikes us as a competitive necessity.”
Morningstar analyst Ali Mogharabi assigns the company no moat and puts fair value for the stock at $27, more than triple recently traded at $8.12.
“Groupon yet again missed expectations with its third-quarter results,” he wrote in a commentary.
“The firm continues to struggle to increase both demand and supply on its platform, as user count and engagement declined, while inventory density remains below expectations.”
But there are positives: User losses in the international market have slowed; and a decline in overall purchase frequency has eased, Mogharabi said.
Morningstar analyst Brett Horn gives the company a narrow moat and puts fair value for the stock at $135. It recently traded at $81, 67% below fair value.
“PayPal’s development of a network of merchants and consumers early in the evolution of e-commerce allowed the company to build and maintain an enviable competitive position,” he wrote in a commentary.
“In recent years, PayPal’s growth has remained turbocharged by the ongoing shift toward electronic payments and e-commerce.”
Longer term, “we see a mix of competitive opportunities and threats that create a fairly wide range of outcomes,” Horn said.
The author of this story owns shares of Amazon and PayPal.
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