Black Friday is coming up in just two weeks, marking the start of this year’s holiday shopping season, and the experts are already trying to predict what retailers can expect from ‘the American consumer’. Will 70-inch flat screen TVs run out the door at loss-leader prices? How will Apple’s iPhones hold up? Will an important past trend continue, with buyers continuing to migrate toward online retailers?
That last may be key. Brick-and-mortar retail has been feeling a hurt from online competition for years now and there is no sign that this trend will falter. The biggest questions are, how long will traditional stores hold out, and how will the market divvy up in the end?
For stock traders, though, there is another question: how will the online retailers perform in the equity markets? We’ll use TipRanks’ analyst data to look at three major players in the online retail segment, to see how they stand just two weeks out from Black Friday. TipRanks gathers all of the top market analysts’ reports, and data mines them to make the information available and accessible to the average market trader.
Let’s take a closer look:
First off the Blocks
Jeff Bezos’ company is the 800-pound gorilla the online retail room. With a $795B market cap, Amazon.com, Inc. (AMZN – Research Report) has the third largest cash holdings of any publicly traded company; in fact, it touched the $1 trillion mark earlier this year. What started out as an online book store 22 years ago is now a retail behemoth selling almost anything you can think of – and delivering it right to your door.
Such size has a quality all its own, and Amazon helps to prove that. The share price stands above $1,600 and is commanding an optimistic outlook, despite losing 24% since September and whiffing slightly on the Q3 earnings report. AMZN holds a whopping 33 ‘Buy’ ratings and stands near the top of TipRanks ‘Most Recommended’ stocks. Checking with the analysts gives us some idea why now may be the right time to acquire Amazon.
Ronald Josey (Track Record & Ratings) of JMP Securities forthrightly acknowledged the underwhelming Q3 report, but noted that company remains strong: “While we acknowledge the concerns post earnings around decelerating revenue and unit growth, we highlight significantly improving profitability and the continued potential across all of Amazon’s initiatives…” He set a $2,050 price target, giving a 26% upside forecast.
With such a high share price, it may seem that AMZN lacks much room for growth. Victor Anthony (Track Record & Ratings) from Aegis feels otherwise, however, and bumped his price target up to $2,225 – a 37% upside! He justifies his outlook by saying, “Amazon, in our view, remains one of the best longer-term values in Tech and we still see a path to where the shares could double over the next three years.”
The analyst consensus on Amazon is a ‘Strong Buy,’ and upside is 23% with an average price target of $2,165. Compared to the forecasts, and the company’s known strengths, this may be the time to pick up Amazon on the dip.
An Early Competitor Still in the Game
Ebay Inc. (EBAY – Research Report) has been underperforming in the markets lately, and share prices have fallen almost 30% this year. There doesn’t seem to be an easy answer why that is, however, as the company showed real strength in last week’s Q3 earnings report. Earnings per share came in at $0.55, compared $0.48 one year ago, while the quarterly revenues of $2.65B exceeded last year’s Q3 revenues of $2.41B.
The analysts have noticed. Last week, Ebay received 14 analyst reviews – 9 ‘Buy’ ratings, 4 ‘Hold’ ratings, and one ‘Sell.’ Some of the recent ‘Buy’ ratings bear a closer look; they may shed some light on the strength under EBAY’s softness, and perhaps clarify whether EBAY is a bargain now, while it’s down.
Raymond James’ Aaron Kessler (Track Record & Ratings) gave EBAY a $35 price target, without comment. Eric Sheridan (Track Record & Ratings), from UBS, maintained a ‘Buy’ rating, also without comment, and set his price target at $42 – a $2 drop from his previous target. Clearly, while these top analysts see Ebay as a stock opportunity to buy at a discount, they have some reservations.
Meanwhile Aegis’ Victor Anthony (Track Record & Ratings) definitely sees a share price recovery in the future for EBAY, and he does not hold back on saying so: “We model Non-GAAP EPS growth of 14% in 2019 and another 14% in 2020, which could prove conservative given the shift of focus to increased margins. If eBay gets to our $3 in 15x multiple gets us to $45.”
Anthony has been tracking EBAY over the last two years, and has a solid record on his forecasts:
Ebay shares currently hold a ‘Moderate Buy’ rating on the analyst consensus, with the average price target of $38 giving a 28% upside from the current share price. The company stands to gain as holiday shoppers look for online bargains.
An Arrival from China
Alibaba Group Holding (BABA – Research Report) is looking forward to Singles Day, the biggest shopping day of the year in China. The company expects to fare well, which is no surprise for this e-commerce giant, but the big one-day traffic and revenue totals may not fully cover up some real concerns about the economic background in China.
As US President Donald Trump dials up his trade war, turning rhetoric into policy, and as slower wage growth and tighter lending link up with a weaker yuan to dampen Chinese consumers’ appetite for, well, consumption, retailers – even online retailers – are starting to look at retrenchment.
Analysts are still bullish on BABA, though. The stock is another of the TipRanks’ top analyst picks, with 16 ‘Buy’ ratings in a row, dating back nine months. Clearly, something about Alibaba bears notice. Let’s see what some of those analysts have to say.
To start with, they see plenty of strength under the softness. Sometimes, a strong company can cut back to weather a storm. Alibaba, by sheer size, has plenty of options when the business environment turns. Youssef Squali (Track Record & Ratings) from SunTrust set a price target of $180, a 7% cut, commenting that he sees reason for optimism in BABA: “we believe the longer term prospects for BABA remain positive as the monetization potential of the platform is massive, especially as UI adjustments short term improve customer segmentation [and] targeting and drive conversion.” His price target, even reduced, gives a 25% upside over the current share price.
Similarly, Nomura’s Jailong Shi (Track Record & Ratings) dropped his price target by only 1%, to $200, saying, “As widely speculated by the market, Ali officially revised down its FY19F revenue guidance by 4-6%, which the management says is attributable mainly to slower customer management revenue, as Ali decided to suspend releasing new ad inventories in view of a softening macro environment, which we believe is the right decision.”
The analyst consensus is a ‘Strong Buy,’ based on those 16 consecutive ‘Buy’ ratings – and that’s with the reduced price targets. Clearly, market analysts expect Alibaba to continue its dominant role in online commerce.
Enjoy Research Reports on the Stocks in this Article:
You can find the right stock for your investment, based on the choices of top analysts. On TipRanks’ Most Recommended page, you’ll find the stocks that are hot with industry professionals. Amazon and Alibaba made that list. Want to see what else is there? Go to the Most Recommended stocks now.