Chronicle Journal: Finance

4 Retail Stocks for a Post-Christmas Bounce: Amazon, Target, JD.com, and Chewy

Some e-commerce stocks are ready for a post-Christmas uptick. The good news for these names is that the worry over a new, more virulent, strain of COVID-19 will likely keep consumers indoors and reliant on online shopping for longer than was originally anticipated. Additionally, a just-passed COVID-19 relief bill and stimulus package in the U.S. is expected to give a much-needed kick to the economy that should boost consumer spending. Against this backdrop, Amazon.com, (AMZN), Target Corporation (TGT), Chewy (CHWY), and JD.com (JD) are poised to see strong momentum we believe.

E-commerce stocks witnessed a strong bull run ahead of Christmas this year. But the celebration may not be over. President Donald Trump finally signed a $900 billion COVID-19 relief bill on Sunday evening. With this, a total of $2.3 trillion will be injected into the United States economy, which is expected to eventually translate into higher consumer spending.

Democratic House Speaker Nancy Pelosi is now pushing for the increase in stimulus payments to Americans from $600 to $2000 per month, for which President Trump is an advocate. However, most observers believe the requested increase in stimulus payments is unlikely to be passed by the Republic-led U.S. Senate.

With a threatening new mutant strain of Coronavirus now infecting non-U.S.  populations in particular for now, confining people indoors once again, e-commerce companies should keep thriving because people are being compelled to continue to rely on online shopping for most of their needs for the foreseeable future. Hence, Amazon.com, Inc. (AMZN), Target Corporation (TGT), Chewy, Inc. (CHWY), and JD.com, Inc. (JD) will likely e the direct beneficiaries.

Amazon.com, Inc. (AMZN)

AMZN is a global leader in the sale of consumer products and subscriptions across North America and other countries. North America, International, and Amazon Web Services (AWS) are the three segments in which the e-commerce portal operates. AMZN also manufactures and sells devices such as Kindle, Fire tablets, Fire TVs, Rings, and Echo.

In a move to consider merchants that have incurred losses in the pandemic, AMZN has announced that it will postpone its logistics fee increase until June 1t 2021. The e-commerce giant also stated that it has spent more than $10 billion in pandemic-related operating costs, which included floor space expansion to boost its fulfillments and logistics efforts by 50% and hiring 400,000 people.

AMZN’s revenue during the third quarter ended September 30,2020 climbed 37% year-over-year to $96.1 billion. The company’s EPS for the quarter tripled to $12.37 from $4.23. CEO Jeff Bezos stated, “We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season.”

The Street estimates AMZN’s revenue for the fourth quarter ending on December 30, 2020 to be $119.5 billion, representing a 36.7% increase year-over-year. Meanwhile, EPS for the fourth quarter is expected to be $7.15, up 10.5% year-over-year.

On a year-to-date basis, AMZN has surged 71.7% to end Thursday’s trading session at $3172.69. Over the past six months, the stock has climbed 16%.

How does AMZN stack up for the POWR Ratings?

A for Trade Grade

B for Buy & Hold Grade

A for Industry Rank

B for Overall POWR Rating.

It is currently ranked #16 of 61 stocks in the Internet Industry.

Target Corporation (TGT)

TGT is a leading general merchandise retailer in the United States. Dry grocery, dairy, frozen items, accessories, home décor, electronics, and toys are among the categories of merchandise available from TGT. The company sells its products through its stores and online channels such as Target.com. TGT has nearly 1900 stores across the country.

TGT’s overall sales for the third quarter ended September 30, 2020 increased 20.7%, while digital sales surged 155%. Same-day services (Order Pick Up, Drive Up and Shipt) jumped 217% during the quarter.  Its total revenue rose 21.3% year-over-year to $22.6 billion. And its EPS climbed to $2.01 from $1.37 posted in the same period last year.

Analysts expect revenue for the quarter ended January 31, 2021 to be $26.7 billion. Representing 13.9% year-over-year growth. EPS for the quarter is likely to climb 33.7% to $2.26.

TGT ended Thursday’s trading session at $175.19, representing a 36.6% gain on a year-to-date basis. The stock has jumped 46.3% over the past six months.

TGT is rated a “Strong Buy” in our POWR Ratings system. It has an “A” for Trade Grade, Peer Grade and Buy & Hold Grade, and a “B” for Industry Rank. In 18-stock Grocery/Big Box Retailers Industry, it is ranked #1.

JD.com, Inc. (JD)

JD is a Chinese e-commerce company and retail infrastructure service provider that operates in two segments--JDRetail and New Businesses. The company sells home appliances, mobile and other electronic products, such as printers, desktop, laptops, and office equipment. The company operates fulfilment centers in 700 warehouses in 89 cities.

JD has become China’s first virtual platform to accept Beijing's home-grown digital Yuan as payment for some merchandise on its online portal. In a separate development, JD announced that it had completed the first flight of its new self-developed delivery drone, JDY-500, in Sichuan province. This drone has the capacity to transport a few hundred kilograms of goods per flight and to airdrop miscellaneous supplies in case of an emergency.

JD’s revenue during the third quarter ended September 30, 2020 climbed 29.2% year-over-year to RMB 174.2 billion. And the company’s earnings per ADS surged to RMB 4.70 from RMB 0.41 posted in the same period last year. Its annual active customer’s accounts for the 12 months ended September 30, 2020 rose 32.1% to 441.6 million.

The Street expects revenue for the quarter ended December 30, 2020 to climb 37.4% year-over-year to $33.5 billion. Analysts also expect EPS for the quarter to surge 200% year-over-year to $0.24.

JD has climbed 139.8% year-to-date to end Thursday’s trading session at $84.49. Over the past six months, the stock has gained 41.2%.

JD is rated a “Buy” in our POWR Ratings system. It has an “B” for Peer Grade, Buy & Hold Grade, and Trade Grade. In the 115-stock China Industry, it is ranked #10.

Chewy, Inc. (CHWY)

CHWY is an e-commerce platform based in the United States that mainly sells pet care products. These include food, health-care products, supplies, medications, toys, accessories and other health products for dogs, cats, birds, fish, horses, and reptiles. CHWY offers more than 65,000 products from over 2,000 brands. CHWY added 2.9 million new customers during 2019.

CHWY’s Chief Financial Officer, Mario Marte, said the company plans to ramp up the number of products it offers to increase orders and is also considering the monetization of its new, free telehealth service for animals.

During the third quarter ended October 31, 2020, CHWY’s net revenue climbed 45% year-over-year to $1.8 billion. The company’s net loss per share narrowed to $0.08 compared to a $0.20 loss per share posted in the same period last year. At the end of the quarter, CHWY had nearly 18 million customers.

Consensus revenue estimates for the quarter ended January 31,2021 is $2 billion, representing a 44.4% year-over-year increase. Meanwhile, its EPS is expected to grow at the rate of 132.1% per annum over the next five years.

CHWY has rallied 258.7% year to-date to close Thursday’s session at $104.01. Over the past six months, the stock has gained 109.1%.

CHWY’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade and Peer Grade, and a “B” for Industry Rank. It is currently ranked #3 of 37 stocks in the Consumer Goods Industry.

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AMZN shares were trading at $3,226.29 per share on Monday morning, up $53.60 (+1.69%). Year-to-date, AMZN has gained 74.60%, versus a 17.72% rise in the benchmark S&P 500 index during the same period.



About the Author: Namrata Sen Chanda

Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.

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