A retailing trend that appears irreversible, at this point, is consumers’ increasing preference for buying goods and services online.
And the pace is likely to quicken given consumers’ growing use of mobile devices, such as phones and tablets. They make comparison shopping, and the whole shopping experience, much easier, since it can be done from virtually anywhere that tends to prompt impulse purchases.
In addition, retailers are becoming more aggressive online marketers by offering loyalty programs that offer perks such as free shipping, the use of online media such as Facebook, and by the use of “flash” sales or online discounting via email to lure buyers to their websites.
The technology and market research firm Forrester Research said consumers spent $202 billion online buying retail goods in 2011, and projects that will grow by 12 percent to $226 billion this year and by 45 percent from that, to $327 billion, by 2016, according to a projection it released Feb. 27.
And by 2016, e-retail will account for 9 percent of total retail sales, up from 7 percent in both 2012 and 2011, Forrester said.
This tidal shift in habits by consumers is attracting more online advertisers, so online companies with the largest user base are likely to capture an increasing portion of that revenue that may have gone to other, more traditional media, which will serve as an additional catalyst to even faster growth for them.
And note that retailing bellwether Wal-Mart Stores said last week that it reached an agreement to raise its stake in the Chinese e-commerce firm Yihaodian to roughly 51 percent in order to tap China’s world-leading, fast-growing consumer online marketplace.
That helped prompt S&P Capital IQ equity analyst Scott Kessler to screen his firm’s stock data base for companies with “consumer-facing” technologies that are likely to play roles in the growth of online retailing and that S&P analysts are “bullish on.”
Here are nine highly rated, “consumer-facing” technology stocks cited by S&P Capital IQ analysts ranked in inverse order of “buy” ratings from Wall Street investment analysts:
, with a $54 billion market value, makes a range of consumer and electronic products including copiers (18 percent of sales), cameras (23 percent), and printers (35 percent) around the globe. Canon’s headquarters and 26 of the firm’s 45 manufacturing plants are in Japan, but nearly 80 percent of revenue is derived from international markets.
Investor takeaway: Canon’s shares are up 2.6 percent this year and have a three-year average annual return of 23 percent and carry a 3.15 percent dividend yield. Analysts give its shares one “buy” rating, one “buy/hold,” and one “weak/hold,” according to an S&P survey. Those same analysts project earnings will grow 14 percent this year to $2.79 per share. S&P has it rated “buy,” with a $50 price target, an 11 percent premium to the current price.
, with a $1.6 billion market value, makes lightweight headsets for mobile and cordless headsets designed for long-time telephone conversations in office settings such as for customer service workers, or in mobile applications.
Investor takeaway: Plantronics’ shares are up 6.3 percent this year and have a three-year average annual return of 63 percent. Analysts give its shares four “buy” ratings, one “buy/hold,” and four “holds,” according to an S&P survey. S&P has its shares rated “buy,” on an outlook for steady earnings growth, with a $46 price target, which is a 21 percent premium to the current price.
, with an $800 million market value, is one of the nation’s largest Internet services providers, and also offers value-added services such as web hosting, advertising, voice over Internet protocol telephone services, and managed data networks.
Investor takeaway: Earthlink’s shares are up 16 percent this year and have a three-year average annual return of 12 percent. Analysts give its shares five “buy” ratings and one “buy/hold,” according to an S&P survey. S&P has its shares rated “strong buy” with a $10 price target, which is a 33 percent premium to the current price.
The company says recent acquisitions have significantly boosted business services capabilities which will boost sales.
with a $19 billion market value, is one of the most heavily visited collection of websites on the Internet. Some of its more trafficked sites include Yahoo Search, Yahoo Mail, and Yahoo News. Advertising represents 84 percent of revenue. The company also owns 35 percent of Yahoo Japan and 43 percent of Hong Kong-based Alibaba.com.
Investor takeaway: Its shares are down 7.7 percent this year, and have a three-year average annual return of 5.3 percent. S&P gives its shares a “strong buy” rating with a $20 price target, a 35-percent premium to the current price. Analysts give its shares five “buy” ratings, four “buy/holds,” 20 “holds,” and two “weak holds,” according to an S&P survey.
Although it’s losing market share in advertising areas it once dominated, Yahoo! has a solid balance sheet with just over $2 billion in cash at year-end and cash flow of $1.33 per share. Its real value may be unlocked as an acquisition target or in the sale of some of its business units. Its new CEO is said to be pursuing all alternatives, and “we think there is significant interest in some/all of the company,” says S&P.
, with $30 billion in market value, is an international online travel aggregator that offers booking services for hotel rooms, airline tickets, rental cars, cruises, and other vacation packages.
Priceline.com reported Monday that its fourth-quarter profit rose 66 percent to $4.41 per share, while revenue grew 36 percent to $991 million. Total bookings rose by almost 52 percent from a year ago to almost $5 billion.
Investor takeaway: Its shares are up 26 percent this year and have a three-year average annual return of 91 percent. S&P has its shares rated “buy,” with a $650 price target, about a 10 percent premium to the current price, while analysts surveyed by the firm give its shares eight “buy” ratings, 11 “buy/holds,” four “holds,” and one “weak hold.” It is expected to earn $29.76 per share in 2012, up 29 percent over last year.
is a manufacturer and direct seller of notebook computers, desktop computers, software, and other peripheral equipment. It’s also building a retail store presence.
Investor takeaway: Dell’s shares are up 19 percent this year and have a three-year annualized return of 28 percent. S&P gives Dell a “buy” recommendation after lowering it from “strong buy” on Feb. 15 on valuation concerns. It has a $19 price target, an 8 percent premium to its current price. Analysts give its shares 11 “buy” ratings, five “buy/holds,” 15 “holds,” two “weak holds,” and two “sells,” according to an S&P survey. Those analysts estimate 2012 earnings at $2.14 per share and that they will decline by 4 percent in 2013.
, with a market value of $264 billion, develops the Windows PC operating system, the Office suite of productivity software, and its other businesses include the Xbox 360 video game console, the Bing Internet search engine, business software, and software for mobile devices.
Cloud computing , or the computing world’s shift to web-based applications, is the latest challenge to its operating system, but it is likely to find new ventures in cloud computing to make up for that.
Investor takeaway: Its shares are up 22 percent this year and have a three-year average annual return of 25 percent. Analysts give Microsoft shares 14 “buy” ratings, nine “buy/holds,” 14 “holds,” and one “sell,” according to an S&P survey. It’s expected to earn $2.70 per share this year and that that will grow by 11 percent in 2013.
, with a $36 billion market value, is the biggest Chinese-language Internet search engine provider, with about 500,000 advertisers.
Investor takeaway: Baidu’s shares are up 16 percent this year and have a three-year average annual average return of 111 percent. S&P, which has it rated “buy,” with a $180 price target, a 33 percent premium to the current price, found 16 “buy” ratings, nine “buy/holds,” five “holds” and one “weak hold,” in a survey of analysts.
Two weeks ago, the company reported a 77 percent rise in profit in the fourth quarter, to 93 cents a share, beating analysts’ estimates by 2 cents, on an 83-percent jump in revenue.
, with a market value of $487 billion and one of the most widely held stocks in the world, designs and manufactures consumer-electronic devices, including personal computers under the Mac name, iPad tablets, the iPhone, and the iPod portable music player. Its iTunes online store is the largest music distributor in the world.
Investor takeaway: Apple’s shares are up 29 percent this year and have a three-year average annual return of 80 percent. Analysts give its shares 36 “buy” ratings, 13 “buy/holds,” four “holds,” and one “sell,” according to an S&P survey. S&P itself has the shares rated “buy” with a $650 price target, a 24 percent premium to the current price, which would then give it a price-to-earnings ratio of 16.
S&P says it expects some “shareholder friendly” actions on the part of the company, which had cash flow of $29.61 per share in 2011 and $26 billion in cash on the balance sheet at year-end. Analysts expect earnings of $42.59 per share this year and that they will rise by 10 percent next year.
Morningstar analysts put a “fair value estimate” on its shares of $560. They say “the iPhone remains the cornerstone of Apple’s consumer strategy, and few opportunities loom larger than the global handset market. The iPhone already accounts for more than 50 percent of revenue, and we expect this percentage to grow to more than 60 percent” within the next few years.
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