Analysts at Bank of America have chosen several U.S. and global e-commerce stocks to buy ahead of an acceleration in growth next year. While the bank expects the holiday season to be tough for retailers this year , it also sees an acceleration in the second half of 2022 as the shift online continues. It estimates that 24% of global retail sales will be online by 2024, up from around 19% this year. "We estimate global eCommerce industry revenues will reach $5.4tn FY23 [full year 2023], with healthy 14% 3-year sector growth as Online penetration continues, and we think 2H [second half] acceleration could be a catalyst for US eCommerce stocks in 2022," the analysts said in a research note published Oct. 13. Amazon is the bank's top pick in the sector, due to increasing product availability and better shipping times in 2022, which will "drive a reacceleration in growth," the analysts said in a research note published Oct. 13. They also like its strength in cloud computing, with Amazon Web Services generating more than half of its operating profit for the past few years. However, BofA said that Target , along with Walmart , is taking e-commerce share from Amazon. "While we project a healthy 17% US eCommerce growth for Amazon in 2021, we expect faster growth for Walmart at 21% and Target at 20%," the analysts wrote. BofA singled out Target as being "well-positioned for Holiday," being one of the U.S.'s largest importers and therefore getting shipping port access ahead of competitors — it typically starts receiving goods for the season in June. "Target is positioned to drive continued digital momentum (particularly through its same-day offerings - Drive Up, Pick Up, Shipt)," the analysts stated. Walmart is also able to navigate potential supply chain congestion as a large importer, BofA said, while pointing to digital advertising as an "alternative profit stream." The grocer's ad platform, Walmart Connect, reported a 95% increase in sales in the second quarter. BofA's note comes as ongoing global supply chain issues are threatening holiday inventory levels , which has led retailers including Amazon and Target to start offering holiday promotions even earlier than normal in an effort to get ahead of the lack of inventory. Global stock picks In Asia, the analysts picked U.S.-listed Chinese retail giant JD.com as "likely to grow faster than the industry average due to room for both user growth and more merchants on the platform," despite a slowdown in domestic consumption. BofA also picked Coupang (also listed in the U.S.), Korea's largest e-commerce platform, with the analysts liking its market dominance and "strong traction" in Japan. They also like the fact that it is increasing sales via buy now, pay later technology. In Europe, the bank chose British-Portuguese retailer Farfetch for its "unique" model, where it sells luxury fashion via its online marketplace but does not own goods, meaning there is less risk in its business strategy, according to BofA. It also offers more choice for customers and "better pricing" for brands, analysts said. "As a result, Farfetch has been able to grow 2x faster than its market in the past 5 years, and should grow 30-35% in the medium term," the analysts stated. "The valuation currently offers a particularly attractive entry point for [the] long term story," they added. MercadoLibre , an operator of online marketplaces with headquarters in Buenos Aires, is set for "fast" growth in Latin America, BofA said. It is building a network of drop-off and pick up points for goods, which are set to speed up shipping times, and has also moved into TV content distribution that is "creating new potential revenue streams," the analysts said.
Amazon boxes are seen stacked for delivery in New York City.
Mike Segar | Reuters
Analysts at Bank of America have chosen several U.S. and global e-commerce stocks to buy ahead of an acceleration in growth next year.