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Proprietary Data Insights Financial Pros’ Top Online Retail Stock Searches in the Last Month
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Pros Top 5 Online Retail Stock |
A whopping 70% of Americans shop online. Their purchases represent 18% of global e-commerce. Amazon (AMZN) owns 37.8% of the U.S. online retail market, with Walmart (WMT) trailing far behind at 6.4%. Financial pros revealed their top five online retail stocks; sure enough, Amazon topped the list. That hasn’t always been the case. The company’s stock is just reaching all-time highs as it replaces Walgreens in the Dow Jones Industrial Average. Most folks assume shares of the company are expensive. But you might be surprised by what we uncovered… Amazon’s Business It’s almost guaranteed you or someone you know has ordered from Amazon in the past year. The retail behemoth delivers 1.6 million packages a day, and almost 6 billion annually, more than UPS or FedEx, though not the U.S. Postal Service. Its online marketplace sells products from 3rd party vendors as well as its own suppliers under Amazon’s own brand. The company’s business is split into three categories:
Source: Amazon Q4 2023 Earnings Report North American retail accounts for 62% of sales, and international accounts for 24%. Amazon Web Services (AWS), the company’s cloud computing arm and one of its key growth engines, accounts for 14% of sales. Even before Jeff Bezos left, Amazon dabbled in adjacent businesses, including its acquisition of Whole Foods. These offshoots have largely fizzled, though they are no longer the major drag they once were. Financials
Source: Stock Analysis Despite its size, Amazon continues to grow at double digits. Simultaneously, it expanded gross margins to almost 47.0% and operating and free cash flow margins to 6.4%. The company generated an astounding $85 billion in cash from operations last year, almost double what it did the prior year. While it plowed $52.7 billion back into Capex, the company still has $86.8 billion in cash onhand against $161.6 billion in total debt. Heck, the company has $16.51 per share in tangible book value – the value of its assets minus liabilities and intangible assets like goodwill. Valuation
Source: Seeking Alpha We’ll admit, 40.5x forward earnings doesn’t look that appealing. But consider that more traditional retailers like Walmart and Target (TGT) trade at 25.1x and 18.0x forward earnings respectively. In fact, Amazon trades at less than 2x the price-to-cash ratio as Walmart and Etsy (ETSY). That might seem a bit lofty. But consider the difference in margins and growth. Growth
Source: Seeking Alpha Amazon’s three and five-year average annual revenue growth is triple that of Walmart and Target. Only Etsy and Alibaba (BABA) are even in the ballpark. What’s even more remarkable is that only Amazon and Etsy were able to increase free cash flow at a positive annual rate over the last three years. Profitability
Source: Seeking Alpha While Amazon’s EBIT and free cash flow margins aren’t like traditional tech companies, they’re leaps and bounds over traditional retailers. The company is so big it generates over twice the cash from operations as Walmart. Our Opinion 9/10 Long-term, you can’t go wrong with Amazon. It may be a bit pricey here. Yet, it’s well deserved. The company is producing more cash while still achieving remarkable growth. We expect the efforts to expand into AI and similar verticals will pay off in the near future as competition in the sector heats up. |
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