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Retail sales topped expectations in September, rising 0.7% to more than double the consensus forecast - driven by a 1.1% increase in online spending, in particular. The consumer discretionary space will attract plenty of attention this week, with earnings from heavyweights like Home Depot (HD), Target (TGT), Walmart (WMT), and Macy's (M) all slated for release - and with expectations already running low for the holiday shopping season, any pullback in retail stocks could present potential buying opportunities to bet on the strength of the U.S. consumer.
Here's a look at two top e-commerce stocks to consider right now - both of which have earned “buy” ratings from analysts, and with growth forecasts that easily outpace their industry peers.
Shopify
Shopify (SHOP) is a cloud-based e-commerce platform with a market cap of $78.66 billion. The shares have gained more than 79% year-to-date, easily outperforming a 41% gain for the Nasdaq-100 Index ($IUXX).
In its early November earnings report, SHOP beat the Street by reported an adjusted profit of $0.24 per share on revenue of $1.71 billion.
Looking ahead, the company's forward revenue growth is pegged at 21.6%, and forward EPS growth at 16.1% - both of which are well above their respective sector medians.
SHOP has a consensus rating of “moderate buy,” from analysts, with an average price target of $67.99 - indicating expected upside of 9.4% from current levels. Out of 36 analysts tracking the shares, 14 have a “strong buy” rating, compared to one “moderate buy” and 21 “holds.”
MercadoLibre
An Argentine company based out of Uruguay, MercadoLibre (MELI) is sometimes called the “eBay of Latin America” - not too much of a stretch, since it operates a large e-commerce marketplace with its own built-in payments system.
The company has a market cap of $69.49 billion, and the stock has gained 63.5% so far in 2023.
In MELI's Nov. 1 earnings report, the company reported adjusted earnings of $7.16 per share, while quarterly revenue checked in at $3.76 billion. Both figures beat Wall Street's expectations, continuing a trend for MELI of surpassing analysts' estimates.
Looking ahead, MELI's forward revenue growth is projected at 34.4%, while EPS growth is estimated at 163.8%. That's well above the median expected growth rates for consumer discretionary stocks.
Analysts are big fans of MELI, too, with an average “strong buy” rating from the 12 in coverage. Only three analysts have a “hold” rating, compared to nine “strong buys.” Plus, the average 12-month price target of $1,678.85 indicates expected upside of 21.5% from here.
