The holiday shopping season is expected to start early be pretty strong for online spending. But will it be enough to boost Amazon stock and those of other e-commerce companies?
U.S.-focused e-commerce stocks have been a mixed bag this year. Amazon stock has stalled out since early July. EBay has rallied this year but still sits well below 2021 highs. Smaller platforms such as Etsy and Wayfair have shed value this year.
But there's potential good news: Forecasters see holiday-related e-commerce spending accelerating after two slower years. Adobe projects U.S. online sales to reach $240.8 billion from Nov. 1 through Dec. 31, up 8.4% from 2023. That was also stronger than the 4.9% year-over-year growth in the same period last year.
"There is much stronger growth improvement compared to 2022 and 2023, when inflation was really ratcheting up, and now we're back at the sort of growth level of 2021," Adobe Digital Insights lead analyst Vivek Pandya told Investor's Business Daily.
Amazon Stock: Early Holiday Deals
Pandya said people are spending more time shopping on mobile devices, while discounts offered on the shopping days around Thanksgiving, sometimes called the Cyber Five, have proven "staying power."
With consumers focused on finding deals, retail giants are offering holiday bargains early, led by Amazon's upcoming Prime Big Deal Days.
The third annual Prime Big Deal Days kicks off Oct. 8, acting as a smaller, autumn version of Amazon's major summer Prime Day discount event.
Four years after Covid-19 accelerated the adoption of online shopping, EMarketer analyst Sky Canaves said in a recent research report that Amazon's October event now "heralds the real start" of the holiday shopping season.
Meanwhile, brick-and-mortar retail giants Walmart and Target are running discounting events to match. Walmart will run a Holiday Deals event from Oct. 8 through Oct. 13. Target, meanwhile, hosts a second Target Circle Week this year from Oct. 6 through Oct. 12.
Polling by research firm Civic Science this summer found about half of U.S. consumers expected to start holiday shopping prior to Thanksgiving.
This year also poses some unusual challenges for retailers. Retail activity typically slows during the week of major elections, Canaves said in the EMarketer report.
Thanksgiving, meanwhile, falls on a later-than-usual Nov. 28. That means less time in the traditional holiday shopping window.
Analysts are also closely watching what impact the dockworker strike in East and Gulf Coast ports will have on product availability and prices.
Amazon Vs Walmart: Who Gets More Holiday Sales?
Amazon captures, by far, the largest percentage of U.S. e-commerce sales. That will remain the case for holiday shopping, analysts say.
EMarketer projects Amazon will capture 42.1% of all U.S. online holiday sales, worth $112.3 billion.
Behind Amazon, Walmart is expected to land 8.1% of U.S. e-commerce sales this holiday season and Apple 4.5%. Walmart's projected 9.7% year-over-year growth for holiday season e-commerce, as projected by EMarketer, is slightly ahead of Amazon's 9.1%.
How Have E-Commerce Stocks Performed?
The 60 stocks in the Retail-Internet group tracked by IBD have gained a cumulative 4% so far in 2024, compared to a roughly 20% gain for the S&P 500. Meanwhile, the group's six-month performance ranks 47th out of 197 groups tracked by IBD.
Some top gainers in the group this year have been international stocks. That includes MercadoLibre, the so-called Amazon of Latin America. Southeast Asia's Sea Ltd has also rallied.
For U.S.-focused e-commerce retailers, the picture has been mixed. E-commerce stocks soared in 2020 and into 2021 as pandemic conditions pushed shoppers online. But growth slowed in 2022, as the in-person economy opened back up and inflation prompted consumers to pull back.
While still behind its 2021 highs, eBay stock has advanced 49% this year. That's despite posting low single-digit sales growth each of its past four quarter. EBay's earnings growth has improved and some analysts are bullish on the company's plan to use generative AI to drive more sellers and products to its platform.
Etsy, meanwhile, has shown similarly sluggish sales growth. The stock has fallen more than 30% this year, as adjusted earnings have also declined for three consecutive quarters. Shares of Etsy are 80% off 2021 highs and the company was recently dropped from the S&P 500.
On the other hand, e-commerce companies that deliver products such as groceries on demand – including Instacart and DoorDash – have seen strong revenue growth. Instacart stock is up more than 65% this year while DoorDash is ahead nearly 50%.
"We continue to see a bifurcation in results with those that can provide a wide assortment of products (everyday essentials), convenience (fast delivery, pick up or both), and value generally winning," Bernstein analysts wrote, recapping e-commerce second quarter earnings reports in August.
Amazon Stock: Trading Down On Price
Amazon, of course, hopes to be the "everything store" for customers. That includes a push to sell more essential items, including groceries, through same or next day delivery.
But that approach, paired with caution from consumers of late, has led to lower average selling prices across the broader retail business, Chief Executive Andy Jassy told analysts following the firm's second quarter earnings report in August.
"Customers continue to trade down on price when they can," Jassy said. "More discretionary, higher ticket items like computers or electronics or TVs are growing faster for us than what we see elsewhere in the industry, but more slowly than we see in a more robust economy."
Amazon missed revenue estimates with its Q2 results and gave a lower-than-expected third quarter sales forecast. While the e-commerce powerhouse is still a popular pick among analysts, the revenue miss has prompted concern that its long-term shift to selling essentials will bring a short-term drag on retail profits.
Amazon stock is up more than 20% this year but has yet to return to highs reached in early July. Following a slide in response to its Q2 results in early August, Amazon has regained momentum to form a consolidation pattern with a 201.20 buy point, according to MarketSurge.
Investors will know more about what Amazon expects for the holiday season after it publishes third quarter results later this month. The tech giant typically provides guidance for fourth quarter revenue along with its Q3 results. Analysts are projecting the company's sales will reach $186.2 billion in the fourth quarter, according to FactSet, up 9.6% from a quarter earlier.
Analysts Expect Big Ticket Purchases
Meanwhile, Adobe's projections are based on an analysis of more than 1 trillion visits to U.S. retail sites. Adobe also conducted a survey of more than 5,000 U.S. consumers.
A question for the holiday season is whether seasonal deals can push consumers to higher-ticket items. Adobe's Pandya told IBD that consumers have indeed been increasingly seeking lower-cost items but that could change.
"The holiday season kind of bucks that trend," he told IBD before the Adobe report was published. "Categories end up having broader overall discounts, especially sporting goods, electronics, appliances. Consumers think, 'OK, well, I'm buying this for a family or friends, so I actually might want to stretch and actually buy that more premium product.'"
