These are the stock market's 5 ecommerce winners of the COVID-19 pandemic, according to one Wall Street firm

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  • The COVID-19 pandemic helped serve as a shot in the arm for ecommerce growth in the US as consumers shifted to online shopping to social distance and avoid crowded stores.
  • But as the pandemic wanes, consumers will transition back to offline shopping, resulting in a likely dip in ecommerce growth from its recent peak, Stifel said in a note on Wednesday.
  • In navigating the likely decline in online shopping growth going forward, investors should focus on ecommerce companies who are best positioned to navigate a recovery and enjoy a sustained benefit to their business from the pandemic.
  • Here are Stifel’s 5 ecommerce stocks investors should watch going forward.
  • Visit Business Insider’s homepage for more stories.

Ecommerce companies — and, by extension, their stock prices — have been major beneficiaries of the COVID-19 pandemic, as consumers have transitioned to online shopping in order to avoid large crowds and social distance.

According to data from the US Census Bureau, ecommerce sales grew 45% in the second quarter, representing the largest quarterly increase since the fourth quarter of 2000. Meanwhile, online sales made up 22% of all retail sales, a sizable increase from 2019’s ecommerce penetration rate of 16%.

The pandemic effectively pulled forward two to three years of demand in a matter of six months, Stifel said, noting that it didn’t expect ecommerce to hit the 22% penetration level until 2022 or 2023.

But as the pandemic wanes, consumers will likely transition back to offline shopping, resulting in a dip in ecommerce growth from its recent peak, Stifel said in a note on Wednesday.

Accordingly, investors should set their sights on ecommerce companies that are poised to navigate the likely dip in ecommerce growth and enjoy a sustained benefit from the pandemic.

Detailed below are Stifel’s five stock-market winners in the ecommerce sector investors should watch going forward.

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1. Amazon

The accelerated growth of Amazon’s Prime membership base, its ability to grow its grocery business, the “elimination of a substantial portion of offline retail competition,” and the accelerated adoption of cloud services all set up the ecommerce giant to be best positioned to navigate a potential slow down in ecommerce growth, Stifel said.

“Under a recovery scenario, we see Amazon continuing to benefit from these developments,” says Stifel.

Stifel rates Amazon as a “Buy” with a $3,500 price target, representing potential upside of 11% from Tuesday’s close.

2. eBay

” We note (1) the addition of new CEO Jamie Iannone and more active management of the platform (2) improvements to the buyer/seller experience and (3) the revenue/operating income opportunity from managed payments may support stronger than anticipated growth,” Stifel said, after observing that eBay is not immune to a slowdown in growth given it has seen a surge in business driven by strong sales in work and learn from home categories.

Additionally, eBay’s current valuation “potentially limits downside in shares,” the note said. eBay traded at a forward twelve month price to earnings ratio of 13.3x, according to data YCharts.com.

Stifel rates eBay as a “Buy” with a $70 price target, representing potential upside of 35% from Tuesday’s close.

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3. Carvana & 4. Vroom

Used car sales is the largest consumer product category in the US and one of the last industries to migrate to ecommerce, with online sales representing less than 1.0% of used car sales, according to Stifel. Accordingly, the firm sees potential in online used car retailers like Carvana and Vroom to continue to benefit from the COVID-19 pandemic.

“The pandemic has sparked consumer awareness and interest in online car sales potentially accelerating eCommerce adoption,” Stifel said. Meanwhile, the limited supply of new cars due to temporary production halts amid the pandemic should serve as a healthy demand boost for used cars, benefiting the two online platforms.

Another factor benefiting the space is the potential for increase car ownership as consumers trade in the city for the suburbs and avoid public transportation, according to the note.

Stifel rates Carvana as a “Buy” with a $195 price target, representing potential upside of 13% from Tuesday’s close. 

Stifel rates Vroom as a “Buy” with a $65 price target, representing potential upside of 22% from Tuesday’s close.

5. Etsy

As Etsy has directly benefited from the sale of masks to prevent the spread of COVID-19, it also has experienced a surge in growth outside of the mask category, with gross merchandise volume surging 93% ex-masks in the second quarter, Stifel said.

“Etsy has driven greater awareness through the pandemic and has realized the opportunity to accelerate purchase
frequency on the platform,” Stifel noted. Additionally, the Etsy has experienced “frequency among buyers improve across all cohorts,” the note said.

“We believe Etsy has the opportunity to elevate its long-term growth profile through product enhancements and retention of new and re-engaged buyers on the platform,” Stifel concluded.

Stifel rates Etsy as a “Buy” with a $150 price target, representing potential upside of 35% from Tuesday’s close.

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