These Companies Profit From America’s Shopping Addiction
Americans have an affinity for some things the rest of the world doesn’t quite understand. NASCAR, frivolous lawsuits and canned cheese come to mind.
We also love shopping more than other countries … especially online.
E-commerce is one of the main drivers of America’s credit card debt crisis, and it’s not slowing down. Revenue has steadily increased annually from $399 billion in 2017 to $925 billion in 2023. By 2027, it’s projected to reach $1.4 trillion.
For context, that’s more than GDP of all but 13 nations. So yeah, we enjoy shopping as much as we love watching loud cars drive in circles, eating processed cheese products and suing anyone for anything.
Therefore, investing in companies like Mastercard (MA) or Visa (V) seems to be a no-brainer, especially when considering their year-to-date gains of 17% and 21%, respectively.
However, since today’s Cyber Monday, there’s no better time to highlight …
America’s Online Shopping Addiction
Disney was on to something when they released WALL-E in 2008. The animated film depicts humans in the year 2805 as sedentary, recliner-bound, sugar-dependent and device-addicted.
We expect that reality much sooner. Contemporary Americans already share those traits with future generations. The only thing missing is the mobile La-Z-Boy.
So as we embrace our inevitable decline into a nation of Disney caricatures, it’s fitting that e-commerce spending now exceeds other forms of retail revenue. After all, if we don’t have to get up, why should we?
Last year, Americans spent a record $11.3 billion on Cyber Monday, a 5.8% increase from 2021’s $10.7 billion.
And because we’re fast-tracking our transition to WALL-E humans, Cyber Monday spending now outpaces Black Friday spending by over $2 billion.
So where’s all that money going? A considerable amount ends up in the financial statements of these …
Kings of E-Commerce
No. 1: Amazon
We’ll start with the most obvious: Amazon.com (AMZN). The company not only exemplifies today’s theme, but it also comes with its very own Disney-approved real-life villain, Jeff Bezos, who — apt for a movie antagonist — is now hell-bent on space commercialization.
The “self-made” billionaire oversees Amazon, a company with a $1.47 trillion market cap. Since its inception, it’s disrupted the e-commerce model and continues to do so. Today, $80 billion of its revenue is attributed to Amazon Web Services, its cloud services subsidiary.
Despite being up 14,501% since 2001, Zacks and TipRanks still rate the stock a “Buy.” Shares are currently trading around $142. TipRanks gives AMZN a one-year price target of $175.51, and the Wall Street Journal’s average price target is $175.
However, by some metrics, the stock is overvalued. Its price-to-earnings ratio of 74.05 is absurdly high. But for tech companies, that’s not outside of the norm. Tesla (TSLA), for example, has a P/E ratio of 77.69.
After hitting a pandemic high of $185.97, AMZN fell 55% before bottoming in December 2022. Since then, it’s up 69%. Consensus earnings per share (EPS) for Q4 2023 is 77 cents.
No. 2: Shopify
Shopify (SHOP) is an e-commerce platform for online stores and point-of-sale systems. And although its CEO lacks Dr. Evil vibes, the company’s established an $88 billion market cap. Shares are up 2,330% all time.
One of the reasons sites like TipRanks (“Moderate Buy”) and Zacks (“Hold”) are tepid on SHOP is because the stock’s down 60% from its all-time high in 2021. But since bottoming in October 2022, share have rebounded 164% and are currently trading around $68.
At the other end of the P/E ratio spectrum, SHOP currently sports a -77.22. Negative P/E ratios typically indicate a company that’s losing money. But in its last quarterly earnings call, Shopify reported:
- Revenue of $1.71 billion, up 25.48% year-over-year (YoY).
- Net income of $718 million, up 551% YoY.
- Diluted EPS of 55 cents, up 558% YoY.
- And a net profit margin of 41.89%, up 460% YoY.
Those numbers are indicative of the company’s stock rebounding, as shown in the following one-year performance chart (blue line) along with AMZN (orange line).
TL;DR
Cyber Monday is a microcosm of America’s online shopping addiction. E-commerce revenue is forecast to continue growing substantially, and companies like Amazon and Shopify will continue raking in revenue.