E-commerce and online retail stocks gained ample acclaim during the worst days of the coronavirus pandemic, resulting in the “pandemic play” label.
As the pandemic continued, that label became a drag, and it also belied the point that many companies in these spaces were growing before COVID-19 became part of everyday vernacular. More importantly, the long-term future growth trajectory for e-commerce is attractive regardless of the global health crisis.
For investors who don’t want to stock pick among individual e-commerce names and for those who don’t want the commitment of a dedicated fund, exchange traded funds such as the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ) are practical options for exposure to this still-growing industry. The e-commerce exposure offered by these ETFs could be compelling in the years ahead.
“But as consumers began shopping in person again, investors started to ask: Was the Covid-bump a one-and-done deal, or could e-commerce growth continue?” according to Morgan Stanley research. “Our view: Over the long term, the e-commerce market has plenty of room to grow and could increase from $3.3 trillion today to $5.4 trillion in 2026.”
QQQ and the lower-fee QQQM both track the Nasdaq-100 Index (NDX), meaning that e-commerce juggernaut Amazon (NASDAQ:AMZN) is one of the largest holdings in both ETFs. That’s relevant not only because of Amazon’s heft and increasingly diverse business model, but also because of the company’s mastery of e-commerce plumbing issues.
“Many factors are driving growth, including logistics, mobile device ownership and marketplace expansion. For investors, this means the e-commerce boom will likely continue, offering opportunities for gains across multiple businesses, regions and verticals—and at a time when recent stock valuations don’t necessarily reflect that growth,” noted Morgan Stanley.
Of course, the reason investors initially were enthusiastic about e-commerce was growth prospects. The recent return to brick-and-mortar may appear to dent that thesis, but the opposite could prove to be true. The reality is that analysts still expect thousands of retail stores to close in the years ahead while there’s still plenty of room for e-commerce to continue gaining market share.
“The growth of digital commerce represents a permanent change in how people shop. In fact, Morgan Stanley’s industry model, along with other data, suggests that e-commerce will continue to gain traction, even in countries where online shopping is already popular,” concluded Morgan Stanley. “In the U.S. e-commerce could reach 31% of sales by 2026, up from 23% now, as brick-and-mortar stores close and consumers prioritize convenience.”
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