The pandemic has seen many sectors of the economy dive. Many retail stores were affected and forced to shut down as well. However, some retail stores thrived with the onset of the pandemic.
You may safely invest in these retail stocks for your new year 2021 goals.
The store was a good performer even before the pandemic. They have 378 retail stores in 25 states in the USA. The economy was affected by the health crisis that happened.
Their strategy to continue bringing in profits was in supplying essential stuff. By the end of the first quarter on May 2, they had an increase of 6% earnings per share. This percentage went up in the latest quarter, with earnings being at 197% compared to where they were one year ago. Now every diluted share is at $1.04.
However, potential investors will need more convincing about the rate at which this business has grown. Its growth potential is still great as the company has stores in only 25 states and is expanding at a rapid pace.h
Five Below Retail Store
Their portfolio is about selling items at $5 or below. Their main customers are teenagers. They cover a considerable part of the country, that being 38 states. It has a total of 950 stores and has the potential for expansion in the USA.
Also, it stayed afloat after the onset of the pandemic. It recovered in the most recent quarter that ended on August 1. From a 45% revenue that was decreasing by the end of May 2 to a 4% year over year EPS.
The Five Below management wants to expand to over 2500 stores in the USA. The price-earnings ratio is at around 59. The earnings will accelerate by over 103%next year.
For this business, 2020 brought in a good return. The company was deep in debt, and growth was slow. After the onset of the pandemic, consumers came after their necessities, and their revenue shot up.
The acceleration was such that what the business had previously made in a year, they made in a quarter. The company has already started expanding and getting rid of the debt is owed. So far, they have opened businesses in Michigan and Ohio.
As the restrictions caused by the pandemic get lifted, and with more money coming in, they plan to open six new stores in 2021. They are trading their stock at a price-earnings ratio of 16. However, their profits have gone up by 81% in 2020. In the predicted 11% fall in earnings anticipated in 2021, the business will still hold up. Investing in BJ’s stock would, therefore, be a good idea.
Is Amazon still worth investing in
Like in many other businesses, Amazon was dealt a blow by the onset of the pandemic. They had to spend 4 billion dollars in matters directly related to the pandemic. But due to increased online shopping during the same period, it turned out to be of little effect.
They raked in 89 billion dollars in net sales in the second quarter. That was a 40% increase year-over-year. They exceeded Wall Street’s predictions by earning 10.30 dollars per share.
Amazon’s growth is due to its AWS/Amazon Web Services, proceeds from devices that can support the smart speaker Alexa, plus Prime subscribers. Besides, they have efficient delivery services and their spectrum of goods and services.
The increased demands faced by Amazon during the pandemic has seen them running out of stock from time to time. Their customers are opting for other companies’ supply, giving them competitors. The problem is positive. Many people are still buying Amazon stock-taking their shares very high.
Reasons to invest in Amazon stock
The management team of the company has smart people who look at the long-term performance of the business, not just the quarterly.
The economic crisis brought on by the pandemic has been Amazon’s opportunity to make profits. Their stock is worth buying now because it is poised for long term growth.
Also, the system of the business through cloud computing and online advertising fuels the growth of the company. Furthermore, the company has a wide range of products and services that boosts its e-commerce.
Amazon’s online advertising is yet to gain ground in the likes of Google and Facebook. But the progress is notable. During the second quarter, this part of the enterprise brought in 4.22 billion dollars in revenue. That was a year-over-year rise of 41%.
Drawbacks of investing in Amazon stock
Amazon’s share price is way up there, exceeding the earnings expectations. There are regulatory risks under the management of a new president and overvaluation risks associated with this. Then there is the likelihood of steep competition facing the e-commerce bit of it.
The steady increase in earnings is bound to fall. This expectation makes the stock less desirable. That does not negate the fact that everything is going great right now.
Further, the recession could continue for longer than anticipated, lowering the demand for cloud computing and e-commerce. Amazon is known for e-commerce. However, a host of other businesses are close behind it, competing for the same recognition.
Though this is highly unlikely as online shoppers are only increasing by the day. Amazon, by itself, cannot be able to handle them all. The real competitors are Walmart in e-commerce and Alphabet and Microsoft in cloud computing.
While all these are suppositions, they are probabilities worth considering when deciding whether you will invest in Amazon stock.
There you have it. If you were planning on buying some retail stock as the year 2020 ends, or when 2021 begins, you can take your pick from the above mentioned. If you already have Amazon stock and are planning on a long- term investment with the company, you may continue with their stock.
However, if you are scanning the market for something new to try out with no long-term plans, the first three retail businesses could be the preferred stock to buy.