Online Retail Stocks Are Likely to Shine Again This Year; Here’s Why

Online retail companies have been flourishing over the past couple of years, driven by changing market trends and customers focus on digitalization and e-commerce. These companies have gained hundreds of billions of dollars of market cap in the previous few years. Amazon (NASDAQ:AMZN), which emerged as the largest U.S. online retailer had hit a market cap of $890 billion last year. The Chinese online retailer Ali Baba’s (NYSE:BABA) market cap peaked at $570 billion.

eBay, JD.com, and Etsy are also among the biggest gainers in the online marketplace.

Source: Morningstar.com

The stock prices of these companies boomed along with the growth in their market share, revenues, and profits. Amazon’s share price, for instance, rose close to 170% in the last three years. The substantial growth in share price was supported by revenue increase of 135% in the past three years. Its revenue had hit a record level of $232 billion in fiscal 2018; the company had generated earnings of $20 per diluted share.

Source: Morningstar.com

Similarly, the share price of Ali Baba (BABA), the largest Chinese retailer, doubled in the past three years driven by significant growth in its market share.  Ali Baba revenue grew 135% in the past five years and the e-commerce company had reported $19 diluted earnings per share in fiscal 2018.

Online retailers are likely to extend the momentum in fiscal 2019. The threat of trade war is fading after China and Donald Trump is expected to reach a trade agreement. The improving global economic outlook always has a positive impact on sales of online retailers. Donald Trump has changed its aggressive tone against China over the last few months; the president says he plans to boost U.S. GDP growth to 3% in the coming years.

Source: Twitter.com

He has urged China to eliminate tariffs on U.S. agricultural imported products, adding that trade talks are going well. The U.S. has previously announced to suspend the planned tariff increase until further notice.

Improving market fundamentals would offer support to sales growth acceleration. Amazon expects to generate 20% sales growth in fiscal 2019 to a new record level. Ali Baba, on the other hand, anticipates sales growth in the range of 40% from the previous year. Overall, online retail stocks are in a strong position to extend their share price momentum this year. The trade deal between two big economics could be the biggest catalysts for this industry.

 

 

 

 

Etsy, Inc: The Less Known Stock With Strong Momentum

Etsy, Inc (NASDAQ: ETSY) is one of the fastest growing online retail stock. The company’s shares have been on upside momentum over the last couple of years, thanks to substantial growth in revenue and earnings. Its share price soared 181% in the last twelve months, extending the three-year rally to more than 700%.

Source: Morningstar.com

Its shares are currently trading close to an all-time high of $70 a share. The stock has a 52-week trading range of $24.41 – $73.33. Investors are showing confidence in Etsy stock amid its expansion strategies and sustainable growth in financial numbers.

The e-commerce company has topped revenue and earnings estimates for fiscal 2018. Its revenue of $604 million in fiscal 2018 increased 37% from the previous year, driven by growth in both Marketplace and Services revenue. Its active buyers rose 18.2% year-over-year in the fourth quarter while the twelve-month GMS per active buyer rose for the fifth straight quarter. Active sellers also jumped 9.4% year-over-year.

Source: Earnings Release

Josh Silverman, Etsy, Inc. Chief Executive Officer said, “On a currency-neutral basis, 2018 gross merchandise sales grew 20.4% to $3.9 billion for the year, revenue was up 36.8% to $603.7 million for the year, and we improved our margins. We kept our focus on improving search and discovery, building trust in the marketplace, expanding our marketing channels, and investing in services that fuel our sellers’ success.”

Source: Earnings Release 

The company also appears in a strong cash position to support revenue growth. It has been aggressively investing in marketing and social media campaigns to enhance its brand awareness. It has generated $199 million in operating cash flows while its cash and cash equivalents were standing above $600 million at the end of last year.

Its future fundamentals are solid considering projected financial numbers for 2019. Etsy expects revenue growth in the range of 30% for fiscal 2019 and the adjusted EBITDA margin is likely to stand in the range of 23 to 25%.

On the back of high double-digit growth in revenues and earnings, its shares could extend the upside momentum in fiscal 2019. In addition, market fundamentals are also improving amid the potential trade deal between the United States and China. Therefore, buying and holding this stock could result in big gains for investors.

 

 

 

Here’s Why Kroger is Not a Good Stock For Dividend Investors

Kroger Co (NYSE: KR) has been struggling to generate sustainable growth in revenue and earnings. The company’s revenue grew only 4% in the past three years while operating earnings declined 12% during the same period. However, its earnings per share are growing at a faster pace than revenue growth, thanks to its strategy of reducing outstanding shares.

Source: Morningstar

On the back of slower revenue growth, its shares are also underperforming compared to industry peers. Its share price rose only 2% in the past twelve months, but the stock price is down 24% in the past three years.

Although Kroger has raised its dividends every year over the last twelve years, the company’s future dividend growth looks questionable amid slower revenue growth. The meeker revenue and earnings growth are also negatively impacting its cash generation potential. The company has generated negative free cash flows of $297 million in the latest quarter. This means that Kroger is supporting its dividend from external sources, which isn’t a good sign for big dividend hikes.

The company’s financial numbers are struggling due to increasing market competition and the arrival of private labels. Its CEO says, “Kroger is transforming its business model. We’re moving from a traditional grocer to a growth company with both a strong customer ecosystem that offers anything, anytime, anywhere and asset-light, high-margin alternative partnerships and services.”

The company expects its GAAP net earnings guidance in the range of $3.80 to $3.95 per diluted share for fiscal 2018, down from previous guidance for $3.88 to $4.03 per diluted share.

Analysts are pessimistic about the future fundamentals of Kroger. Buckingham Research, for instance, provided an Underperform rating to KR shares – with the price target of $24. Its shares are currently trading close to $28 a share. Bleak financial outlook, transformation strategy, and limited dividend growth potential are likely to put more pressure on Kroger share price in the following months.

Dividend investors, on the other hand, always like to invest in companies that have the capacity to generate sustainable double-digit growth in financial numbers to support dividend growth and share price appreciation. Overall, the financial headwinds along with negative share price movement make Kroger a bad play for dividend investors.

 

 

Costco is a Good Stock for Long-Term Investors

Costco Wholesale Corporation (NASDAQ: COST) continues to generate double-digit growth in revenues and earnings, which is permitting the company to return significant cash to investors. It operates 533 warehouses in the United States – with extensive penetration in Puerto Rico, Canada, Mexico, the United Kingdom, Japan, and Australia. The company’s strategy of expanding its global presence combined with strengthening its e-commerce websites in developed markets are the biggest catalysts for financial growth.

Investors and market pundits are showing confidence in future fundamentals of Costco amid extensive global presence and the strategy of entering new markets.

Over the past several years, COST has grown its operations within Australia successfully and now has ten locations with plans to further expand the footprint over time,” Oppenheimer says.

Source: SeekingAlpha

Its strong cash generation has also been offering a room for high dividend hikes. The company has increased its dividends at a double-digit rate over the past 14 successive years; the average dividend growth in the past ten years stood around 15%. The company is likely to make a double-digit dividend increase at the end of the first quarter, which would also offer support to its share price performance.

Investors are likely to enjoy share price appreciation. Its share price rose close to 90% in the past five years, thanks to investor’s confidence in its financial growth, dividends, and future fundamentals.

Source: Morningstar.com

Costco shares are currently hovering slightly below from all-time high of $245. Its shares have upside potential considering the financial outlook and the expected dividend growth. Indeed, some market experts expect a special dividend this year due to strong cash generation potential.

The CEO says, “We still continue to generate a lot of cash in excess of our CapEx and in excess of roughly $1 billion annual dividends that is really historically about 13% a year.”

The company has generated almost $2.1 billion in operating cash flows in the latest quarter compared to capital investments of $700 million. Thus, the company was left with $1.4 billion in free cash flows when its quarterly dividend payments stood around $500 million. The huge gap in free cash flows and dividend payments would offer a significant room for a dividend increase in 2019.

On the whole, Costco appears like a safe stock for the long-term investors who are seeking steady growth in share price along with strong growth in dividends. Its business strategy and penetration in international markets are among the biggest catalysts for the increase in share price and dividends.

 

 

 

 

Roku: This Small-Cap Stock Offers Solid Value Investment Opportunity 

Roku Inc (NASDAQ: ROKU) is one of the best examples of small-cap stocks that have the capacity to generate big gains for investors. These types of aggressively growing small-cap stocks offer two profitable scenarios to investors: they could be acquired by a large competitor at a heavy premium or these small-cap stocks expand their growth rate as a standalone company.

Why Roku is a good stock to buy? Roku has been impressing market participants amid its aggressive growth strategies and revenue expansion. Its revenue enlarged 45% in fiscal 2018 to $742 million compared to revenue of $512 million in the previous year.

Revenue growth remains the essential factor for small-cap growth stocks; the growth rate indicates demand from end users along with the effectiveness of business model and business expansion strategies. Roku’s business model of providing a streaming platform for television continues to gain market share from competitors like Comcast. The company is operating through two business segments: Player and Platform.

Roku CEO has presented a bright financial and operational outlook in a letter to shareholders. He said, “2018 was an excellent year for Roku, with record results and solid progress towards our long-term vision of powering every TV in the world. Roku added nearly 8 million active accounts in 2018, increasing our total active accounts to more than 27 million at year-end. We estimate that nearly 1 in 5 U.S. TV households now use the Roku platform to stream at least a portion of their TV viewing.”

The company expects its revenue to grow at a similar pace in fiscal 2019. Its revenue could reach $1 billion level this year, thanks to its business strategy of scaling the number of households using the Roku platform and increasing monetization per user.

In addition, Roku has also been showing solid growth in its gross margins. Its fiscal 2018 gross margin grew to 86% from the previous year. The gross margin expansion shows that the company is selling its products and services at a premium compared to the cost of production.

ROKU Roku, Inc. daily Stock Chart

Source: Finviz.com

After experiencing some volatility during the final quarter of last year, Roku shares grew 62% since the start of this year. Its share price is gaining investor’s confidence amid the substantial growth in revenues and active accounts. Moreover, some analysts and traders see Roku as s the likeliest M&A target in the Internet sector. Therefore, buying and holding this small-cap growth stocks could offer big returns to investors.

 

 

Cannabis Industry is Booming; Don’t Miss the Buying Opportunities

Cannabis industry has been growing at a massive pace over the last year. The market has been witnessing the emergence of several new players following the legalization of recreational cannabis in Canada and in some parts of the United States. Indeed, some biotech companies have also been moving their focus towards cannabis industry. This is because of the strong growth prospects of the emerging industry.

Market participants expect cannabis sales to reach $200 billion level in the next ten years. The market has already started seeing significant sales growth opportunities in the past couple of quarters. Consequently, these companies have been aggressively working on merger and acquisitions combined with investments in supply chain and other activities to capitalize on increasing demand.

ACB Aurora Cannabis Inc. daily Stock Chart

Source: Finviz.com

Aurora Cannabis (NYSE:ACB), for instance, has made 16 strategic acquisitions in the last two years. In addition, the company plans to acquire more companies in the coming days to expand its footprints in emerging markets. Aurora has also been boosting its production capacity; it expects cannabis production to reach 500000 kg by 2020 from 100000 kg at the end of fiscal 2018.

Its cannabis products sales, on the other hand, rose substantially in the previous few quarters. In the latest quarter, its net revenue of $54 million increased 430% from the same period last year and it is up almost 83% from the previous quarter.

CGC Canopy Growth Corporation daily Stock Chart

Source: Finviz.com

The share price of Canopy Growth (NYSE:CGC) rose more than 100% in the past twelve months. The gains are supported by its aggressive growth strategy along with investor’s confidence in future fundamentals of the emerging industry. Its revenue grew 283% in the latest quarter compared to past year period while kilograms and kilogram equivalents of cannabis sold jumped 334%. Canopy Growth has also secured $5 billion investment from Constellation Brands Inc and began putting that capital for key acquisitions of Storz & Bickel and the assets of ebbu Inc.

Several other cannabis companies such as CannTrust Holdings, Aphria, and MedMen Enterprises had generated more than 100% increase in revenues in the latest quarter.

On the whole, the cannabis industry is likely to see considerable growth in revenue in the future. Therefore, buying and holding major cannabis stocks that have the potential to generate sizeable growth in production and distribution appears like a good strategy.

 

 

 

Cronos Group Share Price Double in Two Months; Further Upside is Ahead

Cronos Group (NASDA: CRON) share price double since the start of this year. The bull-run is supported by an investment of $1.8 billion from Altria Group. CRON share price jumped from $9 a share at the beginning of this year to $21 a share at present. Traders believe that $1.8 billion of investment from Altria Group would not only help in expanding CRON production potential, it would also aid Cannabis Company to enjoy the 100 years of Altria’s experience in the tobacco industry.

CRON Cronos Group Inc. daily Stock Chart

Source: Finviz.com

In addition, bulls believe Altria’s experience in the tobacco business could be leveraged to speed up CRON’s penetration in the cannabis market. Thus, the combination of both companies would provide a valuable synergistic potential.

Altria’s  CEO said, “Selecting the right partner in this category was critical and we’ve done just that” and further added that “our investment will allow Cronos to more quickly expand its global footprint and production capacity.”

According to the agreement between both companies, Altria Group will receive a 45% stake in the CRON, which could enlarge 10% every year over the following four years. Altria will also have the right to appoint four directors at Cronos board, including one independent director.

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Source: Market Realist

Cronos Group appears in a solid position to expand the penetration in cannabis markets. This is evident from its recent financial performance. The company had generated revenue of $3.8 million in the latest quarter, representing a growth of 180% from revenue of $1.3 million in the same period the previous year.

Kilograms of cannabis sold rose to 514 kilograms, up 213% from 164 kilograms in the year-ago period. Cronos says the increase in revenues and kilograms sold was supported by improved production capacity and higher demand from domestic and international medical cannabis channels. The growth in recreational cannabis market added to the revenue growth.

Overall, Cronos looks in a strong position to capitalize on increasing demand from cannabis markets. The investments of $1.8 billion would help CRON to expand their production facilities and distribution network both in Canada and the United States. Therefore, CRON shares are likely to extend the upside momentum in fiscal 2019.

 

 

Here’s Why Boeing is a Perfect Stock for Growth Investors

Growth investors always like to invest in companies that have the potential to generate a substantial increase in revenue, earnings and cash flows. These financial numbers help in enhancing investor’s confidence, which results in a sustainable rally in share price. Boeing (NYSE: BA) appears like a solid stock for growth investors considering the double-digit growth in financial numbers along with strong future fundamentals and big dividends.

Source: Morningstar.com

Boeing share price rose close to 28% since the beginning of this year, extending the three-year rally to 250%. Amidst big share price gains, the stock is likely to extend the upside momentum, supported by its rosy financial outlook, the potential dividend growth, and share repurchase program.

Boeing has generated record revenue of $101 billion in fiscal 2018 compared to revenue of $97 billion in the previous year. The company continues to see healthy demand from Commercial Airplanes, Defense, Space & Security, and Global Services.

Revenue from its commercial Airplanes segment, which is the largest revenue generation segment, increased 5% from last year. Fortunately, demand for the company’s Defense, Space & Security, and Global Services jumped at a high double-digit rate.

Source: Earnings Release

Besides from revenue growth, Boeing’s strategy of enhancing its operational and production activities is resulting in big earnings growth. Share buybacks are also contributing to earnings growth. The company had generated core earnings per share growth of 30% in fiscal 2018 from the previous year.

Its CEO said,”Our One Boeing focus, clear strategies for growth and leading positions in large and growing markets give us confidence for continued strong performance, revenue expansion and solid execution across all three businesses, which are reflected in our 2019 guidance.”

Source: Earnings Release

The company expects fiscal 2019 revenue to stand in the range of $111 billion and earnings per share are likely to exceed $20 per share. The outlook for 2019 represents high double-digit growth in financial numbers compared to the previous year. Its free cash flows are expected to hover around $15 billion this year, which is more than enough to offer better cash returns to investors relative to the past year.

Source: SeekingAlpha

The company currently offers a quarterly dividend of $2 per share. However, Boeing’s solid financial growth would allow it to make a double-digit increase in dividends along with returning billions of dollars to investors in the form of share repurchases. Last year, BA has returned $9 billion to investors through share buybacks.

On the whole, Boeing looks like a solid play for growth investors who are seeking aggressive share price appreciation along with the substantial increase in dividends. The company’s financial numbers and operational activities are likely to support its share price and dividends in the future. Therefore, buying and holding Boeing could be a wise investment strategy.

 

 

 

 

 

Lockheed Martin Stock is Undervalued; Buy for Big Dividends and Share Price Gains

Lockheed Martin (NYSE: LMT) share price offers an attractive entry point to investors who are looking for big dividends and share price gains. It is one of the largest company in the defense industry.

The company operates through four business segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. Combined with political instability and the increasing defense budgets all over the world, Lockheed Martin is likely to generate big revenue and profits over the coming years.

LMT Lockheed Martin Corporation daily Stock Chart

Source: Finviz.com

Although LMT’s share price gained some momentum since the start of this year, its stock looks significantly undervalued considering strong future fundamentals and the potential high double-digit dividend hikes.

The stock is currently trading close to $300, down from 52-weeks high of $362.32 a share. Lockheed Martin shares look undervalued amid below-average valuations along with substantial growth in financial numbers. Its stock is trading around 1.64 times to sales and 17 times to earnings compared to the industry average of 1.9 and 19 times, respectively.

The stock price is likely to receive support from financial numbers. The company had generated record revenue of $54 billion in fiscal 2018, up 8% from the previous year. Its segment profit had also hit a record level of $5.3 billion last year. This represents 15% growth over fiscal 2017. Its earnings per share, however, grew at a much faster pace than revenue and operating profit, thanks to share buybacks. Lockheed Martin generated earnings per share of $17.59 in fiscal 2018 compared to earnings of $13.27 in the previous year.

The company is optimistic about future fundamentals. Lockheed Martin (LMT) Chairman, President, and CEO Marillyn Hewson said, “As we look ahead to 2019, we remain focused on performing with excellence for customers, and our record backlog and differentiating portfolio have us well-positioned for continued growth and long-term value creation for shareholders.”

Source: Earnings Release

The record backlog of $130 billion is an indication of strong demand for LMT’s products and services. The company expects to generate record revenue of $57 billion in fiscal 2019 while its earnings per share are also likely to achieve a new all-time high. It anticipates earnings to stand around $19 per share this year.

The dividend growth looks safe. Its cash flows are expanding at a sharp pace due to sustainable growth in earnings. The company has recently increased its quarterly dividend by 10%. Nevertheless, the huge gap in free cash flows and dividend payments offers a room for a further dividend hike. The company returned $2.3 billion to investors through dividend payments compared to free cash generation potential of close to $6 billion.

By and large, Lockheed Martin is a good stock for growth investors. The company’s dividend growth is safe while the share price is trading below the fair value. In addition, year over year increase in financial numbers would offer support for share price gains. Thus, buying and holding this stock could result in hefty gains for investors.

 

 

 

 

 

 

Automatic Data Processing is a Cash Machine; Buy and Hold for Hefty Returns

Automatic Data Processing Inc (NASDAQ: ADP) has been returning a significant amount to investors in the form of cash dividends, share buybacks and share price appreciation. The company had raised its quarterly dividend every year over the past 44 consecutive years. In addition, its dividend growth is amazing. It lifted quarterly dividend by 25% in fiscal 2018 while the average dividend growth rate in the past five years stood around 12%.

Source: SeekingAlpha

A leading provider of Human Capital Management (HCM) solutions returned close to $300 million to investors last quarter in the form of share buybacks.

The share price of Automatic Data Processing, on the other hand, rallied at a sharp pace over the past five years. Its stock is currently trading around $150, up 30% in the trailing twelve months and the share price enlarged close to 100% in the past five years.

Source: Morningstar.com

The strong returns from Automatic Data Processing are due to its aggressive growth strategy and substantial growth in its financial numbers. The company continues to generate high mid-single-digit growth in revenues and high double-digit growth in earnings.

Technology and service are the core components to our success, and our focused investments in our strategic platforms are having the desired effect,” said Carlos Rodriguez, President, and Chief Executive Officer, ADP. “We are especially pleased with the progress of our transformation initiatives, which are supporting our commitment to stay at the forefront of the HCM industry and maximize value for all of our stakeholders.”

Source: Earnings Release

Its returns are safe considering the recent financial performance and the outlook for this year. ADP’s revenue increased 8% in the latest quarter to $3.5 billion. The company’s strategy of improving operational efficiencies and cost-cutting are allowing generating significant growth in earnings compared to revenue growth. Its adjusted net earnings rose 29% to $587 million in the latest quarter while adjusted diluted EPS jumped 30% to $1.34. The company expects its fiscal 2019 diluted EPS to grow by 22% from the previous year.

The high double-digit growth in earnings has also been enhancing its cash generation potential. Its cash flows are offering complete cover to dividend payments. ADP’s free cash flows, for instance, was standing close to $600 million in the latest quarter compared to dividend payments of $300 million.

On the whole, ADP appears in a strong position to generate big cash returns for investors in the following quarters. The substantial growth in financial numbers would allow it to make a big dividend increase along with working on a share buyback program.