Here's your e-commerce stock bundle for the holidays

Key Points

• Shopify is primed to benefit from the Q4 holiday shopping season, coming off a blowout Q3 2023 EPS beat by 9 cents and a 25.5% YoY revenue surge.
• Affirm is ready to benefit from consumers using its buy-now-pay-later (BNPL) service to weather economic uncertainty and tighter discretionary spending budgets.
• Best Buy is the last man standing when it comes to big-box consumer electronics, and ordering online and picking up curbside is a great way for paranoid consumers to avoid damaged electronics during the shipping and delivery process.

The 2023 holiday shopping season has arrived, and more consumers will be doing their shopping online. While nearly every store now has an online presence with omnichannel capabilities, certain stocks can benefit directly from e-commerce activity during this season. Here are three e-commerce stocks that can be bundled and added to your holiday shopping list in the Retail, Business Services and Consumer Discretionary sectors.

Shopify Inc. NASDAQ: SHOP

E-commerce platform operator Shopify provides a complete e-commerce ecosystem for businesses to develop and grow their online stores. The platform handles everything from payment processing, product management, shopping carts to shipping and fulfillment services. It provides merchants with marketing and analytics tools under various monthly subscription plans. It's also partnered with Amazon.com Inc. NASDAQ: AMZN to service its Prime members, and Affirm and Block Inc. NYSE: SQ added Afterpay to offer buy-now-pay-later services.

Robust momentum heading into the holiday shopping season.

Shopify crushed its Q3 2023 EPS of 24 cents, beating estimates for 15 cents by 9 cents. Revenues spiked 25.5% YoY to $1.71 billion versus $1.67 billion consensus analyst estimates. Gross merchandise volume (GMV) grew 22% YoY to $56.2 million. Monthly recurring revenue (MRR) increased 32% YoY to $141 million, driven by growth through all its subscription plans. Shopify Plus contributed 31% or $44 million to MRR.

Full-year 2023 forecast

Shopify cautioned that comps may be difficult since Q4 2022 was the strongest quarter of 2022. Full-year revenues are expected to grow in the high teens YoY. Q4 gross margins are expected to grow 300 to 400 bps higher YoY due to the absence of its logistics business. Gross margins will be down from Q3 2023. Payments revenues will be a larger percentage of overall revenue due to the holiday shopping season.

Shopify President Harley Finkelstein commented, "Our ability to help our merchants succeed in any economic environment by delivering innovative product solutions has not only built strong trust with our merchants but has positioned Shopify for sustained growth and profitability for the future." He continued, "As we look forward to the busiest shopping season of the year, we're confident that our unified commerce platform empowers our merchants with the tools they need to seize every opportunity and achieve greater success."

Shopify analyst ratings and price targets are at MarketBeat. Shopify peers and competitor stocks can be found with the MarketBeat stock screener.

Weekly cup and handle pattern  

The weekly candlestick chart on SHOP illustrates a cup and handle pattern. The cup lip line formed at $71.43 in February 2022. SHOP fell to a low of $23.63 by October 2022 and has since been rallying back to test the cup lip line at $71.43 in July 2023. Shares pulled back from the lipline to $45.50 in October 2023. The Q3 2023 earnings release surged shares higher to form the handle on its way to a potential breakout through the cup lip line to trigger the breakout. The weekly relative strength index (RSI) continues to climb through the 60-band. Pullback support levels are at $55.42, $51.20, $45.50 and $39.02. Check out the sector heatmap on MarketBeat.

Affirm Holdings Inc. NASDAQ: AFRM

Tightening discretionary consumer spending budgets may take advantage of buy-now-pay-later (BNPL) services like Affirm during the holiday season. Affirm lets shoppers choose their terms, selecting how many months to make payments. It also enables merchants to accept payments from consumers who don't have credit cards. The company is still losing money but is growing at double-digit percentages.

Growth over profits.

On November 8, 2023, Affirm reported its fiscal Q1 2024 losses of 57 cents per share, beating analyst estimates by 13 cents. Revenues rose 37.3% YoY to $496.5 million, beating $444.48 million analyst estimates. GMV grew 28% YoY to $5.6 billion. Q2 operating margins are expected between 2% to 4%. Active customers rose 15% to 16.9 million, up from 14.7 million in the year-ago period.

Low balling guidance

Affirm issued in-line guidance for fiscal Q2 revenues of $495 million to $520 million versus $503.5 million consensus analyst estimates. GMV is expected between $6.7 billion to $6.9 billion versus $6.8 billion analyst estimates. GMV is expected to rise over $24.25 billion in fiscal full-year 2024, with operating margin raised to 5%, up from 2%.

CEO comments

Affirm CEO Max Levchin commented, "We had a very strong fiscal Q1, exceeded our outlook across all metrics. GMV growth accelerated sequentially. We significantly exceeded our outlook for revenue, less transaction costs. We continued to gain market share, kept our already strong economics quite good, drove positive credit outcomes, which matters to us the most, and added some funding capacity."

Affirm analyst ratings and price targets are at MarketBeat.

Weekly rounding bottom cup formation

The daily candlestick chart for AFRM illustrates a rounding bottom that completed the cup formation. The cup lip line is at $27.26, formed in September 2022, preceding its sell-off to $8.63, before staging a rally back to retest the cup lip line in early November 2023. The weekly RSI has been climbing towards the 70-band. Pullback support levels are at $21.87, $17.56, $15.97 and $13.64.

Best Buy Inc. NYSE: BBY

Best Buy is the leading consumer electronics retailer and the last of the big box electronics stores. The company offers electronics ranging from mobile phones to desktop computers to laptops, smart TVs and home appliances. It also provides set-up, technical support and repair services through its Geek Squad division. The company offers protection plans and has a loyalty program.

For those who don't trust delivery and last-minute shoppers

Best Buy provides the convenience of ordering products online for in-store and curbside pickup. This is especially beneficial for consumers who don't want to risk having their fragile electronic products damaged during delivery. It's also worth noting that consumers who wait until the final week before Christmas will have to order from stores like Best Buy and pick up directly to avoid the potential for e-commerce deliveries to arrive after Christmas.

National Retail Federation forecasts

On November 2, 2023, the National Retail Federation forecast that holiday spending is expected to reach record levels during November and December with 3% to 4% YoY growth. This equates to $957.3 billion to $966.6 billion in sales. NRF President and CEO Matthew Shay commented, "It is not surprising to see holiday sales growth returning to pre-pandemic levels. Overall household finances remain in good shape and will continue to support the consumer's ability to spend."

Goldman Sachs upgrade

On October 19, 2023, The Goldman Sachs Group Inc. (NYSE: GS) upgraded shares of Best Buy from Neutral to Buy, raising its price target from $79 to $85. Analyst Kate McShane sees signs of stabilization in demand for tech products and improving comparable sales trends. She noted that Best Buy is lapping several quarters of declining comp sales, which sets the bar low moving forward. She commented, "Our view for a potential inflection is supported by recent commentary surrounding stabilizing demand for certain tech products, and we see the potential for demand to stabilize and recover next year, supported by innovation and the upgrade/replacement cycle."

Best Buy analyst ratings and price targets are at MarketBeat.