Needham analysts predict that e-commerce will continue to flourish long after a COVID-19 vaccine has been developed and distributed to the public.
Needham analyst Rick Patel recently surveyed several hundred consumers, and concludes that “digital channels will remain strong despite the vast majority of stores now being open since early summer,” Barron’s recently explained.
Patel notes that a quarter of those who visited a store still said they planned to shop more online going forward, up from 17.5% who said so in July. “In our view, loyalty to the online channel continues to increase at the expense of traditional stores, and this should be the biggest benefit to those that offer broad assortments, the most convenience, and a differentiated experience, particularly Amazon.com (AMZN).”
Fifty-five percent said that they would shop online at the same levels even with a vaccine, and 16% said they would shop more online in the future “regardless of the outcome,” Barron’s said.
More than 70% of respondents “have a preference for the online channel regardless of the availability of a vaccine, which supports our view that the uptick in digital demand is here to stay,” he writes, Barron’s reported.
Patel notes that the demand for face masks remained high in the third quarter, good news for Etsy (ETSY). He also expected consumers to continue to “nest” in their home as winter approaches, benefitting Overstock.com (OSTK) and Wayfair (W).
“This could also benefit athleisure stocks like Nike (NKE) and Lululemon (LULU), although Patel notes that 30% of respondents said they would buy more going-out clothes if there were a vaccine. That could benefit Revolve (RVLV),” Barron’s said.
However, not everyone on Wall Street is so optimistic about the market’s future.
Pacific Investment Management Company (Pimco) expects low returns across asset classes in the coming three to five years as the global economy recovers from the coronavirus pandemic.
The investment giant’s outlook argues that given the current high valuations in credit and equity markets, and the likelihood that interest rates will be kept near zero, investors should expect a stagnation or decline in profit as a percentage of gross domestic product.
Credit and equity markets have been bolstered this year by investors’ hunt for yield. With interest rates near zero, share prices have risen and borrowing costs have fallen for riskier companies.
But the pandemic’s economic realities still mean that revenue – especially in sectors like travel, entertainment and hospitality – won’t quickly recover, and central banks are unlikely to intervene to prevent defaults from rising, Reuters explained.