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- Colin Sebastian is the most accurate analyst covering consumer discretionary stocks, according to analyst-ranking firm TipRanks.
- Sebastian covers online shopping, advertising, and video game companies, many of which have seen spectacular gains during the coronavirus pandemic.
- He told Business Insider about seven top stocks that can give investors broad exposure to the sector and benefit from its continuing evolution.
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From FANG, to FAANG+ and FAANMG, Wall Street’s favorite acronym is getting a little complicated.
Colin Sebastian, senior research analyst for Robert W. Baird & Co., is offering a path that’s easier to keep track of than the evolving FANG group, and more importantly, might give investors more bang for their buck. He calls it “WASP,” and it consists of Wayfair, Amazon, Shopify and PayPal.
Sebastian covers e-commerce, video games, and online advertising, and TipRanks says he’s the most accurate analyst working in the consumer discretionary sector today. He told Business Insider about the seismic change in the way people are shopping.
“E-commerce share has roughly doubled in the last few months,” he said. “We’ve seen growth rates really accelerate across the board for companies like Amazon, eBay, Wayfair, any company that has a meaningful e-commerce business.”
He notes there’s evidence that Baby Boomers and older people who never got into the habit of shopping online have finally made the change as part of an effort to avoid the coronavirus. That’s been a powerful addition to the pre-pandemic shift. But he also says it’s going to reverse when the pandemic fades from view.
“Our assumption is that about half of that incremental market share shift will be retained,” he said, “What that means is that e-commerce penetration in just a matter of three months will sustainably increase by about 50%.”
Sebastian says his select group of four companies should stay ahead during a pullback and well into the future.
Sebastian says that Amazon and Walmart could be two of the three biggest online shopping platforms of the future. And the third isn’t a rival retailer — it’s Shopify.
“They provide e-commerce a technology and an e-commerce platform for all of the merchants, all of the businesses that are not large enough to build it themselves,” he said. “What they bring to the table is a kind of an enterprise-grade, very scalable, very sophisticated e-commerce platform that’s accessible to merchants of any size.”
Shopify stock is up 160% in 2020, and Sebastian raised his price target to $1,100 a share on Monday, implying a gain of about another 10%.
“In this brave new world of e-commerce, we see further upside potential to estimates as well as share prices, and remain opportunistic buyers,” he said. “eBay continues to improve as well, which we’ve highlighted for more value-oriented investors.”
He’s also enthusiastic about two online car retailers. Sebastian is far from alone in his enthusiasm for used-car seller Carvana, which has rallied almost 50% this year.
“They’re one of the smaller companies I cover, but in an emerging category with massive growth potential,” he said. He’s also enthusiastic about rival Vroom, which went public last month. He says the US used-car market is worth $800 billion a year, which means there’s more than enough room for both companies.
“While Carvana was successful in legitimizing direct online sales of used cars, Vroom can now capitalize on the recent acceleration in e-commerce in a market still in the early stages of disruption,” he wrote.
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