Shares of San Francisco-based mobile ecommerce company ContextLogic Inc. (WISH) have advanced 9.1% over the past month to close yesterday’s trading session at $10.91. This performance can be attributed primarily to the Reddit crowd’s interest in the stock and investors’ optimism about its two-year partnership with France-based PrestaShop, which it announced on June 14.
However, several law firms have filed class action lawsuits against WISH, alleging violation of federal securities laws. Furthermore, WISH’s net loss has increased 93.9% year-over-year to $128 million for the first quarter ended March 31, 2021. In fact, its $0.21 loss per share for the quarter was 16.7% wider than analysts expected. Also, its EPS is expected to remain negative in its fiscal years 2021 and 2022. Also, in terms of forward EV/S and P/S, the stock’s respective 1.62x and 2.16x are higher than the 1.56x and 1.38x industry averages. So, WISH is significantly overvalued at its current price level, and we think it is wise to wait for a better entry point.
The internet retail industry, however, is expected to continue growing in the post-pandemic environment on increasing sales of smartphones and consistent innovation and improvements in 5G services, among other factors. According to an eMarketer report, the retail e-commerce sales in the United States is expected to increase 13.7% to $908.73 billion this year.
So, we think it could be wise to bet on fundamentally-sound internet retail stocks Liquidity Services, Inc. (LQDT), and LightInTheBox Holding Co., Ltd. (LITB) to cash in on the industry’s growth.
Click here to checkout our Retail Industry Report for 2021
Liquidity Services, Inc. (LQDT)
LQDT operates a network of e-commerce marketplaces that enable buyers and sellers to transact in an automated environment. The Washington, D.C. company has roughly 3.8 million registered buyers and more than 15,000 corporate and government sellers. Its services include program management, asset management, refurbishment and recycling, and compliance and risk mitigation.
In June LQDT was awarded a four-year contract by NEPO to sell used cars, commercial vehicles, and construction equipment on behalf of a range of public-sector organizations in the United Kingdom, including local authorities, educational establishments, emergency services and NHS bodies. The contract is expected to expand LQDT’s consumer base.
For its fiscal second quarter, ended March 31, 2021, LQDT’s total revenue was $61.79 million, which represents a 17% year-over-year rise. The company’s gross merchandise volume (GMV) increased 43.7% year-over-year to $207.30 million. Its adjusted net income for the quarter came in at $6.80 million versus a $3.23 million loss in the prior-year period. Its adjusted EPS was $0.19 compared to a $0.10 loss per share in the year-ago period.
Analysts expect LQDT’s revenue to increase 12.7% year-over-year to $232.08 million in its fiscal year 2021. The company’s EPS is expected to increase 300% year-over-year to $0.20 for the about-to-be-reported quarter ended June 30, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 29.2% over the past three months to close yesterday’s trading session at $23.78.
LQDT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth and Quality and a B grade for Momentum. We’ve also graded LQDT for Value, Stability, and Sentiment. Click here to access all the LQDT ratings. LQDT is ranked #5 of 43 stocks in the Internet - Services industry.
LightInTheBox Holding Co., Ltd. (LITB)
Headquartered in Shanghai, China, online retail company LITB delivers products directly from manufacturers to its customers worldwide. The company offers products in the three core categories of apparel, small accessories and gadgets, and home and garden. It has more than 687,800 product listings.
LITB’s CEO Jian He said on June 1, “The growth in revenue and profitability is our greatest motivation to continue to implement our established growth strategies, leveraging technological innovations and to improve our customers' all-rounded shopping experience.”
The company’s total revenues increased year-over-year to $112.05 million for the first quarter, ended March 31, 2021. LITB’s income from operations came in at $1.37 million compared to a $3.18 million loss in the prior-year quarter. Its net income was$1.39 million, which represents an 87.2% year-over-year rise. Its adjusted EBITDA for the quarter came in at $2.28 million, up 59.4% year-over-year. The stock has rallied 43.4% over the past year to close yesterday’s trading session at $1.75.
LITB’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary ratings system.
The stock has a B grade for Value and Quality. In addition to the POWR Ratings grades we’ve just highlighted, one can see LITB’s ratings for Momentum, Growth, Stability, and Sentiment here. LITB is ranked #2 of 70 stocks in the China group.
Click here to checkout our Retail Industry Report for 2021
LQDT shares were trading at $23.71 per share on Tuesday morning, down $0.07 (-0.29%). Year-to-date, LQDT has gained 49.03%, versus a 17.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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