Forward of the fourth-quarter reporting season, Goldman Sachs’ Eric Sheridan sized up the e-commerce business.
In an analyst notice printed on Wednesday, Sheridan issued scores for the next firms:
- Amazon.com Inc AMZN with a Purchase score and a worth goal of $240.
- eBay Inc EBAY with a Promote score, elevating its worth goal from $53 to $55.
- Chewy Inc CHWY with a Purchase score and a worth goal of $40.
- Etsy Inc ETSY with a Promote score, decreasing its worth goal from $47 to $45.
- Wayfair Inc W with a Impartial score and a worth goal of $50.
Principal Takeaways: Sheridan discovered the fourth quarter confirmed steady efficiency, boosted by stronger-than-expected vacation on-line gross sales. Non-discretionary and subscription-based purchases drove progress, particularly amongst higher-income households.
The analyst is bullish on Amazon and Chewy for his or her buyer loyalty, and in Amazon’s case, its subscription. Sheridan famous that buyers “traded down” on worth to shut the yr.
Goldman Sachs’ Purchase scores on Amazon and Chewy displays “continued desire” for e-commerce firms which might be uncovered to much less discretionary classes with excessive repeat habits by way of subscriptions and/or necessities buying, Sheridan says. On-line spending “stays unstable throughout discretionary classes and lower-income households.”
Chewy and Etsy have fewer repeat purchases and are pushed by “fanatic” patrons, he provides.
Sheridan additionally believes firm margins will disperse in 2025, with Amazon and Chewy as beneficiaries and eBay and Etsy on the dropping finish.
Sheridan expects to see “a divergence in margin trajectories” between:
- Firms that may stability stronger demand with focused progress investments and produce engaging incremental margins with income outpacing bills (Amazon, Chewy) and
- A doubtlessly tougher margin outlook for the businesses the place we count on income to stay pressured (eBay, Etsy, Wayfair) “absent any further value discount measures.”
Sheridan anticipates on-line retail firms will preserve their dedication to share buybacks in 2025.
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