02 Feb 2021
Posted in Business Fundamentals
Online retailers accounted for 77% of the cumulative MCap gain recorded by top 25 global retailers in 2020, says GlobalData
Online retailers had a remarkable year in 2020, seeing a 65% gain in cumulative market capitalization (MCap) in 2020 over 2019, according to GlobalData, a leading data and analytics company.
Keshav Kumar Jha, Business Fundamentals Analyst at GlobalData, comments: “Major online retailers such as Amazon, Alibaba, Pinduoduo, JD.com and eBay benefited from the increase in demand for e-commerce and contactless delivery services owing to the raging pandemic of COVID-19 the world over.
“The ability of these companies to capitalize on their distribution strength, and offer uninterrupted and timely service during the pandemic also helped them win investors’ confidence.”
Amazon reached the $1 trillion mark and registered a whopping 78.4% increase in MCap in 2020 over that in the previous year. Considerable increase in the number of people using e-commerce platform, and growth in its cloud business during the year also contributed to the increase in MCap.
The Chinese e-commerce giant, Alibaba, also reported an increase in the number of active users on its e-commerce platform during the pandemic. However, the Ant Financial IPO fiasco and the alleged public criticism of Chinese regulators by Jack Ma cost the company dearly and its MCap declined 21% in Q4 2020.
Retailers including Walmart, Nike, Lowe’s, Fast Retailing, Target, and Dollar General recorded over 20% YoY growth in MCap.
Jha adds: “The strategy of these retailers to invest in multi-channel services kept investors interested in their stocks. They continued to invest in building their digital capabilities such as implementing digital-powered retailing supply chain and strengthening online offerings to respond to the pandemic-driven change in consumer and shopper behavior.”
Magazine Luiza, the Brazilian omnichannel retailer, also entered the top 25 retailers list with 60.2% increase in its YoY MCap. The company’s stock surged on the back of strong e-commerce sales in the first three-quarters and its decision to strengthen further its online offerings such as selling books.
In terms of valuation, 2020 was a disappointment for the US-based pharmacy retailers such as CVS Health and Walgreens Boots Alliance, with both the companies reporting YoY decline in MCap. Although CVS Health reported net decline in MCap during the year, investors seemed convinced about its strength in the prescription category and increase in diagnostic testing in Q3.
The subdued financial performance and increasing operational costs made investors skeptical about Walgreens Boots Alliance’s stock.
Jha concludes: “The rollout of COVID-19 vaccines is expected to lead to economic recovery; however, challenges to vaccine procurement and its efficacy remain, which lead to uncertainty. A successful vaccination drive could ease the social distancing norm by allaying people’s fears and helping retailers gain growth momentum in the months ahead.”