In this article, we discuss the 5 best delivery stocks to buy now. If you want to read our detailed analysis of these stocks, go directly to the 11 Best Delivery Stocks To Buy Now.
5. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 49
BMO Capital analyst Kelly Bania has an Outperform rating on Target Corporation (NYSE:TGT) stock with a price target of $275. The analyst believes that Target Corporation (NYSE:TGT) has made a “prudent” decision to invest in the customer and value for the long-term, something that would help the firm accelerate share gains in the consumables sector. The analyst also lauded the same-day delivery service of Target Corporation (NYSE:TGT), citing it as a key to a loyal and growing customer base.
GQG Partners is a leading shareholder in Target Corporation (NYSE:TGT) with 5.5 million shares worth more than $1.2 billion. Of the 867 funds tracked by Insider Monkey, 49 own a stake in Target Corporation (NYSE:TGT). The combined worth of these stakes is $4.3 billion.
In its Q2 2021 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Target Corporation (NYSE:TGT) was one of them. Here is what the fund said:
“We added Target (tkr: TGT) to our consumer staples sector. Target offers a broad array of products in owned and known brand items at affordable prices. Its omnichannel fulfilment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target is an attractive holding.”
4. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 71
Walmart Inc. (NYSE:WMT) stock has attracted the attention of investors in the past few months as a value offering in an inflationary environment. Walmart Inc. (NYSE:WMT), one of the largest retailers in the US, has surprised analysts by capturing market share from ecommerce giant Amazon in the retail space with growth of the online business. However, Amazon is still on track to become the largest retailer in the US in 2022 on the back of strong holiday sales. With online sales and international presence both increasing, Walmart Inc. (NYSE:WMT) could give Amazon tough competition in the retail sector in the next few months.
Walmart Inc. (NYSE:WMT) has been a hedge fund favorite for many years due to strong fundamentals and an impressive dividend history stretching back nearly five decades. Washington-based investment firm Fisher Asset Management is a leading shareholder in Walmart Inc. (NYSE: WMT) with 13 million shares worth more than $1.8 billion.
3. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 73
Shopify Inc. (NYSE:SHOP) is a Canadian ecommerce company that is growing dealings with merchants and subscription revenues rapidly. It offers businesses a whole ecosystem within which to operate, a distinction that has helped it differentiate itself from other ecommerce firms. Analysts expect Shopify Inc. (NYSE:SHOP) to beat revenue expectations in the fourth quarter and point to a potential 25% upside in the shares in the coming months.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Shopify Inc. (NYSE:SHOP) with 1.4 million shares worth more than $1.9 billion.
In its Q4 2020 investor letter, RGA Investment Advisors, an asset management firm, highlighted a few stocks and Shopify Inc. (NYSE:SHOP) was one of them. Here is what the fund said:
“While we are pleased with the results of these specific purchases, we made a huge mistake of omission at that time. This mistake will likely be one of the biggest we ever make in our careers. Specifically, we did deep work on Shopify and loved everything about the business qualitatively. Unfortunately, we ultimately found ourselves unable to get comfortable with the numbers.
We built our model up from the key performance indicators (KPIs) that drive revenues. Our last save of the model dated 8/3/2016 looked as follows: (Page 2). These numbers seemed right from everything we understood about the company. While we tend not to rely on sell-side consensus estimates before finishing our own workup of the business, we do give them a look once we feel comfortable with how we have approached our analysis as it is often helpful to get a sense of what the average participant in the market expects the business to do. With Shopify, the sell-side consensus was so far from where our numbers were shaking out, it seemed almost impossible that we were basing our analysis on the same underlying information. Our natural next step was thus to take the sell-side consensus data and work backwards to figure out the implied expectations on each of the key revenue drivers. Here is what the sell-side consensus looked like as at the time: (Page 2).
Shopify’s actual revenues for 2016-2018 ended up being $389m, $673m and $1,073m. In other words, not only were we justifiably far more optimistic than the consensus estimate, but we also were far too conservative in terms of how the company actually performed.
The nature of our job as securities analysts is to take calculated risks, in an uncertain world where the “true” answer is inherently unknowable before the fact. We operate in what many call an “efficient market” and subscribe to the belief that for the most part, markets are generally pretty efficient and it requires differentiated analysis to find a return above what the market can offer. So why did we pass on Shopify despite 1) deeply believing in the qualitative elements of the business; and, 2) seeing a meaningful gap between what we expected and the consensus expected? The answer is unfortunate but simple: we lacked confidence in ourselves. It was the first time we truly experienced such a stark divergence between our expectation and the consensus and the result was the inclination was to pound ourselves over the head with how dumb we must be, rather than the other way around. We also learned that the truly great companies use their strong business advantages, smart management and execution to raise the bar every step along the way. Obviously this is a cycle which cannot continue ad infinitum, but especially in instances where our qualitative work identifies the inherent strengths in the business and the numbers shake out to be quite fair, the consistent “raising of the bar” can be a potent driver for the stock.
Please do not judge us too harshly for our mistake on Shopify, for we have from the very beginning made one commitment above all else to both our clients and ourselves: that we will be better today than we were yesterday, and better tomorrow than we are today. While this mistake was quite costly, it ended up being a key confidence and process builder.”
2. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 143
Uber Technologies, Inc. (NYSE:UBER) operates in the delivery space through the UberEats service. The stock has been among the top picks of hedge funds for several years. Altimeter Capital Management is a leading shareholder in Uber Technologies, Inc. (NYSE:UBER) with 24 million shares worth more than $1 billion.
JPMorgan analyst Doug Anmuth has an Overweight rating on Uber Technologies, Inc. (NYSE:UBER) stock with a price target of $68. The analyst has underlined that internet stocks like Uber Technologies, Inc. (NYSE:UBER) were in a better place at the end of 2021 as compared to pre-pandemic levels, largely because of the digitization of the economy.
RiverPark Advisors, LLC, in its Q4 2020 investor letter, mentioned Uber Technologies, Inc. (NYSE:UBER). Here is what the fund has to say in its letter:
“UBER was also a strong contributor, as shares rallied following the approval of California’s Proposition 22 by voters, allowing the company’s California-based drivers to remain independent contractors (rather than become more expensive employees). We believe this news is not just about the 10%-15% of Uber’s revenue tied to California, but the influence this will have on other states reassessing driver pay. UBER also reported strong third quarter results with Delivery Gross Bookings growing 135% year-over-year which nearly fully offset a reduction in Mobility Gross Bookings, which were down 50% year over year. Total Gross Bookings for the quarter were down only 10% year over year as compared with down 35% last quarter.
Despite the COVID disruption, UBER remains the undisputed global leader in ride sharing (44% of the Company’s third quarter revenue), with greater than 50% share in every major region in which it operates. The company is also a leader in food delivery (46% of revenue), where it is number one or two in the more than 25 countries in which it operates. We view UBER as more than just ride sharing and food delivery, but also as a global mobility platform with the ability to sell to its more than 100 million users (by comparison, Amazon Prime has 130+ million members) and penetrate new markets of on-demand services, such as grocery delivery, truck brokerage and worker staffing for shift work. At its current $96 billion market capitalization, UBER trades at only 6x next year’s revenue from its two core businesses. Additionally, the company has substantial, seemingly unrecognized, value in its several nascent development businesses and another $12 billion in equity stakes in synergistic businesses around the world.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 242
Amazon.com, Inc. (NASDAQ:AMZN) stock has registered minor slumps in the past few months, largely due to a revenue miss. However, some of the drivers of the growth for Amazon.com, Inc. (NASDAQ:AMZN), which include advertising and deliveries, are still showing strong potential. Amazon.com, Inc. (NASDAQ:AMZN) entered the food business with aggressive acquisitions in big markets like India during the pandemic.
Monness Crespi analyst Brian White has a Buy rating on Amazon.com, Inc. (NASDAQ:AMZN) stock with a price target of $4,500. In an investor note, the analyst has backed the firm to benefit from the accelerated digitization of the economy.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ:AMZN) was one of them. Here is what the fund said:
“Amazon (AMZN):We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”read the entire letter here]
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