Online retail outlook still strong
Investors shouldn’t treat online retail as a relic of the coronavirus pandemic. The industry is still growing and the growth prospects are compelling.
Likewise, market participants should also be cautious about the rebound of physical stores. Among exchange-traded funds, Invesco NASDAW Internet ETF (PNQI) is an idea with which to marry these concepts.
PNQI, which tracks the Nasdaq CTA Internet Index, is not a dedicated retail ETF, but many of its 83 member companies are among the dominant or fast-growing names in Internet retail. That exposure remains relevant today as store closures — an issue that emerged before the coronavirus pandemic — are highlighted by some analysts.
For example, UBS recently said that 40,000 to 50,000 retail stores will close over the next five years. That’s down from an earlier projection of 80,000 closures, but even at 45,000 – the midpoint of the aforementioned range – it’s not exactly a ringing endorsement of land-based retail. This, however, underlines the rise of e-commerce.
“The worst outlook has landed on apparel and accessories retailers, home furnishings companies and consumer electronics retailers. UBS predicts these three retail categories will see 23,500 closures over the next five years. », report the real deal.
Specific to the PNQI, the update on apparel retailers is relevant because Amazon (NASDAQ:AMZN) is the largest apparel retailer in the United States, and this stock is the second-largest holding in the ETF at a weight of 8 .54%. Several other components of the PNQI are also exposed to clothing.
While the aforementioned UBS is better than the bank’s former, other anecdotal evidence supports the idea that retailers’ growth is online.
“In the meantime, Unibail-Rodamco-Westfield is get rid of its shopping center portfolio in Southern California, along with the rest of its US assets, as it focuses on Europe. The market was Westfeld’s largest, comprising 10 shopping centers from Los Angeles to San Diego that combine for approximately 12 million square feet of retail space,” according to the Real Deal.
An interesting part of the PNQI equation is that the ETF does not rely heavily on direct retailers, but does have exposure to platform providers, such as Shopify (NYSE:SHOP), as well as the emerging trend of commerce social. Regarding this last point, Meta Platforms (NASDAQ:FB), Snap (NYSE:SNAP) and Twitter (NYSE:TWTR) combine for about 12% of PNQI’s weight.
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Opinions and predictions expressed herein are solely those of Tom Lydon and may not materialize. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.