Color These 2 Stocks Black Friday

 | Nov 08, 2017 | 11:00 AM EST
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As we finish off the Halloween candy and take the decorations down, consumers are again moving their minds and spending dollars in step with the year-end holiday shopping season. Over the last few weeks, we've received rather upbeat forecasts for the season. We'd note that most of these forecasts focus on the period from November to December/January, more commonly known as the Christmas shopping and return season that culminates in post-holiday sales, which will have retailers looking to make room for the eventual spring shopping season. 

The National Retail Federation (NRF) expects holiday retail sales in November and December -- excluding automobiles, gasoline and restaurants -- to increase 3.6% to 4% to reach $678.75 billion to $682 billion, up from $655.8 billion last year. As we always say, context and perspective are key and this year's forecast compares to last year's growth of 3.6% and the five-year average of 3.5%. Christmas falls 32 days after Thanksgiving this year, one day more than last year, and is on a Monday instead of Sunday, giving consumers an extra weekend day to complete their shopping. 

What's missing from the NRF's forecast is the accelerating shift to digital shopping (online and mobile). That led us to collect and parse the following: 

Deloitte expects retail holiday sales to rise as much as 4.5% between November and January, vs. last year's rise of 3.6%, to top $1 trillion. In line with our thinking, Deloitte sees e-commerce sales accelerating this year, growing 18% to 21% compared to 14.3% last year, to account for 11% of 2017 retail holiday sales. 

EMarketer is forecasting total 2017 holiday season spending of $923.15 billion, representing 18.4% of U.S. retail sales for the year, a 0.1% decline from last year. Parsing the data from a different angle, that amounts to nearly 20% of all 2017 retail sales. Digging into this forecast, we find eMarketer is calling for U.S. retail e-commerce sales to jump 16.6% during the 2017 holiday season, driven by increases in mobile commerce and the intensifying online battle between large retailers and digital marketplaces. By comparison, the firm sees total retail sales growing at a moderate 3.1%, as retailers continue to experience heavy discounting during the core holiday shopping months of November and December. 

As we saw above, a differing perspective can lead to greater insight. In this case, eMarketer's data put e-commerce's share of this year's holiday spending at 11.5%, with November and December accounting for nearly 24% of full-year e-commerce sales. 

Global business-advisory firm AlixPartners forecasts 2017 U.S. retail sales during the November-January period to grow 3.5% to 4.4% vs. 2016 holiday-season sales. Interestingly, the firm arrives at its forecast using some mathematical interpolation -- over the past seven years, year-to-date sales through the back-to-school season have accounted for 66.1% to 66.4% of retail sales annually, with holiday sales accounting for 16.9% to 17%. 

Based on nine years of aggregate data from midsized and large online retailers, NetElixir forecasts this year's holiday e-commerce sales will see a 10% year-over-year growth rate. NetElixir also predicts Amazon's (AMZN) share of holiday e- commerce sales will reach 34%, up from the 30% share it owned last year. 

Collecting these other forecasts, the quick and rather obvious consensus view is that digital shopping will continue to take consumer wallet share. That bodes extremely well for Amazon and its two-day Prime shipping, especially given data that suggest roughly 71% of domestic households have a Prime account. Per Statista, it's estimated there were 90 million U.S. Amazon Prime accounts, up from 63 million as of June 2016. Two other statistics coming from the recent Internet Retailers Conference and Exhibition (IRCE) show that roughly $4 out of every $10 spent online in the U.S. is with Amazon (43%), and 80% of online growth comes from Amazon sales. 

Also helping Amazon over other retailers is its position as the low-cost online price leader. Per a new report, "Price Wars: A Study of Online Price Competitiveness," that analyzed the prices of more than 52,000 exactly matched, in-stock products across 13 categories including beauty, toys and games, electronics and pet supplies, collected daily from June to August 2017, Amazon's prices are lower compared to online efforts from Walmart (WMT) , Target (TGT) , Staples (SPLS) , Best Buy (BBY) and Home Depot (HD) . With wage growth tepid and ballooning credit card and student debt, odds are shoppers will turn to Amazon to stretch their disposable spending dollars this holiday season. 

In my view, this makes Amazon the company to own as digital shopping grabs consumer wallet share this holiday season. When I think of digital shopping, I am reminded that some way, somehow, the ordered merchandise needs to get to the intended person. While there is often talk of Uber, Lyft and the U.S. Postal Service, the company with the consumer-facing hub and spoke logistics-delivery service is United Parcel Service UPS. Not only will its business benefit as Amazon's digital shopping grows this holiday season, but as retailers from Macy's (M) to Best Buy and Nike (NKE) to Apple AAPL look to compete with the online giant. With the company expected to deliver more than 750 million packages this holiday season plus a new price increase set for Dec. 24, we continue to see favorable operating leverage ahead. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)

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