The ARK Next Generation Internet ETF (NYSEArca: ARKW) has the ingredients for a 2022 rebound, including strong exposure to online retail and social commerce trends.
In what could prove to be an ill-fated bet for some market participants, some of the blush has come off the e-commerce rose in 2021 amid expectations that growth in the space was a product of shelter-in-place directives forced by the coronavirus pandemic. However, that thesis ignores the point that online retail was soaring before the global health crisis.
“U.S. e-commerce sales are on track to exceed $1 trillion for the first time next year, as sales growth plateaus but total purchases remain far above pre-pandemic levels, according to a recent forecast by eMarketer. E-commerce sales grew by 32.4% between 2019 and 2020, reflecting the abrupt shift to online shopping, working and learning during first waves of the pandemic. The growth rate fell to an estimated 16.1% between 2020 and 2021 and is expected to remain near that level for the next two years,” notes S&P Global Market Intelligence.
As noted above, online retail’s growth dipped this year, but that’s likely the result of shoppers wanting to get out and head to brick-and-mortar retailers again after having to halt those excursions in 2020. Plus, e-commerce is still growing.
Bolstering the ARKW case is the fact that the pandemic clearly shifted consumption trends, meaning that consumers are displaying increased comfort with and preference for shopping online.
“A 451 Research survey fielded in October found that while some shoppers reported changing their habits due to the pandemic, convenience outranked COVID-19 as a key factor driving a portion of holiday shopping online,” notes S&P Global. “About one-fifth of respondents to 451’s Voice of the Connected User Landscape: Connected Customer, Holiday Experiences survey said most of their in-store shopping had shifted online as a result of COVID-19, and another one-third said some of their shopping had shifted.”
The actively managed ARKW currently holds 45 stocks, several of which have direct ties to online and several others with indirect ties. Those include Shopify (NYSE:SHOP), Etsy (NASDAQ:ETSY), and Snap (NYSE:SNAP), among others. Additionally, ARKW has relevance as a holiday shopping play.
“Among those who planned to do most of their holiday shopping online, convenience was cited as the reason among 64.3% of respondents, followed by the ability to shop at their own pace (55.3%) and the ease of comparing prices and hunting for bargains online (50.8%),” concludes S&P Global.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.