It is undeniable that what likely will be 20% or worse unemployment and a drop of more than 20% in gross domestic product is a very bad recession. It’s also undeniable that many businesses have been crushed, many sectors of the economy have been damaged and millions of workers have been harmed. Despite all the economic carnage, many companies are thriving in this economy. Many other companies want their share of the new economy as well.
24/7 Wall St. has been tracking the economic and corporate changes in great detail, as well as all the trends around the COVID-19 impact on the community and the economy. Many defensive stocks did not live up to being defensive, but the new economy has been absolutely dominated by just 40 companies, while the rest of the business world was either closed to tried to muddle on.
While Amazon.com Inc. (NASDAQ: AMZN) has been growing and then taking over certain aspects of the U.S. economy, Shopify Inc. (NYSE: SHOP) has been growing exponentially and taking its share of the e-commerce pie. These companies have similar approaches on part of their business efforts, but Shopify is more of a platform and partner for merchants. Even as Shopify is adding the equivalent of a banking back-end for its merchants, Facebook Inc. (NASDAQ: FB) wants its slice of the action as well.
The bad news for these businesses is that it will be a more competitive landscape ahead. The good news is that these business efforts to win the hearts and minds of business owners to come under their platform still has massive and untapped growth potential in what has been a highly fragmented market for merchants.
Facebook should have been included in the companies thriving in the recession, but at the time we were evaluating the companies its stock had not recaptured its losses. Facebook also was busy communicating how its advertising revenues were being hit hard as advertisers were pulling back. The social media platform is already a portal of sorts for many sole proprietors and small businesses alike, but now the Facebook Shops effort will be unified with Facebook and Instagram with more advanced e-commerce solutions.
What happened in the past two weeks is that Facebook’s new “shops” effort has helped the stock hit a new all-time high above $230. The stock even hit its consensus analyst price target from Refinitiv of $237.38, as analysts have been raising their projections again. Deutsche Bank issued a new report signaling that the year-ago estimate of Instagram Checkout having a potential $10 billion value could now be a $30 billion revenue opportunity.
As for Amazon, it has been winning all around in the new economy. On top of the endless packages delivered to almost every home in America, Amazon’s data center growth from Amazon Web Services (AWS) has allowed it not to even care about the old-world brick-and-mortar stores it competes against, as they are either still closed or gradually reopening with the phased reopening of the U.S. economy.