In the early 1990s, personal computers were just becoming ubiquitous at home and in the workplace, and the wide range of goods and services that would be offered via the internet was just a dream for futurists and tech nerds. The reality is that the sharing economy has changed our world so drastically in the past 25 years, that business, and they way we do and acquire things in the 21st century, has been permanently changed forever.
A fascinating new Merrill Lynch report offers a deep-dive into the sharing economy and takes a look at companies that are, in the analysts’ words, transforming the world. They said this in the report:
The Sharing Economy encompasses a range of disruptive models (on-demand, rental, gig economy, access, collaboration, platform, circular and peer-to-peer) that are transforming 21st century business. Sharing Economy disruptors have attracted US $45 billion in financing over the last 5 years, and eight of the world’s ten largest start-ups are in the Sharing Economy universe. We estimate the current global Sharing Economy market at US $250 billion and the addressable market at US $2 trillion – and identify 12 sectors representing US $6 trillion (8% of global gross domestic product) being impacted.
Here are the key sectors and stocks that the Merrill Lynch analysts see dominating. All these companies are rated Buy at Merrill Lynch.
The analysts see this as a $7 trillion industry, with Alphabet Inc. (NASDAQ: GOOGL) for autonomous vehicles and Waze P2P traffic sharing data. Merrill Lynch has a $1,035 target, and the shares closed Friday at $958.62. The analysts also cite Yandex N.V (NASDAQ: YNDX), the Uber of Russia, for launching car-pooling. Its shares closed Friday at $25.57. Needless to say, Uber and Lyft are in this mix but are still private.
For leisure or work, many people are eschewing hotels and renting or sharing homes. Expedia Inc. (NASDAQ: EXPE), which owns HomeAway, is number two in vacation rental. The analysts at Merrill Lynch have $163 price target, which compares with a Friday close of $146.21. Priceline Group Inc. (NASDAQ: PCLN), with a $1,920 price target, is huge in vacation rental via Booking.com. The shares closed Friday at $1,802.61.
Grubhub Inc. (NASDAQ: GRUB), which is rated Buy with a $49 price target, is the number one U.S. food delivery company and is soon launching its own delivery drivers. Uber is also moving toward that service. For now, GrubHub is the leading online and mobile provider of food delivery and pick-up services (take-out). Its software powers take-out orders for nearly 35,000 local independent restaurants in more than 900 cities across the United States. The stock close trading on Friday at $43.32.
eBay Inc. (NASDAQ: EBAY) revolutionized online retail for second-hand and new goods. The company also owns GumTree and StubHub, which are highly successful resale companies. The stock has a $38 price target. Shares ended Friday at $33.96.
This massive $2 trillion industry has been revolutionized by Buy-rated Facebook Inc. (NASDAQ: FB), which is the top social network, photo sharing (Instagram), message sharing (WhatsApp), Marketplace and Workplace. The Merrill Lynch price target for the shares is $170, and that compares with the price at Friday’s close of $150.64. The analysts also point to Match Group Inc. (NASDAQ: MTCH) the number one dating site, which has Tinder for “on-demand” matchmaking. This stock has a $21 target and closed Friday at $17.03.
Netflix Inc. (NASDAQ: NFLX) is the ultimate media story and is the number one subscription company for video on demand. The stock has $184 price target and closed Friday at $152.38.
Cloud Services and Equipment
Numerous companies are leaders here, including Box Inc. (NYSE: BOX), which offers consumer cloud file sharing and is moving into enterprise. The stock has a $21 price target and ended the week at $18.59.
IAC/InterActiveCorp (NASDAQ: IACI) is also Buy rated with a $133 price target, and it is considered the “Uber of home services,” especially with the HomeAdvisor/Angie’s List merger. The stock closed trading Friday at $101.44.
The analysts also include Intuit Inc. (NASDAQ: INTU), with a $145 target. They cite the company’s QuickBooks consumer tax assistance for gig economy workers. Gig economy jobs are a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. Shares closed last Friday at $139.49.
This is where the sector leaders like Amazon.com (NASDAQ: AMZN), which is Buy rated with a $1,150 price target, are so dominant. The analysts cite the company’s new and secondhand goods, AWS, delivery/logistics (Prime/Flex), food groceries (Fresh) and Friday’s stunning announcement of the purchase of Whole Foods Markets Inc. (NASDAQ: WFM), as well as Music/Video and Kindle. Amazon shares closed Friday at $987.71.
They also highlight Alibaba Group Holding Ltd. (NYSE: BABA) ,which has transport (Did), food (Ele.me), Ant Financial, Alipay, P2P wealth management, crowdfunding and social credit scoring (Sesame Credit). The price target for the Asian giant is posted at $161, and shares were last seen at $134.87.
Merrill Lynch concluded this in the report:
The Sharing Economy is transforming 21st century business via disruptive business models like on-demand, rental, gig, access, collaboration, platforms, circular and P2P. These tech-focused models are unlocking the value of unused and underused assets, driving a shift from asset-heavy to asset-light businesses and enabling access over ownership.
The bottom line is the sharing economy is gigantic and will only grow bigger as demand increases and the need for flexibility and timeliness becomes more and more important. In a 21st century world, time and efficiency are of the essence, and these companies and others that will one day perhaps be publicly traded are offering just that.
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