ProShares Online Retail ETF Offers A Perfect Buy And Hold Opportunity

Seeking Alpha2023-03-19

SummaryProShares Online Retail ETF offers one of the best long-term buy-and-hold opportunities, as the fear of a recession kept the fundamentally strong online retail industry around its 52-week low....

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Rick13
2023-03-20
Rick13
Ok
BKT
2023-03-19
BKT
Pls like thanks
hellodarz888
2023-03-19
hellodarz888
Thanks

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History also demonstrates that buying undervalued stocks and ETFs during downtrends results in significant long-term gains for investors. Investors can currently capitalize on one such profit-making opportunity by buying the hard-hit ProShares Online Retail ETF (NYSEARCA:ONLN), which provides broader coverage of the global online retail market. As the troubled online retail industry is cyclical in nature and seems to have already reached its bottom, I think now is the ideal time to capitalize on the recent downtrend.Online Retail Industry: Worst is BehindONLN Price Chart (Seeking Alpha)The global economy and consumer purchasing power have a direct impact on the performance of the online retail sector. In 2022, the industry underperformed due to high inflation and slow economic growth. Supply chain problems and rising costs exacerbated operational and financial difficulties. As a result, shares of ONLN ETF have fallen by half in a year and are still trading near their 52-week low.Fed Atlanta Q1 GDP Forecast (atlantafed.org)The good news is that fiscal 2023 appears to be a recovery year, as the worst appears to be over. This is due to the fact that the global economy has done noticeably better in 2023 than many had anticipated at the beginning of the year. Upward projections for both US and global GDP growth reflect this as well. The Atlanta Fed, for example, forecasts that US GDP will grow by 3.2% in the first quarter of 2023, up from its initial forecast of less than 1% growth. Given that the United States makes up 65% of ONLN's portfolio holdings by country weight, the sharp change in economic conditions there is encouraging. Recent retail sales and employment data also indicate a decrease in the likelihood of a 2023 recession. The United States added 311,000 jobs in February and 504,000 in January, while wages increased by 4.6 percent year on year. Furthermore, the chaos in the US banking sector has put the Fed under significant pressure over its aggressive rate hike policy. As a result, there is now a much lower likelihood of a significant rate increase in March and subsequent months. Furthermore, projections for the terminal rate, which was previously higher than 5.5%, have been reduced to around 5%.Additionally, reports from international markets are encouraging. For example, China has eased COVID-related restrictions, while the Eurozone has avoided recession. The Chinese economy is expected to grow by up to 5.2% this year, up from the 4.5% previously predicted. As a result, the Fitch rating agency now forecasts 2% global GDP growth in 2023, up from 1.4% previously. Overall, a global economic recovery appears to be underway in 2023, which is encouraging for the cyclical nature of online retail businesses. I, therefore, believe that the online retail sector will fare better in the months and years ahead.Earnings Projections Support RecoveryFiscal 2023 Earnings Forecast (FactSet.com)According to FactSet data, the consumer discretionary sector may outperform all others in terms of earnings growth in 2023. The data also suggests that one of the key contributors to the sector's strong performance may be online retailers. In the first quarter of 2023, the online retail industry is expected to generate $2.8 billion in profits, compared to a loss of $3.2 billion during the same period last year. Signals such as a 6.4% increase in retail sales in the United States in January, the largest increase in nearly two years, also set the stage for a solid recovery in 2023. Additionally, according to Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payment, e-commerce sales increased 13.2 percent year over year in February.ONLN Top 10 Portfolio Holdings (proshares.com)The majority of the top ten holdings in the ProShares Online Retail ETF, which account for 70% of the portfolio, have a positive outlook. Amazon (AMZN), for example, is expected to grow its revenue and earnings by double digits in the coming years, which I believe will be sufficient to drive up the company's stock price. However, given the significant increase in retail sales in the first two months of 2023, the median estimate of $560 in 2023 revenue appears conservative. On the other hand, the company is expected to return to profitability in 2023, as its net loss of $2.7 billion in 2022 was primarily due to a $12.7 billion pre-tax valuation loss. For 2023 and 2024, Amazon's estimated median earnings per share are $1.44 and $2.53, respectively. Alibaba Group (BABA), the second-largest holding in the ProShares Online Retail ETF, delivered a strong fourth-quarter performance, exceeding analysts' expectations with earnings of $2.79 per share on $35.92 billion in revenue. The company received a negative A quant grade for earnings revisions because the majority of Wall Street analysts raised their earnings and revenue forecasts for 2023 and 2024. The remaining top holdings are also expected to perform well in 2023 and the years ahead due to economic growth, increased digitalization, and a shift in consumer purchasing trends.Quant RatingsQuant Ratings (Seeking Alpha)In contrast to my buy recommendations, Seeking Alpha's quant system gave ProShares Online Retail ETF a strong sell recommendation. It's true that the quant system helps to eliminate emotions from analysis because it places emphasis on the actual data. Quantitative ratings, however, don't appear to be a reliable tool when we use Buffett's adage to buy stocks when others are fearful. This is because when stock prices begin to fall significantly, quantitative factors such as momentum and risk start flashing sell signals and warning signs. Furthermore, I'm considering a 3- to 5-year investment horizon based on a fundamental outlook, whereas quant ratings provide a short-term outlook based on technical elements such as momentum and liquidity. ProShares Online Retail ETF received an F quant grade on the dividend factor, which contributed to a strong sell rating. I believe the dividend is irrelevant in the case of consumer cyclical stocks, an industry that is regarded as the hub of growth stocks and where investors typically invest to profit from share price increases.In ConclusionFor cyclical industries like online retail, there is a limited amount of downside risk left because market dynamics have been improving steadily and negative factors have already been factored into prices over the past year. Consequently, now is the ideal time to invest in stocks and ETFs like ProShares Online Retail ETFs that have been hit hard but are fundamentally sound. Despite having a somewhat high expense ratio of 0.58%, this high-beta ETF has the potential to make a robust comeback in 2023 and establish a persistent bullish trend.This article is written by Komal Sarwar for reference only. Please note the risks.","kind":"highlight","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9943164516,"gmtCreate":1679291947336,"gmtModify":1679291950695,"author":{"id":"3582011723925907","authorId":"3582011723925907","name":"Rick13","avatar":"https://static.tigerbbs.com/2d3e47faeb6cb380146cd4f1415c29cf","vip":1,"crmLevel":7,"crmLevelSwitch":1,"idStr":"3582011723925907","authorIdStr":"3582011723925907"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9943164516","repostId":2320670515,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9943191249,"gmtCreate":1679236437782,"gmtModify":1679236442104,"author":{"id":"3570853427202414","authorId":"3570853427202414","name":"BKT","avatar":"https://community-static.tradeup.com/news/15cb8e8f0a7c44ca01c83b3bfdddbd86","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3570853427202414","authorIdStr":"3570853427202414"},"htmlText":"Pls like thanks&nbsp;","listText":"Pls like thanks&nbsp;","text":"Pls like thanks","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9943191249","repostId":2320670515,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9943199970,"gmtCreate":1679234612191,"gmtModify":1679234615956,"author":{"id":"3583033675115574","authorId":"3583033675115574","name":"hellodarz888","avatar":"https://static.tigerbbs.com/4e5f7fa39ea3c821aa8099f517287dcb","vip":1,"crmLevel":7,"crmLevelSwitch":1,"idStr":"3583033675115574","authorIdStr":"3583033675115574"},"htmlText":"Thanks","listText":"Thanks","text":"Thanks","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9943199970","repostId":2320670515,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":201,"commentSize":3,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2320670515"}