This Backdoor Play on Amazon's Tremendous Growth Will Pay You Every Quarter

While the market has made quite an amazing rally over the last few weeks, we are not out of the woods yet.

Corporate earnings are still in process discussing the COVID-19 impact on every call, businesses are still closed, and most people are still working from home.

Outside of Georgia, most states are not even thinking about opening back up, and when they do, it will be a slow start.

But regardless of where the market goes from here, there is one type of business I can always count on: e-commerce.

E-commerce has been a savior for me over the years, and with a little over 224 million Americans having bought an item online in 2019, there's a good chance it's been a benefit to you as well.

And that's especially true in today's world.

For example, when I could not get hand sanitizer at my local CVS, I went online. When I could not get to the grocery store, I went online. I can't even count the number of orders I've put in on Amazon this month from toys for the kids to groceries and other everyday products.

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I'm also sure I'm not the only one; Amazon had to delay Prime-member deliveries at one point and tried to stick to delivering essential items only.

In short, e-commerce is saving the day and giving people the ability to stay in their homes.

This is why I am looking to invest in this unstoppable trend with this backdoor play...

The Unstoppable E-Commerce Trend over the Years

Since 2000, this industry has yet to see a downturn, even during the 2001 and 2008 recessions. That is not something you can say for most industries after the dot-com bubble and the financial crises.

In the fourth quarter of 2019, e-commerce retail sales as a percent of total sales were 11.4%, or roughly $600, billion in 2019. This is up 14.9% from 2018. This is a huge industry, and it's only set to capture more of the multitrillion-dollar retail sales market. In fact, eMarketer estimates that e-commerce could reach 16% of retail sales by 2023, a number that will most likely end up much higher, given the estimate was produced last year.

What is happening now is a complete transformation.

Stay-at-home orders across the country have created a once-in-a-lifetime catalyst for the industry. With many retail stores closed, people are spending more time and money online to get the goods they need.

The great part about this is that people are realizing that it is actually more convenient to buy online - not just because of the coronavirus, but even if we weren't quarantined.

Take for example Chewy Inc. (NYSE: CHWY), an online retailer of pet food and other pet-related products. There is a reason its stock is up almost 100% since March. It's easier to have that 20-pound bag of dog food delivered to your door than to go to the store and have to haul it to the car from the store and to your home from your car.

When people know what they want, there is no reason to go into the store. These are trends that are not going to stop when everyone goes back to work and will help to push e-commerce to all-new levels.

Just look at a few examples from the last few months of what this growth looks like:

  • Best Buy C Inc. (NYSE: BBY) domestic online sales are up over 250%.
  • NIKE Inc.'s (NYSE: NKE) digital sales grew 36% in its latest quarter.
  • Target Corp. (NYSE: TGT) sees e-commerce revenue growth of 100% in March and almost 275% in April.
  • com Inc. (NASDAQ: AMZN) and Walmart Inc. (NYSE: WMT) are hitting all-time highs as the largest online sources for goods.

But those are all companies everyone knows. The information I just put up is well-known; but what isn't so well-known is the backdoor play on Amazon's tremendous growth in this megatrend.

The Logistics Real Estate Operator with Amazon, Walmart, and Home Depot as Customers

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Prologis Inc. (NYSE: PLD) is a California-based logistics real estate provider operating in the e-commerce space.

With rapidly growing revenue up 26% from a year ago and customers like Amazon, Walmart, Home Depot, and FedEx, business is set to boom. With 5,500 customers and almost 1 billion square feet of space, they can handle the influx of products. Not only do they house products for thousands of customers, but they also help companies' procurement logistics and management processes to make supply chains operate more efficiently.

And after listening to earnings recently, I knew this company fit the bill.

What I really liked to hear is that the company currently has 30 built-to-suit projects under construction, and all of the underlying customers have indicated their intention to move forward as planned. They also mentioned on its earnings call that during the last 30 days, they have signed almost 200 new leases, up 21% from last year.

Digging into that number deeper, 40% of these new leases are because of elevated e-commerce demand vs. 23% pre-crisis. This is truly a transformation. Compared to many companies cutting back business, Prologis is forging ahead and has no plan to cut its dividend, which it has raised six years in a row.

With stock price estimates as high as $110, this could easily go up 25% - while paying you over a 2% yield every quarter.

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