After the latest round of economic data hit every professional trader’s desk, the moves were made into three distinct names in the retail sector. The moves were backed by leading growth in retail sales data pointing to a breakout in non-store retailers, otherwise known as the E-commerce companies of the economy. With this in mind, investors now have a chance to expand on that opportunity further, as laying out future dominoes to fall is typically what pays in this business.
If there is going to be a breakout in activity for these E-commerce stocks, then there are two other areas that will surely share in the success, and these are online payment systems or platforms, as well as the needed logistics and transportation stocks to fulfill all the new orders that will be coming into these E-commerce platforms in the coming months. With this in mind, today’s list becomes an indispensable map for investors to follow in this volatile market.
By considering exposure to names like PayPal Holdings Inc. (NASDAQ: PYPL) as one of the main payment processing platforms in this ecosystem, investors are signing up for a relatively predictable ride higher on this increased activity. Then there is the transportation aspect of this breakout, which is where United Parcel Service Inc. (NYSE: UPS) and FedEx Co. (NYSE: FDX) come into play as well, offering potential upside in the short-term.
PayPal’s Discount-Attracted Institutional Buyers
Understanding that the dots will be connected in this E-commerce breakout theme, professional investors seemed to have no issues with buying up a stake in PayPal before these benefits show up on the company’s next quarterly earnings results.
[content-module:Forecast|NASDAQ: PYPL]Up to $5.5 billion of institutional capital made its way into PayPal stock over the past quarter, a sign of confidence in this thesis moving forward. Leading the latest buying wave were those from UBS Asset Management, with a boost of 17.1% in PayPal holdings as of February 2025, bringing their net position to $651.6 million today.
Considering that the stock still trades at only 72% of its 52-week high, investors can see that these discounts might have been enough for these institutions to justify a buy in the company, noticing that the risk-to-reward setup favors a buying opportunity today.
Of course, there are also fundamental factors to back this up, such as the Wall Street earnings per share (EPS) forecast for up to $1.30 in the fourth quarter of 2025, implying a net growth rate of as much as 9.2% from today’s reported EPS of $1.19. Since EPS growth is what typically drives stock prices, PayPal has the right factors working for it now.
Double-Digit Upside Awaits UPS Stock
As of late January 2025, analysts from Citigroup decided not only to reiterate their Buy rating on United Parcel Service stock but also to keep a valuation of up to $149 per share on it. Compared to today’s prices, this target would imply that the stock has the chance to jump by 26.4%, which is not a usual view for a company this stable and large.
[content-module:Forecast|NYSE: UPS]There’s another factor investors need to keep in mind here as well, and that is that these targets were set in January, far before the breakout in these E-commerce names, building up a potential scenario where these views are then pushed even higher once analysts realize what the momentum might mean for the company.
The benefit of this stability and predictability for United Parcel Service stock is the ability for management to pay out as much as $6.56 per share via dividends, which at today’s prices would translate to an annualized dividend yield of up to 5.6% today. This not only outpaces any inflation rates in the United States, but provides liquidity for investors during this recent volatility in the S&P 500.
Last, but not least, there is a hidden message from the entire market when it comes to United Parcel Service stock, and that is the way that it’s being valued today. Because it trades at a price-to-earnings (P/E) ratio of up to 17.6x, it commands a premium above the sector’s 13.0x average; the market knows that “It’s expensive for a reason.”
Another Justified Premium for FedEx Stock
Just like its peer, United Parcel Service, FedEx stock now trades at a P/E premium to the rest of the transportation sector, this time at 15.6x. The reason that the market is willing to overpay for these transportation names can be founded on the theme of E-commerce breakouts, which will likely end up translating into more transportation needs.
[content-module:Forecast|NYSE: FDX]Then there is the EPS forecasts for the third quarter 2025 in FedEx, where analysts shoot for up to $5.57 in EPS, a boost of 37.5% from today’s reported $4.05 in EPS.
Remembering that, just like PayPal, it is EPS that drive stock price action and valuations can help investors make sense of today’s premiums in FedEx and United Parcel Service stocks.
This might be the justification that analysts from Deutsche Bank used to initiate their coverage in early March 2025 with a Buy rating and a $337 price target right out of the gate.
This view would push for a net rally of as much as 36.1% from where FedEx stock is today, crystalizing the opportunity investors have in this list today.
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