Buy CargoJet and Descartes for exposure to ecommerce logistics growth: Echelon

With Black Friday having just passed and “Cyber Monday” upon us, Echelon Wealth Partners analyst says he currently covers two stocks that offer investors excellent exposure to what he describes as a “powerful global macro theme”.

That theme? The growing demand from consumers to get their packages quickly.

Garcea says one of the behind-the-scenes stories is that online shopping is “profoundly reshaping” the transportation and logistics industries, and the stocks he has in mind reside in these sectors, CargoJet (TSX:CJT) and Descartes Systems Group (TSX:DSG, Nasdaq:DSGX).

“The impact of online shopping is profoundly reshaping the transportation and logistics industries, creating enhanced revenue and margin expansion opportunities for CJT and DSG,” the analyst says. “We believe that the growth of e-retailing/e-commerce continues to drive increased demand for faster and faster delivery services. The trend should favour CJT, who is the Canadian leader in high priority air freight, and DSG, who is responsible for customs filings and logistics of many e-commerce centric organisations.

Whiel both CargoJet and Descartes have enviable five-year stock charts, Garcea says he sees continued tailwinds for their respective stories.

Ultimately, we believe this secular transition will create further opportunity for CJT and DSG to continue to grow their revenues and expand margins through increased package volumes → which will lead to greater capacity utilizations and customs filings → which drives profitability and free cash flow. As well, we believe that premium services, in terms of rush delivery, will enable CJT to have a stronger bargaining chip at the table when negotiating rate increases for speedier service that we believe will, over time, lead to further margin expansion.

Garcea currently has a “Buy” rating and a one-year price target of $40.50 on Descartes, and a “Buy” rating and one-year price target of $62.50 on CargoJet.