Retail
Holiday Shopping Has Exploded Early: 4 Large-Cap Retail Winners to Buy Now
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The year has flown by. It seems truly hard to believe that winter is just over a month away, the football season is already halfway over and Thanksgiving is right around the corner. What that means, of course, is that many people are already shopping for the holiday season. Spurred on by supply-chain worries, and with the internet playing a massive role now for brick-and-mortar leaders, they are ready once again to take on the internet giants.
Research indicates that omnichannel shoppers, those that use the internet and brick-and-mortar stores, tend to spend more than those who just go shopping at malls and shopping centers. While some of this has changed with the ongoing COVID-19 pandemic still hanging around, retailer expectations remain very positive.
We screened the BofA Securities research universe database looking for the mega-retailers that look poised to cash in this year. We found five stocks that are all rated Buy and look like excellent choices for investors looking to add retail exposure in front of the holiday season.
Amazon
This is the absolute leader in online shopping and is on the BofA Securities US 1 list of top stock picks. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers.
The company serves developers and enterprises through Amazon Web Services (AWS), which provides computing, storage, database, analytics, applications and deployment services that virtually enable various businesses. AWS is also the undisputed leader in the cloud now, and many top analysts see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market.
Like every year, online sales should continue to grow, and Amazon remains the go-to portal for shoppers looking for bargains and a way to stay out of brick-and-mortar stores this year.
BofA Securities has a $4,250 price objective for Amazon.com stock, while analysts’ consensus figure is $4,039.94. The last trade on Tuesday came in at $3,540.70 per share.
24/7 Wall St.Costco Wholesale
This has become the ultimate destination for the American consumer regardless of the economy. Costco Wholesale Corp. (NASDAQ: COST) has a unique business model. It operates membership warehouses, and it buys the majority of its merchandise directly from manufacturers, essentially cutting out the middleman. Costco sells in bulk but also at a lower price, thus fueling its rapid growth. With consumers having more free cash to spend as gasoline prices have dropped, this major retailer may continue to see large revenue gains.
Costco remains one of the few conventional retailers where metrics like store traffic, market share gains and a validated model could bode well for international growth and expansion. The company is largely unharmed by e-commerce, and it continues to add stores in strategically mapped out locations.
Wall Street loves the company’s pricing authority on key items and the leading merchandising offerings, and the relatively new Costco co-branded card with Visa is a real positive. Add in the company’s growing online presence and the future looks bright.
Costco Wholesale stock investors receive a 0.60% dividend. The BofA Securities price target is $550. The consensus target is $508.02, but the shares closed trading at $526.72 on Tuesday.
Target
This remains a solid and safe retail total return play. Target Corp. (NYSE: TGT) is one of the largest discount retailers in the United States, operating roughly 1,900 Target stores across the country. The company sells merchandise in its Signature Categories Style, Baby, Kids and Wellness, as well as other products in both physical Target stores and online at Target.com.
While the company has shot itself in the proverbial foot more than once over the past five years, for a variety of reasons, it remains a prime destination for shoppers and should be poised for a big holiday season. In addition, for over three years, Target has poured tons of money into its e-commerce offerings, overhauling its stores and refreshing its inventory to compete better against Amazon.
Shareholders receive a 1.35% dividend. The $295 BofA Securities price objective compares to the $283.45 consensus target. Target stock closed on Tuesday at $266.39.
24/7 Wall St.Walmart
The giant retailer posted solid results this week but has traded sideways this year and offers a compelling entry point. Walmart Inc. (NYSE: WMT) is the world’s largest retailer, operating retail stores under the formats of Walmart Stores, Supercenters, Neighborhood Markets and Sam’s Club locations in the United States, as well as a growing e-commerce business. Internationally Walmart also operates locations in several countries, including Argentina, Brazil, Canada, China, Japan, Mexico and the United Kingdom.
Each week, nearly 260 million customers and members visit the company’s 11,535 stores under 72 banners in 28 countries and e-commerce websites in 11 countries. With fiscal 2020 revenue of over $550 billion, Walmart employs approximately 2.2 million associates worldwide.
Shareholders receive a 1.54% dividend. BofA Securities has set a $175 price target. The consensus target for Walmart stock is $169.80, and shares were last seen on Tuesday at $143.17.
The key to all of these top companies is that they offer what most consumers are looking for: the lowest prices. In a very competitive world, they continue to be a formidable challenge for smaller companies and should once again dominate the holiday shopping season.
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