Consumers Have Cash Thanks to Cheap Oil: 4 Retail Stocks Than Can Benefit Big

Lee Jackson

Restoration Hardware

This company was a momentum dream since returning from private equity, but it got hammered starting in November and is now down almost 40% from highs printed in 2015. Restoration Hardware Holdings Inc. (NYSE: RH) is a high-brow retailer of home furnishings. Its product categories include furniture, lighting, bathware, décor, outdoor and garden and tableware. The analysts see the company expanding product lines, with the kitchen being the big launch last year. It is also expanding the next generation store galleries in a bigger format.

Despite the massive sell-off, Wall Street remains positive on the company, noting that it continues to garner brand awareness and is gaining market share via strategic promotions, and that the company’s 20% secular earnings growth still looks intact. Some analysts also highlighted the solid operating leverage associated with 20% or so revenue growth and management’s outstanding track record of exceeding guidance, as well as expecting that fourth-quarter operating results could be strong.

The $115 Deutsche Bank price target is well above the consensus target of $106.76. The stock closed Tuesday at $61.80.

O’Reilly Automotive

The automotive parts segment has been, and has stayed, on fire for the past couple of years. O’Reilly Automotive Inc. (NASDAQ: ORLY) is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, serving both the do-it-yourself and professional service provider markets.

The company’s stores also offer enhanced services and programs such as used oil, oil filter and battery recycling; battery, wiper and bulb replacement; battery diagnostic testing; electrical and module testing; check engine light code extraction; loaner tool program; drum and rotor resurfacing; custom hydraulic hoses; professional paint shop mixing and related materials; and machine shops.

Its stores provide do-it-yourself and professional service provider customers a selection of brand name, house brands and private label products for domestic and imported automobiles, vans, and trucks. Many on Wall Street have applauded the company and see near-term secular growth and gains in market share driven by high quality of services and strong management.

The Deutsche Bank price target is $300. The consensus target is posted at $288.89, and the stock closed on Tuesday at $249.85 a share.

Deutsche Bank has superb retail picks for investors to consider now. The pay raise to American consumers provided by lower gasoline prices should not be discounted. This money will flow somewhere, and it’s a good bet that some of these companies are the recipients.