It seems hard to believe, but the summer is over, the football season is already a quarter of the way done, Halloween will have goblins on your street soon, and Thanksgiving is a short six weeks away. What that means of course, is many people are starting to shop for the holiday season, and with the internet playing a big role now for brick-and-mortar giants, they are ready to take on the pure-play internet leaders.
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. With tax breaks providing additional income, and companies raising salaries in some cases, it should be a jolly season for the big retail players.
We screened the Merrill Lynch research universe database looking for the mega-retailers that look poised to cash in this year. We found five that are all rated Buy and look like excellent choices for investors looking to add retail-related stocks in front of the holiday season.
This company is the absolute leader in online retail, and it recently opened its first brick-and-mortar store in New York City. 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, which provides computing, storage, database, analytics, applications and deployment services that enable virtually 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.
Consistent with data from earlier in 2018, digital marketing users overwhelmingly cited Amazon as the fastest-growing channel for advertising budgets, while many retailers are also leveraging their Amazon advertising data to retarget users on other channels (namely Facebook) to drive traffic/ sales to their own websites (bypassing Amazon marketplace/FBA fees).
The Merrill Lynch price target for the stock is $2,200, and the Wall Street consensus target is $2,123.77. The stock closed trading on Thursday at $1,952.76.
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 the company 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 with gasoline prices still low, 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 company’s 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 shareholders are paid a 0.98% dividend. Merrill Lynch has a price target of $255, and the posted consensus price objective is $241.48. The shares closed on Thursday at $233.20.
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