5 Must Own Stocks for What Could Be a Record Q4 Holiday Season

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Don’t look now, but the fourth quarter is here, and that means summer is over, temperatures are dropping, the leaves are starting to fall, football is in full swing and, yes, the holiday season is right around the corner. While Halloween is still a month away, some retailers are already out with Christmas trees and decorations, and many on Wall Street are predicting a banner selling season for the top retailers.

With the economy in solid shape, personal earnings growth and more job openings than unemployed people, many pundits on Wall Street are predicting that a super-strong consumer could help produce one of the best holiday selling and shopping seasons in decades.

With that in mind, we screened the Merrill Lynch research universe for stocks rated Buy that could benefit from the consumer strength and found five that could be big winners in the fourth quarter.

Amazon

This is the absolute leader in online retail, and many feel that online holiday shopping will continue to grow massively. 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 2018, digital marketing users overwhelmingly cited Amazon as the fastest-growing channel for advertising budgets. Many retailers also are leveraging their Amazon advertising data to retarget users on other channels (namely Facebook) to drive traffic and sales to their own websites (bypassing Amazon marketplace or FBA fees).

The Merrill price target is a whopping $2,350, and the Wall Street consensus target is $2,305.41, The stock closed trading on Monday at $1,735.91.

Costco

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 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 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 receive a 0.90% dividend. Merrill has a $310 price target, while the consensus price objective is $292. The shares closed at $288.11 on Monday.