It is hard to believe, especially in an unbelievable 2020, but the summer is over. The socially distanced football season is already a quarter of the way over, Halloween will have goblins with masks no doubt on your street soon, and Thanksgiving is just over a short six weeks away. What that means, of course, is many people are starting to do their shopping for the holiday season. With the internet playing a big role now for brick-and-mortar retail giants, they are ready to take on the internet big-boys.
Research still 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 may change this year with the ongoing COVID-19 pandemic still with us, retailer expectations remain 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 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 shopping. 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. It has one of the most valuable brands in the world.
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.
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 massive $3,560 price objective for the technology giant, but the Wall Street consensus figure is higher at $3,725.31. Amazon.com stock closed at $3,099.96, after sliding over 3% on the day.
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. It is among America’s most popular stores for grocery shopping.
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.
Shareholders receive a 0.78% dividend. The BofA Securities price target is $400, and the consensus target is $363.37. Costco Wholesale closed at $358.35 on Tuesday.
This bargain retailer was hit hard back in August and could be offering a very compelling entry point. Dollar Tree Inc. (NASDAQ: DLTR) operates discount variety retail stores. With the spike in purchasing from lower-income consumers, this could be a huge positive for Dollar Tree, given the company’s big presence in the discount market.
Its Dollar Tree segment offers merchandise at the fixed price of $1.00. These stores provide consumable merchandise, including candy and food, and health and beauty care, as well as everyday consumables, such as household paper and chemicals, and frozen and refrigerated food. The offer variety merchandise such as toys, durable housewares, gifts, stationery, party goods, greeting cards, softlines and other items, as well as seasonal goods that include holiday merchandise.
The Family Dollar segment operates general merchandise discount retail stores that offer consumable merchandise, including food and beverages, tobacco, health and beauty aids, household chemicals, paper products, hardware and automotive supplies, diapers, batteries, and pet food and supplies. Its home products include housewares, home decor and giftware, as well as domestics, such as comforters, sheets and towels.
Family Dollar stores also provide apparel and accessories merchandise, seasonal and electronics merchandise, as well as personal electronics such as prepaid cellular phones and services. This segment operates 7,783 stores under the Family Dollar brand and 11 distribution centers.
The $115 BofA Securities price target is well above the $108.17 consensus target. Dollar Tree stock ended Tuesday’s trading at $88.68 a share.
This remains a solid and safe retail total return play, and it is a member of the BofA Securities US 1 stock list. Target Corp. (NYSE: TGT) is one of the largest discount retailers in the United States, operating roughly 1,800 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 1.72% dividend. The BofA Securities has set a sizable $175 price objective. The consensus target is $160.25, and Target stock closed most recently at $158.31
Shares of this giant retailer have rallied nicely off levels posted in March but are only flat for 2020. 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 year 2019 revenue of $514.4 billion, Walmart employs approximately 2.2 million associates worldwide.
Shareholders receive a 1.54% dividend. The BofA Securities price target is $175. The consensus target is $147.70, and Walmart stock was last seen trading at $140.63.
The key to all these top retailers is they offer what most consumers are looking for at the lowest prices around. 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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