Here are Wall Street analysts’ favorite retail stocks as giants such as Target get set to report
Some of the biggest retailers in the U.S. are set to report their latest quarterly figures this week, potentially giving insight on how well consumers are faring with inflation and the broader macroeconomic environment. Walmart and Home Depot are slated to report Tuesday. Target’s results are scheduled for Wednesday, along with TJX. The sector has broadly struggled this year, with the SPDR S & P Retail ETF (XRT) falling 27.4%, as consumers curb discretionary spending due to strong inflationary pressures. This has led to excess inventories for retailers as well as to increased promotions to clear those goods. Despite this backdrop, analysts see upside in some retailers. To find these names, CNBC Pro screened for stocks that met the following criteria: XRT component (excluding car dealerships) Buy ratings from at least 55% of analysts covering Upside to average price target of 15% or more Market cap of $1 billion or more Covered by at least six analysts Here are the names that made our list. Boots seller Boot Barn made the cut, with 83% of analysts covering it giving the stock a buy rating. Analysts on average also see the stock going up 45% from current levels. Piper Sandler analyst Peter Keith reiterated his overweight rating on the stock last week, noting: “We remain steadfast in our view that BOOT’s sales have structurally moved higher as a result of share gains and widening the appeal of the brand. We also highlight how key brand, Carhartt, is increasingly becoming mainstream.” Boot Barn shares have struggled in 2022, however, losing 47%. Target also made the list, with 59% of analysts rating it a buy and an average price target implying upside of about 17%. The retail giant’s stock has dropped more than 25% in 2022, but it has rallied 16.8% in the fourth quarter. However, Evercore ISI analyst Greg Melich initiated last week a negative tactical trade ahead of the company’s quarterly report. “We see Target posting a miss and lower 3Q reflecting 1) our view that comps are likely in a relatively modest 2-2.5% range, product mix is likely a headwind, and there is further work to clear inventory after a 6+ month build up. If we’re right on 3Q our sense is that it will be hard for management to guide 4Q to expanding EBIT margin in light of ongoing softer discretionary demand trends and further clearance activity,” said Melich, who has an in-line rating on Target. Bath & Body Works also made the cut. Seventy-one percent of analysts covering the stock rate it a buy, and the average analyst price target implies upside of 41.4%, FactSet data shows. Morgan Stanley analyst Alex Straton noted that Bath & Body Works has “credible long-term topline growth drivers in: 1) existing categories, 2) the digital channel, and 3) internationally.” Straton has an overweight rating on the company, which is set to report Wednesday after the bell. Another name that made our list is Amazon. Nearly 80% of analysts covering the e-commerce giant rate it a buy, with the average price target implying upside of 41.6%. Amazon shares have been under pressure in 2022, with the stock losing nearly 40%. However, the Wall Street Journal reported last week that the company is weighing several cost-cutting measures. This, according to Bank of America analyst Justin Post, would be a “positive shift” for Amazon and other “FANG” names. — CNBC’s Michael Bloom contributed reporting.