Black Friday could make or break these 5 stocks

 

It’s Thanksgiving week! This means turkey, football, family gatherings, and of course… Black Friday. Retailers rely heavily on the holiday shopping quarter, and Black Friday sales are a good indicator of which retailers will enjoy strong holiday sales.

Black Friday is when retailers across the country lure in as many shoppers as possible with big doorbuster sales, and each year the competition gets more and more fierce. Retailers open earlier and remain open longer hours, and the sales get bigger each year.

E-commerce has turned the retail sector upside down, but brick and mortar stores remain popular destinations during the holiday season, and Black Friday is a good gauge of where shoppers will turn this year.

Big mall retailers like J.C. Penny (JCP) and Macy’s (M) have a lot on the line since they face the biggest challenges in the modern retail space, but even the biggest retailers like Wal-Mart (WMT) need to put up big numbers.

Overall economic conditions remain favorable, and with consumer confidence running high this could be a great holiday season. Here are five retail stocks that Black Friday could literally make or break.

J.C. Penney

J.C. Penney (JCP) has been struggling. The mall-based retailer has found it very difficult to compete in the modern retail space, and its turnaround program has not been successful. Investors remain very bearish on the stock, which has fallen all the way to $1.26. Earnings are expected to fall 530% this year, and analysts expect 28% annual drops for the next five years. The company put out a huge Black Friday circular, with big sales on a wide range of goods from clothes to household goods. The question is whether or not shoppers will show any interest, or if they will continue to shop elsewhere. Analysts do not see much upside for the stock, with an average price target of just $1.47.

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Abercrombie & Fitch

Specialty retailer Abercrombie & Fitch (ANF) is specialty retailer in need of a big holiday season. The retail sector has always been competitive for retailers specializing in teen retail. ANF started to regain its strength in 2017, but the stock lost its momentum over the summer following a second quarter sales miss. Abercrombie & Fitch is not only competing in a tough teen retail sector, but it also faces challenges from being a primarily mall-based retailer. 2017 proved that traders could quickly come back into the stock on a sign of strength, but history has also proven that they can quickly turn against the stock on any sign of potential weakness. ANF will report its next set of quarterly numbers November 29. If the company has a big Black Friday the stock will gain strength ahead of the report, but a bad Black Friday will hurt the stock and put it in a very bad position ahead of its quarterly report.

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Best Buy

Electronics retailer Best Buy (BBY) is always a popular destination for Black Friday shoppers. In recent years Best Buy managed to drastically turn its business around and overcome the threat that “showrooming” posed on its business. Best Buy has invested heavily in growing its online business, and improving its customer’s in-store experience. Wall Street remains upbeat on the stock, but the company has little room for error. Amazon (AMZN) remains a major threat, and Best Buy has to continue to prove that it can compete online as well as continue to keep shoppers buying in their stores versus simply researching products in person and doing their shopping online. The stock has been trending lower the last two months and will continue falling if Black Friday results fail to impress. BBY trades at $64.40 with an average price target of $79.29.

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Macy’s

Macy’s (M) is yet another big mall-based retailer that has a lot on the line. The stock endure major losses between 2015 and 2017 before finally coming back to life toward the end of 2017. The stock rallied during the first half of the year before turning over and trending lower since mid-summer. Macy’s reported better than expected numbers mid-November, but a post-earnings rally was short-lived and shares remain under pressure. Macy’s faces the same challenges as other mall-based retailers, and Black Friday will be a big test as to whether or not the company is able to attract shoppers into its stores. The market wants to get behind Macy’s, but any signs of weakness could result in the stock quickly giving back its prior gains for the year.

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Amazon.com

OK, so the fate of Amazon (AMZN) does not really hang in the balance of a strong Black Friday. Amazon will have its own day in the sun on Cyber Monday, which will likely provide more evidence of e-commerce’s growing importance to the retail sector, but the market’s sentiment on the stock has been bearish the last two months, and the stock could swing wildly following the opening weekend of the holiday shopping season. After hitting an all-time high of $2,050.50 in early September, AMZN has lost 25% of its value and is currently trading at $1,541. In late October the company posted mixed results with sales falling short of estimates. The mixed report led to additional selling pressure which could ease should Amazon impress the market with strong numbers for the Black Friday weekend. The stock needs a boost, and Black Friday could go a long way in restoring faith in the stock.

Get More Analysis and Trade Ideas on AMZN

Symbols: AMZN ANF BBY JCP M
Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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