These stocks will kill it this holiday season

 

As hard as it is to believe, the year is rapidly coming to an end, and it is definitely not too early to start looking ahead to the upcoming holiday season.

The few months leading up to the holiday season can literally make or break a retailer’s entire year, and each year there are retailers that kill it, and others that fail to live up to expectations.

Each year there are companies that come out on top, but the competition for consumer dollars is always fierce. Companies pour money into advertising, offer deep discounts on products, and keep stores open longer and on holidays to attract as many shoppers as possible.

Consumers have embraced online shopping, and traditional brick and mortar retailers have been forced to invest heavily in their online business. In the current retail landscape, brick and mortar retailers that have not managed to build an online presence will struggle to compete, when you look at stocks to buy ahead of the upcoming holiday season you have to pay attention to the strength in all retailers’ online businesses.

Here are five retailers that will likely kill it this holiday season.

Amazon.com

It goes without saying that online retailer Amazon.com (AMZN) will kill it this holiday season. Amazon is the clear leader in e-commerce, and it will once again be the first place consumers look online for their holiday needs. Cyber Monday will be huge for the company, but the entire two months leading up to the holidays will be a busy time for the company. Last year the company accounted for between 45% and 50% of all online sales, up from 38% in the previous year. Amazon is not only dominant, but it has continued to increase its dominance over all competitors. Analysts see impressive growth moving forward, with earnings expected to rise 46% per annum over the next five years. AMZN trades at $1,927.44 with an average price target of $2,148.38.

Chart courtesy of stockcharts.com

Best Buy

Electronics retailer Best Buy (BBY) has done a fantastic job becoming relevant again in the digitial age. As e-commerce gained in importance, Best Buy failed to keep pace, and the company suffered greatly from “showrooming”, the term to describe customers shopping in their stores and then buying the same products online. Best Buy invested heavily in growing its e-commerce business, and improving the customer experience, and the investments have been working. Best Buy also offers price match guarantees, which helps minimize the showrooming effect. Online sales are growing, rising 10% year over year last quarter, and accounting for 14% of the company’s total sales. Profits are also on the rise, with earnings expected to climb 15.4% during the current year, and by an average annual rate of 14% for the next five years. BBY trades at $77.72 with an average price target of $79.57.

Chart courtesy of stockcharts.com

Five Below

Specialty retailer Five Below (FIVE) has been a strong outperformer in 2018, with shares up 96% year to date. The last two quarters the company has reported earnings growth of 160% for Q1 and 50% for Q2. The strong bottom-line growth has helped drive the stock higher and looking ahead analysts see average annual earnings growth of 25% for the next five years. Consumers are definitely spending, but discount retailers continue to be the hottest sector in retail. Five Sales have been rising across the board, and the company is likely to capture additional market shares in the wake of Toys R Us going out of business. FIVE trades at $130.11 with an average price of $134.00.

Chart courtesy of stockcharts.com

Macy’s

While all brick and mortar retailers have struggled in recent years, retailers whose locations are primarily in shopping centers and malls have had the hardest time. Mall traffic is down as consumer prefer the price and convenience of online shopping, but Macy’s (M) has done a good job remaining relevant, and improved operational results have helped drive the stock up 44% year to date. Last quarter the company reported earnings were up 46% year over year while sales were flat year over year. While mall traffic is down during the majority of the year, the holiday season brings out the crowds, and Macy’s will enjoy strong sales. The stock trades at $35.15 with an average price target of $35.36.

Chart courtesy of stockcharts.com

Apple

The holidays are a huge time for iPhone maker Apple (AAPL). The company always get a big earnings spike around the holidays, as its phones, iPads, and computers are all favorite holiday gift ideas. Apple recently unveiled three new iPhone models, and an updated Apple Watch. The new devices will be popular gift ideas and expect to see another strong launch. AAPL stock remains a favorite on Wall Street, and the stock is currently trading just shy of its all-time high with a valuation just north of $1 trillion. The company is expected to grow earnings by 27% during the current year, and by 13% per annum over the next five years. AAPL trades at $220.44 with an average price target of $227.10.

Chart courtesy of stockcharts.com

Symbols: AAPL AMZN BBY FIVE 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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