The all-important holiday shopping season officially launches the day after Thanksgiving, which is known as Black Friday.
Each year retailers up the stakes with big promotions, longer hours, and sales starting earlier in order to capture as much holiday shopping traffic as possible.
Black Friday and the following Cyber Monday are huge opportunities for retailers to pull shoppers into stores The holiday season provides a huge portion of annual sales for most retailers, so the stakes are always high.
Low unemployment, rising wages, and a strong stock market have consumer confidence high and retailers are expecting a strong holiday season. The current earnings season has had its shares of both winners and losers in the retail sector, and as we come out of the earnings season and focus is put on the upcoming holiday shopping season here are a few retailers to consider.
Walmart (WMT)
Mega-retailer Walmart (WMT) has been one of the stronger brick and mortar retailers in the e-commerce age, and aggressive investments to build its e-commerce business have proven that the company can compete against Amazon.com (AMZN), which just a few years ago did not seem possible. Walmart has not only invested in its online business; it has invested in revamping stores and shuttering weaker performing locations and has invested in its employees to boost employee morale and in turn create a better consumer experience. The company reported its seventh-straight earnings beat in mid-November, keeping shares just below their all-time high. The stock is reasonably priced at 23 times earnings, which analysts expect to rise at an annual rate of 5.2% over the next five years. WMT trades at $118.70 slightly below its average price target of $126.05.
Amazon.com (AMZN)
Online retailer leader Amazon.com (AMZN) continues to enjoy a dominant role in online retail, and while brick-and-mortar retailers have begun to compete better against Amazon, Amazon remains the clear leader and that is unlikely to change any time soon. Amazon continues to grow at a rapid pace, with earnings forecast to rise 50% per annum over the last five years after climbing 100% annually the last five years. Consumers have shown an appetite for both low prices and convenience, and Amazon offers both. In addition to its strong e-commerce business, Amazon is also a leader in the rapidly growing cloud-computing sector which makes it a very strong investment moving forward. AMZN has trended sideways over the last three months, with AMZN stock trading at 77 times earnings. The high valuation does not pose a risk of a value-related selloff, as Wall Street has always traded the stock at high valuations, even when Amazon was losing money, and with profits expected to rise 50% annually the stock has plenty of upside potential barring any negative quarterly reports. AMZN trades at $1,740.17 with an average price target of $2,212.07.
Target (TGT)
Mega retailer Target (TGT) just posted another estimate shattering quarter and boosted its full year guidance to push the stock to a new record high. The company has done a fantastic job revamping stores while boosting its online business and the results have been obvious. Last quarter the company earned $1.36 per share, up from $1.09 during the same period last year. Overall sales rose from $17.87 billion to $18.7 billion. Target is getting it right, and Wall Street remains very bullish on the stock now that the company has proven its ability to compete in the online retail space. Profits have risen 10.9% per annum over the last five years and looking ahead analysts expect to see bottom line growth of 9.3% annually the next five years. The consistent earnings growth should continue to push TGT shares higher, particularly if Target is able to consistently post strong quarterly numbers and outperform analyst estimates. TGT is currently trading at $124.54 with an average price target of $114.79 but you can expect to see a series of price target increases following the strong quarterly numbers and upwardly revised full year guidance.
TJX Companies (TJX)
Consumers have been strong in recent years, with discount retailers such as TJX Companies (TJX) showing the most strength. Consumer confidence remains high, but shoppers have shown a desire to stretch their budgets as much as possible, which is why off-priced retailers have thrived. TJX offers name brand products at discount prices, and the company is poised for another strong holiday shopping season. In its most recent quarterly report the company posted better than expected numbers on both the top and bottom line, and the stock is currently trading just shy of its all-time high at $58.94 with an average price target of $61.53. The stock is trading at 23 times earnings which are expected to rise at an annual rate of 8.4% over the next five years.
