Business

Analysts Expect These Retail Stocks To Outperform This Holiday Season

November 24, 2023

As the holiday season begins, people are ramping up their shopping lists ahead of Christmas.

With the Federal Reserve holding the benchmark interest rates steady, overall spending levels are expected to remain robust in the upcoming months as people gear up for major sale days such as Black Friday or Boxing Day.

The National Retail Federation (NRF) expects total sales in November and December to rise by 3% to 4% year over year, in line with the average holiday spending growth rate of 3.6% between 2010 and 2019.

“Overall household finances remain in good shape and will continue to support the consumer’s ability to spend,” NRF President and CEO Matthew Shay said. “Solid job and wage growth will be contributing factors this holiday season, and consumers will be looking for deals and discounts to stretch their dollars.”

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Analysts expect the following retail stocks to gain big this holiday season.

Amazon

Amazon.com Inc. (NASDAQ:AMZN), the world’s biggest e-commerce company, is poised to be one of the biggest gainers this holiday season. As NRF predicts online and nonstore sales to rise between 7% and 9% over the last two months of the year, Amazon is expected to witness a surge in its total sales volume and profit levels.

Despite the inflation rates, Amazon boasted the biggest-ever Prime Day sale in July, after online spending rose by 6.1% year over year to $12.7 billion. The first 24 hours of the Prime Day sale were touted as the “single-largest sales day in company history.”

Analysts expect Amazon’s revenue to rise 5.3% year over year to $157.16 billion in the fourth quarter. The consensus earnings per share (EPS) estimate of $0.62 indicates a 1,966% rise from the same period last year in the ongoing quarter.

Unsurprisingly, Amazon stock has a bullish outlook. New York-based investment banking firm Tigress Financial Partners has a Buy rating on Amazon, with a price target of $210, indicating a potential upside of over 46%. British multinational bank Barclays reiterated an Overweight rating on the stock, with a price target of $190. This reflects a price target of over 32%.

Shopify

Canadian e-commerce company Shopify Inc. (NYSE:SHOP) has been growing substantially over the past few years to emerge as a go-to platform for consumers, rivaling global industry giants. Up over 76% so far this year, Shopify is one of the most promising retail stocks to buy this holiday season.

Shopify has been integrating blockchain-based payment protocols to facilitate direct cryptocurrency payments, making it one of the early adopters of Web3 payments. Shopify was named a leader in the 2023 Gartner Magic Quadrant for Digital Commerce, recognizing the company’s “ability to execute” and its “unique vision for commerce.”

Analysts expect Shopify’s revenue to amount to $2.8 billion in the fourth quarter, indicating a 19.8% rise year over year. The consensus EPS estimate of $0.22 reflects a 218% increase from the year-ago quarter. Wells Fargo issued an Overweight rating on Shopify on Oct. 31 with a price target of $65. This indicates a potential upside of over 6%.

Walmart

Walmart Inc. (NYSE:WMT), the largest retailer in the world in terms of revenue, is poised to win big this holiday season. The company, whose products range from grocery items to general merchandise, electronics and gifts, expects its top line to deliver solid gains in the fourth quarter.

With over 4,600 stores across the U.S., Walmart is one of the most popular retailers.

“It really shows that the value proposition for Walmart is much more than just low prices or value. It’s convenience today,” Walmart Chief Financial Officer John David Rainey said in an interview with CNBC.

While inflation rates are concerning, Walmart’s diverse product range is expected to shield it from potentially sluggish sales levels. Rising prices have caused wealthy people to opt for Walmart for their basic grocery purchases, as the company reported sales to households with a net income of over $100,000. Walmart has also witnessed a surge in its e-commerce sales and is competing with industry giants such as Amazon and Alibaba Group Holding Ltd.

“If customers want more of something and less of something else, we shift our inventory,” Walmart CEO Doug McMillon said during the company’s fourth-quarter earnings call, “If the economy is strong, our customers have more money, and that’s great. If things are tougher, they come to us for value.”