The second wave of the coronavirus is here. It might not be long until some brick-and-mortar retail stores reduce their hours or temporarily close. However, many will remain open through the holidays like during the previous shutdown.
This is a time for investors to be selective when sorting through retail stocks. In particular, it is prudent to zero in on big-box retailer stocks likely to thrive during the second wave of the virus.
Without further ado, let’s take a look at three big-box retailers well-positioned for the potentially dark months ahead: Walmart (WMT), Costco Wholesale Corporation (COST), Target Corporation (TGT), and Big Lots (BIG).
WMT just might be the perfect retail stock to own as another round of coronavirus lockdowns looms. WMT has successfully transitioned to the online eCommerce realm, selling products from its website through the Flipkart platform. Furthermore, customers can resort to in-person shopping amidst the pandemic, if desired. However, if the coronavirus cases spike, investors won’t lose a second of sleep worrying about their WMT stock simply because the retailer is perfectly capable of making money through online sales.
The POWR Ratings reveal WMT has “A” grades in the Industry Rank, Trade Grade, Peer Grade, and Buy & Hold Grade components. The stock is ranked first of 18 in the Grocery/Big Box Retailers segment. Of the 26 analysts to have studied WMT, 21 rates the stock as a “Buy”, five rates it as a “Hold” and none insist it should be sold.
WMT’s strong earnings recently beat the Street’s forecast. The solid earnings were partially the result of the WMT’s growing e-commerce sales that should help the company continue raking in the cash even if the pandemic worsens.
Costco Wholesale Corporation (COST)
Though some Americans have not yet stepped foot in a COST store, savvy investors from all geographic locations are well aware of the company’s success. COST sells general merchandise, food, appliances, and household products at affordable prices. The only caveat is COST requires a membership. Look beyond this completely unnecessary and antiquated barrier to success, assume most people will be willing to obtain a membership and you will find COST has more than its fair share of merits.
COST is a POWR Ratings beast with “A” grades in the Peer Grade, Trade Grade, Industry Rank, and Buy & Hold Grade components. COST is ranked second of 18 stocks in the Grocery/Big Box Retailers segment. A total of 22 analysts have performed a deep dive on COST with 17 ratings the stock as a “Buy”, five rating it as a “Hold” and none recommending selling.
COST has a track record of success during recessions that every investor should be aware of. The company’s discount products are coveted during economic troughs. Add in the fact that COST’s customer base is fiercely loyal and you have a recipe for lasting success even through a pandemic and economic recession.
Target Corporation (TGT)
It was not long ago when TGT appeared to be somewhat of a doomed big-box retailer with a paltry grocery inventory, long lines, and an outdated business model. TGT wears a wide array of metaphorical hats yet does so in an artful manner. You cannot fault TGT for selling everything from groceries to electronics, household products, and other items simply because the company does it so well.
Add in the fact that TGT’s brass has embraced the shift to the internet with the acquisition of Shipt for prompt delivery directly to consumer homes and you have all the more reason to own this stock. TGT’s slight pivot toward the online realm may make the difference between analyst upgrades and downgrades as the pandemic plays out.
The POWR Ratings show TGT has “A” grades in the Industry Rank, Trade Grade, and Buy & Hold Grade components. TGT is ranked third of nearly 20 in the Grocery/Big Box Retailers space. The bottom line is TGT is an essential business that will continue through the pandemic, helping investors make even more money as the big box superstar continues to capture additional market share.
Big Lots (BIG)
Closeout retailing certainly had its naysayers yet BIG has proven this business model can work. BIG sells affordable products at its Big Lots Wholesale stores, Wisconsin Toy, Consolidated International, and on the web.
The POWR Ratings reveal BIG has an “A” Industry Rank along with “B” grades in the Buy & Hold Grade and Trade Grade components. The analysts are particularly bullish on BIG, setting an average price target of $60.33, indicating the stock is likely to pop by more than 20%.
BIG has an absurdly low forward P/E ratio of 6.3, meaning it is undervalued. BIG just might rise to the $55 to $60 level by the end of the holiday period.
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WMT shares were trading at $150.32 per share on Wednesday morning, up $0.95 (+0.64%). Year-to-date, WMT has gained 28.13%, versus a 13.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…
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