Buy-rated companies from the Essential Retail sector – What to invest in

Melius Research analysts selected seven “buy-rated” stocks, one rated “sell,” and nine “hold-rated” stocks within essential retail (NYSEARCA:XRT), (RTH).

This sector involves convenience stores, club stores, and food, hardline, broadline, and discount retailers.

“Only the highest quality retailers realized underinvestment was unsustainable,” wrote Karen Short, head of Consumer/Retail Research at Melius Research. “Many retailers thought they could maintain the elevated demand, coinciding with underinvestments in their stores, or overexpanded themselves from a store standpoint, which is leading to a reckoning of sorts.”

Buy-rated stocks

• Walmart (WMT) – Target price: $95; Upside: 20.2%; Sales growth: 3.7%
• Home Depot (HD) – Target price: $430; Upside 10.3%; Sales growth: 3.5%
• Lowe’s (LOW) – Target price: $290; Upside 11.5%; Sales growth: 0.8%
• Target (TGT) – Target price: $180; Upside 16.3%; Sales growth: 2.9%
• BJ’s (BJ) – Target price: 90; $Upside 11.1%; Sales growth: 7%
• Tractor Supply Store (TSCO) – Target price: $315; Upside 14.6%; Sales growth: 5%
• Casey’s General Stores (CASY) – Target price: $435; Upside 18.2%; Sales growth: 14.4%

Hold-rated stocks

• Costco (COST) – Target price: $950; Upside 4.7%; Sales growth: 7.1%
• Dollar General (DG) – Target price: $85; Upside -1.2%; Sales growth: 5%
• Dollar Tree (DLTR) – Target price: $70; Upside -2.4%; Sales growth: 3.9%
• Kroger (KR) – Target price: $55; Upside -0.7%; Sales growth: 1.6%
• Best Buy (BBY) – Target price: $100; Upside 2.8%; Sales growth: 2.4%
• Albertsons (ACI) – Target price: $19; Upside 1.8%; Sales growth: 1.4%
• Five Below (FIVE) – Target price: $100; Upside 4.8%; Sales growth: 9.8%
• Sprouts Farmers Market (SFM) – Target price: $; Upside; Sales growth: 10.1%
• Grocery Outlet (GO) – Target price: $17; Upside 6.4%; Sales growth: 9.7%

Sell-rated stock

• Floor and Décor (FND) – Target price: $80; Upside -33.1%; Sales growth: 5.4%