With the holiday shopping season moving into full swing this weekend, what’s the most attractive retail stock for investors right now?
We asked Seeking Alpha analysts Luca Socci and Kenio Fontes for their picks.
Luca Socci: Retail is sensitive to several key macroeconomic indicators. Right now we are seeing low consumer sentiment along with strong consumer spending. This situation affects retailers, who in many categories have had to increase promotions and discounts. We have heard throughout this year’s earnings calls that consumer behavior is cautious and that customers are more value-oriented. In this environment, retailers such as Dollar Tree (DLTR) and Dollar General (DG) right now trade at below-market multiples while seeing strong momentum and decent traffic.
On the other hand, I would avoid Target (TGT), which keeps having some issues in attracting new customers and increasing the size of the average ticket. Walmart (WMT) and Costco (COST) remain all-weather picks, though they keep trading at steep multiples. One small-cap bet could be the circular economy retailer Envela (ELA), which has a segment focusing on pre-owned luxury items that could gain traction during the holiday season.
Kenio Fontes: For me, when it comes to retail stocks, Amazon (AMZN) may not be the first that comes to mind (as it’s not just retail), but it is the most attractive. It really is a unique asset, very diversified, and with excellent prospects. In my view, robotics will be an even bigger game changer in the future and will unlock many gains for e-commerce, in both topline and margins.
Additionally, I am also keeping an eye on Build-A-Bear Workshop (BBW), a stock that may be overlooked but is a company that is executing very well and, with its current attractive valuation, has upside and compounding potential.