8 retail stocks to buy from top analysts as Target signals tough times for the sector
Even though Target ‘s weak earnings and disappointing holiday outlook are being seen by some as a signal of trouble ahead for retail, there are some bright spots in the sector, according to Wall Street. Target on Wednesday reported that its profit fell by 50% as it tried to clear out excess inventory in the third quarter. The discount retailer also warned that it sees a challenging environment ahead in the holiday season and beyond. That doesn’t bode well for the retail sector as it heads into its peak selling season. The fear is that consumers are grappling with high inflation and the threat of a U.S. recession, and will pull back on spending. Still, there are some retail stocks that appear poised for growth. To find a list of top-ranked retail stocks, CNBC Pro searched Tipranks for names in the sector rated at least a “strong buy” and with a more than 20% upside to the consensus price target. Retail stocks set to be winners The list has a range of retailers such as a golf company, a shoe brand on the rise and a denim favorite. Callaway Golf has the largest upside to its consensus price target, with analysts saying it could surge more than 79% from where it currently trades. Jefferies boosted its price target on the name after its third-quarter earnings beat expectations and it raised its guidance for the fourth quarter. “The sport of golf is healthy, Topgolf is gaining massive share, and apparel brands are in early innings,” analyst Randal Konik wrote in a note. “The market won’t be able to ignore these strong fundamentals for much longer, so asymmetric stock upside is ahead, in our view.” Amazon , one of the biggest names in retail, is included. The company is strongly backed by Wall Street and has a more than 43% upside to its consensus price target as it’s been beaten up this year. Even after a mixed earnings report in October , analysts remain confident in the long-term for the company, including Eric Sheridan of Goldman Sachs. “Based on our work, we remain convinced in a multi-year operating income margin expansion story for Amazon on the back of improved eCommerce margins, less International losses & higher profit margin mix contribution from AWS and advertising,” Sheridan wrote in a note. On Holding , the owner of popular running shoe brand On, is also slated to be a winner, according to Wall Street. The company is gaining brand recognition with global consumers, setting it up for solid global growth, UBS analyst Jay Sole wrote in a Nov. 2 note. The stock could jump another 30% from where it currently trades, according to analysts. Bath & Body Works could surge more than 35%, according to analysts. In July, Raymond James analyst Olivia Tong initiated coverage of the company with a strong buy rating, saying it’s oversold and poised to show resilience even in a recession. Tapestry , which owns luxury brands Coach and Kate Spade, and Levi Strauss , the denim brand, round out the fashion names on the list. Analysts see them each surging more than 30% in the future. The list also includes CVS Health and Grocery Outlet , more on the consumer essential side. Analysts see CVS jumping more than 22%, and Grocery Outlet adding more than 28%. —Samantha Subin, Alex Harring, Sarah Min and Jesse Pound contributed reporting.
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