Analysts improve…retail stocks?
It’s not all the carnage in the retail sector
There is certainly carnage in the retail sector, but not everyone is suffering within it. Whether it’s branding, positioning, DTC sales, or a combination of the three, some in the retail world are poised to outperform in the coming year. The three stocks we focus on today have all recently posted earnings, all exceeded their expectations and all are attracting analysts’ attention. In our view, the retail sector is facing some headwinds that will help the industry finish shaking weak hands and leave the winners in even better positions than they are now.
JPMorgan says Ulta is a winner!
Ultimate Beauty (NASDAQ:ULTA) is one of the biggest winners in the commercial space having gained market share from traditional cosmetic companies like Revlon. This, along with the resumption of social gatherings, puts the company on a growth path amid a darkening consumer backdrop. In JPMorgan’s eyes, the stock is a winner and one of two industry favorites.
“We expect the stock to continue to look forward to a strong ‘cyclical rally’ as COVID-19 wanes and event-hungry Americans immerse themselves in social gatherings/experiences with beauty. (and clothes) benefiting from this push.”
Ulta Beauty has received at least 10 reviews from 22 analysts since the first quarter report, including two from JPMorgan. In the first, the company raised its price target to $490 from the Marketbeat.com consensus of $458, and the other is a doubling of that same sentiment. JPMorgan carries an overweight rating against the broader weak buy consensus, but that sentiment and price target is trending higher. Marketbeat.com’s consensus implies around 16% upside for the stock and its trend is up in both 30 and 90 day comparisons.
Morgan Stanley goes defensive with Dollar General
Morgan Stanley upgraded General dollar (NYSE: CEO)to Equal Weight overweight indicating it is one of the most undervalued names in its defensive equity coverage universe. According to them, the company is a high-quality defensive name that has certain offensive characteristics, including the potential for significant margin improvement despite an economic downturn.
“This is arguably our most defensive and counter-cyclical company. Yet while the stock has outperformed the market year to date, it has simply performed in line with other defensive stocks. of our coverage.”
Morgan Stanley’s overweight rating compares well to the broad firm buy consensus, as does the new price target. The new price target of $250 is $5 above the Marketbeat.com consensus which is up from last year, 3 months ago and last month and implies around 5% upside for stock prices. shares.
Autozone upgrade on “sustainable” revenue and profit growth
Morgan Stanley also upgraded Auto Area (NASDAQ:AZO) overweight of equal weight indicating the company has prospects for more sustainable revenue and earnings growth. The firm believes the stock has at least 20% upside potential ahead of it, which is well above the current consensus target of $2,142. Autozone is also a top pick at Wells Fargo, which has an overweight rating as well as the 2nd highest on Wall Street. price target.
“AZO is a self-help story (its business playbook works), the company has a history of prudent expense management, and DIY Auto is a defensive category. These factors enhance AZO’s earnings visibility in a macro context. Further, we are confident in AZO’s pricing power and believe there are more benefits to the DIFM through the mega hub strategy.”