Holiday shopping season has already kicked off. And despite a tepid outlook from analysts, Black Friday sales generated a whopping $9.8 billion in online sales in the U.S., a 7.5% rise year over year, as per an Adobe Analytics Report. Even better, Cyber Monday could be another top sales driver followed by Christmas. With that in mind, let’s take a look at the three retail stocks to buy that are primed for a holiday shopping rally.
Retail Stocks to Buy: Amazon (AMZN)
Amazon (NASDAQ:AMZN) has become a global giant with its strong network and a large market share. With Black Friday sales and the upcoming holiday season, this is one retail stock that is set to bounce higher. Inflation is cooling and we have seen an improved sentiment in the market. Combined with higher consumer spending, this could be a great month for sleeper retail stocks.
Amazon offers a diversified range of products and services including streaming and its dominant position in the market is hard to compete with. It is now trying to position itself as one of the front runners in the artificial intelligence (AI) race and has recently invested in Anthropic, an AI startup that will use AWS as the cloud provider and will develop AI models.
The company has several advantages that will continue to drive growth in the coming years. With an improvement in the overall retail spending, we could see Amazon’s revenue numbers soar higher. Besides shopping, Amazon will continue to benefit from the cloud computing segment and could remain at the top of the industry.
AMZN stock is trading at $147 today and is up 72% year to date. There isn’t much to worry about Amazon, as the economy improves, consumer spending improves and it will directly benefit the company. The current quarter could be very significant for the company and we could see some impressive numbers very soon.
Target (NYSE:TGT) is another one of the top retail stocks to buy that directly benefits from an improvement in the retail industry. The major retailer could benefit from the sales and holiday shopping in the coming months. It has already reported mind-blowing third-quarter earnings and beat analyst expectations which led to a massive surge in the stock.
In its most recent quarter, the company reported a 29% jump in operating income which hit $1.3 billion. EPS came in at $2.10 which is also the biggest rise since the pandemic. Management achieved this with cost-cutting efforts, whcih included reducing inventory in the slow-moving consumer goods segment.
It also planned to invest in new and smaller stores to improve its market share. This investment will cost over $7 billion and I believe it will pay off in the long-term. Physical stores remain a strong business and will continue to do so in the near term. While the company does expect a slow holiday season, it intends to add over 10,000 new items to the store in addition to gifts under $25 which can help improve the financials.
Shoppers who had been waiting for the holiday season and looking for the best deals might consider heading to Target now. Black Friday and the festival shopping season could be an ideal time for the company. The management aims to offer deals that will attract consumers to the store during the next four weeks.
TGT stock is trading at $131 and jumped from $107 to $130 right after the results. I also believe the improved inflation report and improvements with consumer spending will work as a catalyst for the company.
Another well-known retailer, Walmart (NYSE:WMT) couldn’t impress investors with the recent earnings update. However, there’s hope the holiday season can get it going.
In its third quarter, WMT reported a 5% rise in comparable-store sales. It also saw higher consumer traffic as well as improved spending. Until the last quarter, consumer spending hadn’t picked up and people weren’t ready to spend aggressively on products.
The company also saw an improvement in the operating margin and saw the cash flow hit $19 billion from $3 billion. This is another interesting metric worth considering. It means Walmart has enough liquidity to invest in growth and achieve higher market dominance.
Trading at $156 today, WMT stock is up 9% year to date but still lower than the 52-week high of $169. The company is guiding for higher growth in the coming quarters and this should ensure higher returns on the investment. Management aims to avoid excess inventory and understands the market trends. It now aims to achieve sales of 5% to 5.5%, up from the previous forecast of 4% to 4.5%.
As the company enters the holiday period with high consumer traffic, I believe it will ensure positive returns in the coming months. Additionally, it also enjoys a dividend yield of 1.46% which makes the stock more attractive.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.