The significant decline of retail stocks has impacted many well-known clothing stores including J.C. Penney, GAP, Nordstrom, and Macy’s, which reported a 40% loss of net income in the last quarter and a 7.4% decline in revenue.
As these stocks seem to be drowning in the wave of retail demise, discount retailers remain buoyant. Specifically, Amazon.com, Inc (NASDAQ:AMZN), Target Corporation (NYSE:TGT), and Wal-Mart Stores, Inc. (NYSE:WMT) have experienced peak interest from consumers, entertaining the idea that perhaps consumers are being driven by cost effectiveness as opposed to luxury. Could frugality be the culprit at hand for these plummeting retail stocks?
Amazon has been one of the most promising and best-performing stocks in recent memory, nearly doubling its market value. The e-commerce giant continued to beat expectations in its recently posted 1Q earning report released April 28, 2016. While the analyst consensus for EPS was $0.58, Amazon released EPS of $1.07. Revenue was expected to be $27.99 billion, but the company beat consensus yet again with $29.1 billion in revenue, up 28% year-over-year.
It seems as though analysts have been exceedingly bullish on Amazon, and KeyBanc analyst Edward Yruma is no exception. Yruma reiterated a Buy rating on Amazon on May 16, 2016 with a price target of $800. Yruma explained Amazon’s private-label brand, expected to launch soon, will be very beneficial for company success. In addition, the analyst also points out that Amazon can “utilize reviews along with customer surveys to inform product development of private label food or household product offerings.”
Other analysts have pointed out that Amazon is estimated to grow from $16 billion in Gross Merchandise Value (GMV) in 2015 to $52 billion GMV 2020, implying a 9% gain in U.S. Apparel & Accessories market. This is quite an ambitious forecast, but considering the renowned success of the stock, the estimate seems reasonable.
According to TipRanks, the average analyst consensus for Amazon is Strong Buy, with 90% of analysts bullish, and 10% of analysts neutral. All recommendations amounted to a 12-month average price target of $806.17, marking a 14.71% upside from where shares last closed.
Retail giant Target is the second-largest discount retailer in the United States. The widely popular franchise has received overall neutral ratings from analysts in spite of its trending upsurge. Jeffries analyst Daniel Binder reiterated a Hold rating on the stock on May 18, 2016 with a price target of $72.00.
Binder noted that Target’s recent quarter was not as promising as some made it out to be. However, Binder notes some positive implications as well, mentioning, “We still think TGT has been focusing on a number of the right things to distinguish itself in the market, particularly the signature categories.” Other analysts are quick to point out that the company is returning capital to shareholders at an extensive rate, which will likely support current levels of shares.
According to TipRanks, the average analyst consensus for Target is Hold, with 33% of analysts bullish, 53% of analysts neutral, and 13% of analysts bearish. All recommendations amounted to a 12-month average price target of $77.69, marking a 13.15% upside from where shares last closed.
Wal-Mart Stores, Inc.
Wal-Mart recently received a bullish outlook from Nomura Securities analyst Robert Drbul. Drbul reiterated a Buy rating on the stock on May 20 and raised his price target from $70.00 to $81.00 following strong earnings results.
The analyst commented, “We are encouraged by momentum in the U.S. business, with 7 straight quarters of positive comps and 6 straight with pos. traffic.” Drbul further explained, We view the WMT U.S. comp result positively in light of both the challenging retail environment, and more specifically, deflationary trends in food (-60bps hit to WMT US comp in 1Q).” The analyst noted e-commerce sales slightly decelerated, but assures that this should not hinder the company’s success in the long term.
According to TipRanks, the average analyst consensus for Wal-Mart is Hold, with 17% of analysts bullish, 67% of analysts neutral, and 17% of analysts bearish. All recommendations amounted to a 12-month average price target of $71.18, marking a 1.89% upside from where shares last closed.