Which stocks in the retail sector look attractive after the bruising sell-off?
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The retail sector is seeing heavy selling pressure with biting inflationary pressures running up against tough comparables from a year ago when stimulus checks were helping to boost spending. The SPDR S&P Retail ETF (NYSEARCA:XRT) fell 8.29% on Wednesday and shed another 1.20% on Thursday.
Amid the battering of big name retail stocks, Evercore ISI said it sees an "extremely attractive" entry point on Lowe's (LOW).
Analyst Greg Melich said the late spring shifts $350M of sales from Q1 into Q2 for Lowe's. With pricing power, a rational industry, and improved returns, Lowe's (LOW) at 13.6X the 2022 EPS estimate is seen as a bargain for those who believe that the home improvement cycle has longevity and upside. It is noted that an investor would need to go back to the bursting housing bubble of 2007-2008 to get LOW at an under-14X multiple.
Meanwhile, Mizuho Americas thinks investors should buy Mondelez International (MDLZ), BellRing Brands (BRBR) and Simply Good Foods Company (SMPL) off the weakness. Weak EPS prints from Walmart and Target are said to have reflected shifting consumer spending from discretionary and bigger ticket items into consumables and less expensive store brands. MDLZ, BRBR and SMPL are seen as well-positioned in the macro backdrop and trading at attractive levels.
Bank of America reiterated that TJX Companies (TJX) is likely to grab even more market share and has the pricing power to offset cost pressures. Shares of TJX are called attractive even after the earnings rally.