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Stock Market Analysis

3 Retail Stocks To Invest In During The Holidays

The holiday season is upon us and that means shopping and gift-giving. These three retail stocks are a safe bet for the festivities and beyond.

Regardless of your faith and traditions, the holidays probably mean shopping for gifts and signify an important time for retailers. You can’t go wrong with these three stocks, which include the biggest brick-and-mortar shop in the world that’s trying to gain further traction in e-commerce, as well as a bulk-purchase company that is continuing to gain members.

1. Walmart

Walmart (NYSE: WMT) is a company of many distinctions: It is the biggest retailer in the U.S., as well as its biggest grocer; its physical retail space, combined, is 1.5 times the size of Manhattan; and it’s everywhere, having a store within 15 miles of 90% of all Americans. It’s missing one accolade-that of e-commerce leader as that honor goes to Amazon by a wide margin. That’s a fact in the U.S. but not in the highly desirable India, where Amazon is trying to expand its foothold. The winner there is Flipkart, an e-commerce company Walmart acquired a 77% stake in 2018 for a whopping $16 billion (its largest acquisition ever), and it holds a 31.9% market share in India, slightly beating Amazon’s 31.2%. 

During its “Big Billion Days” sale to commemorate India’s festive season, Flipkart took 58% of all sales, easily outperforming Amazon’s 30% take in its own “Great Indian Festival Season” sale. Taking a page out of Amazon’s playbook, Walmart launched its subscription service Walmart+ in September, offering free delivery with no minimums, gas discounts, and same-day delivery on many items. The service gained roughly 19 million members in the last two months. Also, not to be outperformed by Amazon’s over-the-top (OTT) service, Amazon Prime Video, Flipkart launched its own OTT, Flipkart Video, offering free content in an effort to attract a market of 200 million new digital adopters.

Back in the U.S., Walmart’s e-commerce sales are growing at a break-neck pace, at 79% in Quarter 3 and 97% in Quarter 2, outpacing the industry’s average 27%. With e-commerce representing a little over 14% of all sales in the U.S., Walmart, in second place certainly stands to benefit in the future, even if it has to share in the spoils with market leader Amazon. This fact, coupled with tailwinds from the pandemic, has driven the company’s stock price up nearly 25% year-to-date (YTD). Walmart pays a dividend of $0.54 cents per quarter 

2. Target

Target (NYSE: TGT) also benefited from pandemic tailwinds as its digital sales grew by 141% in Quarter 1, 195% in Quarter 2, and 155% in Quarter 3; the company will no doubt retain digital customers once the pandemic dies down. The company has solid financials as its EPS is expected to grow nearly 36% this year, obliterating the industry average of 14%. The company also boasts an impressive sales-to-total-assets (S/TA) ratio of 1.9, meaning that it gets $1.90 in sales for each dollar in assets, again beating the industry average of 1.4. Thirdly, Target’s sales are expected to exceed 16% this year, which is four times the industry average. 

The company’s revenue is up nearly 6% in the last 5 years and its stock price is up nearly 40% YTD. Target also pays a quarterly dividend of $0.68. For the holiday shopping season, Target is boosting its safety measures by doubling the number of parking spaces, reporting on queue sizes for its stores through its app, and allowing customers to use their smartphones for checking out. 

3. Costco

Costco (NASDAQ: COST) had such a good year, that it paid its shareholders a special $10 dividend last week, its highest such payment to date. Its regular quarterly dividend is $0.70, up to $0.5 YTD. The company, like the others on this list, wasn’t immune to pandemic tailwinds and saw a rise of 50% in e-commerce sales for its 2020 fiscal year, which ended on August 30. Costco, which requires membership for shopping in its warehouse-sized bulk-item stores, saw its subscriptions rise over 23% in the last five years to over 107 million as of November.

As consumers stocked up on essentials and toilet paper this year, the company’s stock price rose over 30% and its revenue is up over 9% YTD. Costco, known for its employee-friendly culture, is expected to have even more growth in its e-commerce division and expand its international footprint in the near future, thereby growing its revenue by over 24% to a projected $200 billion by 2025.

These three pandemic-resistant stocks, which all pay a dividend, were transformed by the pandemic, expanding their digital presence, and will continue to grow in the future. 

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above.

David Pinkhasov
David Pinkhasov
David is a contributing writer to MyWallSt. David fell in love with the stock market in 2000 after making $30,000 overnight on Techniclone. His favorite stocks today are Netflix, Google, Amazon, and Apple as they are the market leaders in their sectors and are safe long-term investments.