Goldman gets bullish on big-box retailers, likes Target, Home Depot and Walmart

Customers shop at a Target store in Seattle, Washington.

David Ryder | Bloomberg | Getty Images

In a world of retail “winners and losers” Goldman Sachs is betting on big-box retailers it feels will shoot up over the next year.

The firm recommends Target, Costco, Home Depot and Walmart among others because of their strong market share growth, defensiveness against an unknown trade war with China and years of investments finally paying off.

“We are at an inflection point for several companies where we are starting to see a resumption of operating income dollar growth; demonstrating not only the strong top line execution but also a point of leveraging years of investment to become true omni-channel retailers,” Goldman Sachs’s Kate McShane said in a note to clients on Thursday.

McShane said the stocks that demonstrate these points will be the best performing stocks for the next 12 months.

Most retail management’s comment are positive about the current macro environment, McShane said. After a failed trade deal between the U.S. and China and tariffs slapped on by both countries, investors are worried about retailers passing costs onto consumer.

“Management’s bigger worry is the impact it will have on the overall consumer wallet,” said McShane.

Target is Goldman’s “best idea,” because of sustained strong comp growth “accompanied by ongoing store closures and bankruptcies of other brick and mortar retailers,” said McShane. Goldman said there is more earnings per share upside for the already well-performing stock.

“We note that the Street remains mostly Neutral rated on the name; but we would argue Target has finally reached that turning point in their earnings trajectory they have been working towards for the last 3 years,” said McShane.

BJ‘s, Lowes, National Vision, O’Reilly Automotive, Tractor Supply, and William-Sonoma are also on Goldman Sachs’ “buy” list.

William Sonoma is Goldman’s “most out of consensus idea” because tariff concerns have scared investors away from the stock. BJ’s is Goldman’s best small-cap idea because “the Club model continues to have the best attributes of all retail,” said McShane.

— with reporting from CNBC’s Michael Bloom.

Articles You May Like

What’s The Difference Between Roth IRAs And Roth 401(k)s – Updated For 2023
Tax season starts with boosted IRS workforce, new technology as agency begins to deploy $80 billion in funding
The first ETF is 30 years old this week. It launched a revolution in low-cost investing
Inflation is cooling, but prices on many items are going to stay high for months
The outgoing CEO of a giant autos firm had a message for his successor: Don’t be like me

Leave a Reply

Your email address will not be published. Required fields are marked *