These 3 strong buy retail stocks look compelling, analysts say
One thing is certain, 2020 has shaken the world. The spread of COVID-19 devastated the economy and took investors on a roller coaster ride that saw tremendous volatility in just a few months. Investors saw stocks make a quick and scary jump, followed by a violent V-shaped rebound. Against this backdrop, 10-year and 30-year US bond yields fell to all-time lows and unemployment hit alarming highs. Despite the chaos, a few select retailers stole the show and delivered laudable performances. With that in mind, we used TipRanks' database to identify three retail stocks that received a consensus rating of "Strong Buy" from the analyst community. Let's take a look. Carter’s (CRI) First up is Carter’s, a company whose name stands for children's clothing. The company's brands include Carter's, OshKosh, Skip Hop, and Child of Mine, to name a few. The company operates three segments: US Retail (1,100 retail stores), US Wholesale (18,000 locations) and International. Carter's operating results in the second quarter were negatively impacted by the COVID-19 pandemic. Retail stores were closed for much of the quarter and sales to wholesale customers declined. Overall, revenue decreased 29.9% to $ 219.5 million, while adjusted earnings per share decreased 43% to $ 0.54. One bright spot in the quarter was online sales, which rose an impressive 101%. Despite the poor quarter and the ongoing impact of COVID-19, B.Riley FBR analyst Susan Anderson believes the company is well positioned, suggesting the name changed as of March 23 at Nov. % recovered BTS (back to school) has a lot to do compared to competitors and 50% of sales come from the baby category, which is not affected by an expected weaker BTS season, ”she commented. Additionally, B.Riley FBR analyst views Carter as the best of the group, stating, “… we continue to believe that CRI is the leading retailer and manufacturer of children's clothing to emerge from the COVID-19 pandemic on a stronger footing, when other retailers fight for children. Anderson rates the stock with a buy and writes: "The high e-commerce penetration of CRI, growth initiatives and cost-cutting measures make CRI a strong buy." She has a target price of $ 103 on the stock, a potential 27% increase over the current share price. (To see Anderson's track record, click here.) Most of the road is also on board. 3 buys and only 1 hold in the last three months results in a strong analyst consensus. In addition, the potential target price for an average target price of USD 101.25 is 25%. (See Carter's stock analysis on TipRanks.) Callaway Golf Company (ELY) Next up is Callaway Golf Company, a leading manufacturer of golf clubs and related products under the Callaway, Jack Wolfskin, OGIO and TravisMathew brands. The company sells its products through golf and sporting goods dealers as well as bulk dealers. Callaway saw a strong sales rebound in June, with sales up 8% from June 2019. Still, operating performance was poor overall in the second quarter due to COVID-19. Revenue declined 34% to $ 297 million, while adjusted earnings decreased 84% to $ 0.06 per share. Five-star analyst Joseph Altobello wrote for Raymond James, while the results reflected "significant short-term disruptions from COVID-19". The results "exceeded expectations in terms of profit and profit". According to the analyst, “the latest trends are encouraging”. The stock has largely rebounded from a massive slump earlier in the year, and has risen a whopping 283% since March 18. Altobello is excited about Callaway's future prospects. “Golf is somewhat isolated from COVID-19 headwinds as players are able to maintain social distance with ease. We anticipate the summer's bottom line will continue to improve, and with retailers being essentially open to business, the outlook is much brighter for device makers like Callaway, while apparel trends are improving (albeit to a lesser extent) ” he explained. Accordingly, Altobello rates Callaway as outperforming (i.e. buying it) and setting a target price of $ 22 on the stock, which means it has upside potential of 8%. (To see Altobello's track record, click here.) Overall, the company received a strong buy consensus rating from the analyst community with 8 buy ratings and only 1 hold. The average target price corresponds to that of Altobello. (See Callaway stock analysis on TipRanks) Canada Goose Holdings Inc. (GOOS) Rounding out our list is Canada Goose, known for its red, white and bruise. The company produces high quality outerwear such as parkas, down jackets, rainwear and knitwear. The Canada goose was badly hit by the COVID-19 pandemic. Revenue and earnings per share fell 63% and 66%, respectively, in the most recent quarter, although they were largely in line with expectations. Management has taken steps to alleviate the pain by improving inventory management and realigning the cost structure. With online sales soaring, the company increased its investments to support demand. Wells Fargo analyst Ike Boruchow spoke out in favor of the initiatives, saying, “GOOS can weather the storm. Looking to the future, favorable seasonality limits headwinds in 1 hour and the focus is on improvements in the most important holiday quarter. ”Where is the company going from here? Wells Fargo's analyst thinks the brand has lasted, noting that it's down 69% since March 16. “Canada Goose is a traditional brand that is based on the identity“ made in Canada ”and family-run origins. This authenticity appeals to a range of luxury and outdoor leisure customers and offers a broad addressable market that we believe is largely untapped given the sales base of their much larger competitors, ”he said. In addition, Boruchow believes there are still significant untapped growth opportunities. He then stated, "If you look at GOOS across the spectrum of other outerwear brands (both mid-range and luxury brands), it appears that the brand still has a runway for growth as it begins to drive additional channels, categories and regions." Based on the above, Boruchow has an overweight (i.e. buy) rating on GOOS. The price target of $ 34.45 (CAD 45) represents a significant potential return of 37%. (To see Boruchov's track record, click here.) What does the rest mean? The cops win by an overwhelming majority. 7 buys and only 1 hold means a strong buy consensus rating from the analyst community. The average target price of $ 30.37 (CAD 39.79) isn't as bullish as Boruchow's, but it still offers a significant potential return of 21%. (See Canada Goose stock analysis on TipRanks.) Disclaimer: The opinions expressed in this article are solely those of the analysts featured. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.