Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

4 Must-Have Stocks as Back-To-School Season Kicks Off

Published 08/31/2023, 06:06 AM
Updated 09/02/2020, 02:05 AM
  • The retail sector seems confident about the back-to-school shopping season in 2023
  • And that's to be expected, as back-to-school sales are expected to reach a staggering $135 billion this year
  • Four retail stocks are well-positioned to benefit from this trend

It's that time of year again. Back-to-school season is upon us, bringing a wave of expenses for American families.

However, due to the recent drop in inflation, retailers who were initially uncertain about this year's back-to-school sales are now feeling much more confident about the prospects for the shopping season.

The National Retail Federation conducted a survey that indicates 2023 is poised to become the best-ever back-to-school shopping season, with projected purchases surpassing $135 billion. This marks a significant 21.6% increase compared to 2022.

This positive outlook provides a welcomed boost to the retail sector, which has faced challenges over the past year due to the Federal Reserve's interest rate hikes since March 2022.

Additionally, the sharp decline in inflation over the past year, after hitting a 40-year high of 9.1% in June 2022, is likely to have a positive impact on household spending.

Against this backdrop, we have assessed four stocks that are well-positioned to benefit from the back-to-school shopping trends.

Our analysis was conducted considering recent quarterly results, analyst projections, and valuation models using InvestingPro.

1. Amazon

Amazon (NASDAQ:AMZN), the global e-commerce giant, is a go-to destination for back-to-school shopping. However, due to its diverse range of operations, it's important to note that it isn't solely reliant on back-to-school sales.

Amazon's share price has risen by over 60% since the start of the year, and investors' conviction in the stock has been reinforced by the recent earnings published on August 23, with EPS of $0.65, 89.5% above analysts' forecasts, and sales 2.4% above consensus. Amazon Previous Earnings

Source: InvestingPro

In terms of forecasts, the 51 analysts who follow the stock have set an average target of $168.37, or 24.6% above the current price.

Fair Value

Source: InvestingPro

Furthermore, considering the InvestingPro Fair Value assessment for Amazon stock, which employs a variety of 12 established financial models, the valuation stands at $148.8. This suggests an upside potential of slightly over 10%.

2. Walmart

Walmart (NYSE:WMT), being the largest retailer in the US, is another essential player to consider when looking at stocks that could benefit from back-to-school shopping trends.

Its recent Q2 earnings report, released on August 17, pleasantly surprised investors. The company's EPS came in at $1.84, which was nearly 8% higher than anticipated. Moreover, its sales also surpassed expectations, albeit by a smaller margin.

Walmart Previous Earnings

Source: InvestingPro

In terms of outlook, analysts are cautiously optimistic about WMT shares, with an average target of $176.74, which translates into a potential upside of 9.6%.

Fair Value

Source: InvestingPro

Walmart's InvestingPro Fair Value, which is an average of 15 recognized financial models, is even more conservative, coming in slightly below the current price of $159.90.

3. Target

Target (NYSE:TGT), a popular back-to-school shopping destination in the United States, is positioned to potentially reap significant benefits from this trend this year.

However, it's important to highlight that the most recent quarterly results, announced on August 16, were a bit of a mixed bag. While the company's EPS exceeded consensus estimates by an impressive 26.9%, its sales fell short, coming in nearly 2% below expectations.

Target Previous Earnings

Source: InvestingPro

However, this hasn't stopped analysts from remaining optimistic about the stock, with an average target of $149.85, 18% higher than Wednesday's closing price.

Fair Value

Source: InvestingPro

InvestingPro's Fair Value, which is based on recognized financial models, confirms the bullish potential, standing at $153.62, implying a potential upside of 21%.

4. Kohl's

Kohl’s (NYSE:KSS), a prominent retailer, is frequently mentioned as a stock that stands to benefit from early school-year spending.

In its Q2 earnings report released on August 23, the company delivered a significant positive surprise, reporting an EPS of $0.52, which was more than double analysts' forecasts. However, sales fell slightly short, coming in nearly 1% below consensus.

Kohl's Previous Earnings

Source: InvestingPro

This seems to have cooled analysts' expectations, who see virtually no upside potential for the stock, with an average target of $28.64.

Fair Value

Source: InvestingPro

InvestingPro's Fair Value is even less optimistic, indicating a downward potential of 3.2%.

Conclusion

In conclusion, the back-to-school season brings about a period of heightened spending, potentially favoring numerous companies, including the ones highlighted in this article as significant beneficiaries.

However, back-to-school 2023 also serves as a significant test for US consumer spending, with emerging signs of vulnerability evident in recent July retail sales data.

The performance of retailers in the coming weeks could carry implications extending well beyond this sector.

***

Find All the Info you Need on InvestingPro!

Disclaimer: The author does not own any of these shares. This content, which is prepared for purely educational purposes, cannot be considered as investment advice.

Latest comments

target--lol he must own allot of it to push that.
The only must have stocks are AI stocks..... nothing else are relevant.......
Love to see Messiah AI.got buttkick by Mighty Recession and sidekick the amazing Inflation
No not KSS and certainly not TGT. And btw, all that back to school shopping has been done already.
Agreed back to school season would have been late july or mid august and some of those stocks woulda had high returns by now.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.