4 stocks to take advantage of back-to-school trends on the stock market

Back to school is here, and like every year, it involves its share of expenses of all kinds for American families. However, in the face of the recent decline in inflation, retailers who were initially skeptical of this year’s back-to-school sales are now much more confident that the back-to-school shopping season will hold up well.

According to a survey by the National Retail Federation (NRF), 2023 will be the best season in history, with purchases expected to exceed $135 billion, or 21.6% more than in 2022.

However, this will be a breath of fresh air for the retail sector, which has suffered over the past year in the face of the Fed’s rate hike of 525 points since March 2022.

In addition, inflation has fallen significantly over the past year, after peaking at 9.1% in June 2022, a 40-year high, which could also have a positive impact on household spending.

In this context, we have reviewed several stocks that could benefit from back-to-school buying trends, which investors would do well to pay attention to. These are Amazon.com Inc (NASDAQ:), Walmart Inc (NYSE:), Target Corporation (NYSE:) and Kohl’s Corp (NYSE:).

In particular, we looked at the recent quarterly results released earlier this month, as well as analysts’ targets and valuation model conclusions, drawing on the InvestingPro fundamental analysis platform.

Amazon

As a global leader in e-commerce, Amazon is a must-have for back-to-school shopping, although the diversity of its business makes it difficult to consider it a “pure bet” on back-to-school.

Amazon shares are up more than 60% since the start of the year, and investor conviction for the stock has been reinforced by the recent financial results published on August 23, with EPS of $0.65, or 89.5. % more than what analysts had expected, for a turnover 2.4% above the consensus.

Amazon Results

As for forecasts, it should be noted that the 51 analysts who follow the action show an average target of $168.37, or 24.6% more than the current price.

Amazon Lenses

Furthermore, the Fair Value InvestingPro of Amazon stock, which synthesizes 12 recognized financial models, reached $148.8, which corresponds to an upside potential of just over 10%.

walmart

As the largest retailer in the United States, Walmart is also key in the theme of investing in stocks likely to benefit from back-to-school shopping.

Note that the recent Q2 results released on August 17 did not disappoint expectations, with EPS of $1.84, nearly 8% more than expected, for sales which also exceeded expectations, although to a lesser extent.

Walmart results

Regarding the outlook, it should be noted that analysts are showing limited optimism for WMT stock, with an average target of $176.74 which translates into an upside potential of 9.6%.

Walmart Goals

The InvestingPro Fair Value of Walmart stock, which summarizes 15 recognized financial models, is even more conservative, since it appears slightly below the current price, at $159.90.

Target

Target is also one of the favorite destinations for American households for back-to-school shopping, and could be one of the main beneficiaries of this phenomenon this year.

It should be noted, however, that the latest quarterly results published on August 16 turned out to be mixed. Indeed, while EPS exceeded the consensus of 26.9%, sales disappointed, posting almost 2% below expectations.

Target results

That hasn’t stopped analysts from remaining bullish on the stock, however, as they are showing an average target of $149.85, 18% higher than Wednesday’s closing price.

Target objectives

The InvestingPro Fair Value, which stands at $153.62, and which is based on recognized financial models, confirms the upside potential, showing at $153.62, which assumes an upside potential of 21%.

Kohls

Retailer Kohl’s is also often among the stocks cited as being well exposed to take advantage of early school year spending.

In its Q2 results, which were released on August 23, the company offered a big positive surprise, with EPS of $0.52, more than double analysts’ forecasts. On the other hand, the turnover was displayed almost 1% below the consensus.

Kohl results

This also seems to have cooled analysts, who see in the action an almost zero upside potential, with an average target of $28.64.

Kohl Lenses

Fair Value Investing Pro is even less optimistic, reflecting a downside potential of 3.2%.

Conclusion

A time of inevitable spending increases, so back to school could benefit many businesses, and the ones we’ve covered in this article could, in our view, be among the biggest beneficiaries.

But back-to-school 2023 will also be the next major test for U.S. consumption, which is beginning to show signs of weakness based on recent retail sales data for July, and the performance of retailers during the coming weeks could have repercussions far beyond this sector.

***

InvestingPro Trial