Chasing down red-hot AI stocks isn’t everybody’s cup of tea. As a fundamentals-first investor who prefers great-value picks, it certainly isn’t mine.
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The good news is you don’t need to chase the hot picks that some money managers may be inclined to buy to make themselves look smart as the second quarter of 2023 wraps up. Instead, you can shift to relative value names that stand to benefit as the market moves into its next phase.
Therefore, in this piece, we’ll check in on the retail space with three highly-touted names that Wall Street analysts currently have “Strong Buy” ratings on. Let’s use TipRanks’ Comparison Tool to get a closer look at the potentially value-rich retail stock picks.
Five Below (NASDAQ:FIVE)
Five Below is a discount retailer with a competitive edge over its peers. The company doesn’t just offer a high degree of price certainty in an inflationary, budget-constrained environment. It’s found a way to cater to the needs of younger consumers with great deals on some pretty fun, albeit affordable, stuff.
Indeed, all you have to do is walk into the local Five Below location to appreciate how much emphasis the company places on the customer experience. Over the last 12 months, the stock has been in full-on recovery mode, rising nearly 69%, putting the $220 52-week high (off just 10.8%) within striking distance. I’m a fan of the company, and the valuation isn’t too bad at all, given the recession risks. For these reasons, I’m staying bullish on FIVE stock.
Five Below trades at 35.6 times forward price-to-earnings, just below its five-year average of 44. As a defensive growth stock ahead of a potential downturn, investors should be willing to pay a premium to historical averages. Though a recession may never actually materialize, Five Below stands to grow at a solid pace either way.
Jefferies analyst Randal Konik, who’s also bullish on the stock, thinks the company is on its way to hitting 3,500 stores in the long term. In fact, he thinks 3,500 “may be conservative.” If Five Below underpromises and over-delivers, it may be just a matter of time before the stock’s roaring to new highs.
What is the Price Target for FIVE Stock?
Five Below has a Strong Buy consensus rating, with 14 Buys and two Holds assigned in the past three months. The average FIVE stock price target of $218.27 entails a 10.9% gain from here.
Mattel (NASDAQ:MAT)
Mattel stock has been a stomach-churning ride for investors over the past decade. Since bottoming in 2020, MAT stock has been on an impressive recovery run, rising more than 300% from trough to peak. Since then, shares of the toy company have come in, now down around 29% from their 2022 highs.
Mattel reported a $0.24 per-share loss in its most recent quarter. Undoubtedly, discounting weighed down the numbers. That’s the case with a lot of retail plays these days. As the firm focuses on its core brands while macro headwinds begin to dissipate, I see the means for MAT stock to move higher. The analyst community is bullish, and so am I.
The stock trades at just 16.2 times forward price-to-earnings, well below its five-year average of 43.9 times. That’s a low price to pay for a company that seems to have rather timely catalysts. Going into year’s end, I’d look for the upcoming Barbie movie to give Barbie sales a nice jolt in the second half, all while management looks to move on from a forgettable first quarter weighed down by transitory headwinds.
What is the Price Target for MAT Stock?
Mattel stock boasts a Strong Buy rating, with four unanimous Buy ratings assigned in the past three months. The average MAT stock price target of $26.50 implies a massive 38% upside from current levels.
Tapestry (NYSE:TPR)
Tapestry stock has been underwhelming over the past five years, fluctuating wildly amid industry turbulence. Year-to-date, the stock seems “stuck” in the $39-$44 range for the most part.
The luxury retail play behind Coach New York and Kate Spade may be viewed as a mixed bag by some. However, Wall Street is overwhelmingly bullish on the name, as it seems to be a compelling relative value play in the luxury goods space. Mostly due to the modest valuation, I’m staying bullish on the stock.
At writing, shares of TPR trade at 11.7 times trailing price-to-earnings and 11 times forward price-to-earnings. Earnings are expected to march higher from here, perhaps at a faster pace than expected if the much-anticipated recession never actually happens. Coach is a powerful brand in the handbag space, and if consumer spending does manage to hold up, I’d look for the stock’s valuation multiple to expand rapidly in conjunction with earnings.
Bernstein analyst Aneesha Sherman recently upgraded the stock to a “Buy,” noting that things like inventory issues and weak demand seem to be in the past while also remarking on the valuation. Bernstein’s $55 price target is above the average, implying upside potential north of 28% from here.
What is the Price Target for TPR Stock?
Tapestry stock is a Strong Buy, with 11 Buys and three Holds. The average TPR stock price target of $51.58 implies 20.4% upside.
Conclusion
The retail scene has a lot of value for investors looking to outperform in the second half of the year. Analysts expect the most upside from Mattel, with a jarring 38% expected from here for the next 12 months.
