These Black Friday Stocks are Trending Well – and Could Get Another Bump in this Unusual Holiday Shopping Season.
Black Friday sales have already been trending downward in recent years. And that was before COVID-19. This year’s Black Friday will look different from any previous version of the Thanksgiving weekend shopping extravaganza. Many stores may cancel in-person shopping. Even in places where it’s allowed, plenty of consumers are likely to be scared off by the prospect of being indoors with other people. As a result, traditional brick-and-mortar retailers likely won’t get the kind of one-weekend revenue boost that they normally get. And neither will traditional retail stocks.
Instead, more companies are sure to turn their attention to Cyber Monday, the online shopping “holiday” that immediately follows Thanksgiving weekend.
Of course, holiday retail sales have been increasingly shifting online anyway, resulting in huge numbers for Cyber Monday in recent years. In 2019, Cyber Monday hit a record $9.4 billion, up nearly 19% from 2018. And that was after Black Friday pulled in $7.4 billion in e-commerce sales. Expect both those numbers to climb drastically this year.
Meanwhile, retail stocks are in an uptrend, having rebounded from the depths of the March and April lockdowns and accompanying market crash. Since then, retail stocks have been going nowhere but up; the S&P 500 Retail ETF (XRT) has more than doubled since early April and is up 27% for the year.
Which retail stocks have been trending well? Those are the “Black Friday stocks” worth buying. Not surprisingly given the current climate, most of them either rely solely on online shopping or have a strong e-commerce presence.
So let’s focus on stocks with charts that are already trending in the right direction, and whose business structures are tailor-made for pandemic-era shopping. Here are three retail stocks to buy before Black Friday (and Cyber Monday):
3 Retail Stocks to Buy for Black Friday
Black Friday Retail Stock #1: Amazon.com (AMZN)
This one’s a no-brainer. Amazon dominates Cyber Monday, as the e-commerce giant has expanded its discount deals from a day to a full week in recent years.
The stock is up 68% this year, but has been churning for nearly three months since peaking at 3,531 in early September (it’s now in the 3,100 range). But Amazon stock has a history of jumping around the holidays. Last year, it was up 1.6% from Black Friday until the end of the year. In 2017, it was up 3.5%. In 2016, it was up 2%. Even in 2018 it wasn’t so bad – the stock was flat from Thanksgiving until New Years, at a time when the S&P 500 was down roughly 5% amid a rare holiday market correction.
With AMZN trading at slightly depressed prices, buying right before the company’s busiest time of year makes sense.
Black Friday Retail Stock #2: Lululemon (LULU)
Lululemon has become one of the premiere apparel companies in the world, and its yoga gear has become a staple of the holiday shopping season. But the reasons for buying Lululemon stock are more specific: it’s having an incredible year, up 57% and currently at new highs; analysts are anticipating 13.3% sales growth and 4.3% EPS growth in the holiday quarter – both improvements after the company struggled in the first half of the year due to COVID shutdowns; and, perhaps most importantly, more than half its sales are done online now. In its latest quarter, online sales were up a whopping 157% year over year, helping offset slippage at the company’s brick-and-mortar stores.
Sprinkle in this encouraging year-to-date chart, and LULU looks like a buy headed into Black Friday:
Black Friday Retail Stock #3: Best Buy (BBY)
Counted out for dead years ago, this big-box electronics chain continues to hang in there. The company has grown sales in each of the last three years after three straight years of declines prior to that. It reports earnings later today (Tuesday, November 24) – two days before Thanksgiving; so you might want to wait and see how those shake out before buying BBY. But the stock looks good, up 38% this year and trading near the top of its two-month range. And it’s still pretty cheap given the run-up, trading at just 19 times trailing earnings. Above all, it’s figured out the online thing, coming in at No. 7 in eMarketer.com’s list of the top U.S. e-commerce retailers.
If you want to learn what other momentum stocks we’re recommending as the holidays approach, you can get yourself the gift of a subscription to Cabot Top Ten Trader. In it, you’ll find strong momentum stocks to buy now. For more information, click here.
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!
*This post has been updated from an original version, published in 2017.