The Thanksgiving-weekend sales extravaganza known as Black Friday is once again upon us. And this year, it’s expected to be extra spectacular. Consumers will spend more than they did last year as they gather with family and friends for the first time in nearly two years. Consequently, investors are looking for stocks to buy to play the trend.
According to a just-released report from the National Retail Federation (NRF), Black Friday and Cyber Monday will see nearly two million more shoppers than last year. In total, 158.3 million people, or nearly half the U.S. population, will be hunting for sales this weekend. The NRF forecasts November and December holiday sales can reach a record $859 billion, or an average of $997.73 per consumer.
As we prepare to digest our turkey while lined up to take advantage of holiday sales, consider these three stocks to buy for Black Friday:
Stocks to Buy: Amazon (AMZN)
Online retailer Amazon was built for Black Friday. The company even runs its own version of Black Friday called “Prime Day” each June where it sells deeply discounted items exclusively to consumers who hold an Amazon Prime membership.
This Friday, consumers can find sales on just about anything they can think of on Amazon, from the latest TV sets and video game consoles to basketball nets and skateboards. Amazon today sells more than 12 million products, including wines and Karaoke machines. The Seattle-based company has certainly come a long way from its origins as an online bookseller.
American consumers increasingly rely on Amazon during big sales events such as Black Friday. According to the company, 95 million people in the U.S. (nearly a third of the population) have a Prime membership. Additionally, nine out of 1o consumers use Amazon to conduct price checks.
Online shopping became increasingly popular during the Covid-19 pandemic. Now, consumers seem even more reliant on Amazon when it comes to shopping for deals and having them delivered.
The good news is that AMZN stock is relatively affordable right now. At about $3,550 per share, the company’s stock is up 8.6% year-to-date (YTD). But it has trailed other major tech stocks and the Nasdaq index, which has risen 20% on the year.
FedEx (FDX)
For a shipping and logistics company, the Black Friday through Cyber Monday sales period is the busiest time of the year. In fact, the holiday season is so busy for FedEx that the Memphis, Tennessee-based company announced it’s hiring 90,000 new employees to manage it.
This year, FedEx is hiring 30% more people for the holidays than it did in 2020 during the depths of the pandemic. Clearly FedEx feels that consumer spending will be more robust as people reunite with family and friends for in-person gatherings.
FedEx could use the bump in business it gets this year from Black Friday. The company’s share price has underperformed in 2021, down 5.3% YTD compared with an overall gain of 24% for the S&P 500 index.
In the past six months, FDX stock has come down 21% and now trades around $246 per share. The decline has been blamed on the company’s warning that labor costs and global supply chain constraints are hurting its financials. It also didn’t help that FedEx lowered its 2022 earnings per share (EPS) forecast.
However, the consensus view seems to be that the selloff has been overdone. The median price target on the stock is $300 per share, which would be 22% higher than the current share price.
Stocks to Buy: Walmart (WMT)
The term “door buster” was practically invented to describe the hordes of shoppers who line up to enter Walmart at midnight on Black Friday and grab the latest and greatest products when they are on sale. Like Amazon, Walmart is a destination for people who want all manner of items ranging from electronics to kids toys.
With more than 10,000 stores in 24 countries, Walmart is a shopping destination for consumers in many regions. And the company makes sure to advertise its various Black Friday deals early and often, which include discounts on everything from teddy bears to tents.
Like Amazon and FedEx, Walmart’s shares have underperformed in 2021. WMT stock is essentially flat for the year, having risen only 1.4% YTD.
The company recently released third-quarter results that beat expectations on both the top and bottom lines, but it did little to move the stock. Walmart also raised its earnings forecast for the full year, saying it now expects EPS to come in at $6.40 versus its previous expectation of $6.20 to $6.35.
While Walmart continues to have a dominant brick-and-mortar presence, it is also beefing up its online sales channel. In its latest earnings release, the company said that its e-commerce sales in the U.S. rose 8% compared to a year earlier and are up 87% since 2019. Maybe a strong showing on Black Friday will get the stock climbing.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
