3 Discount Retail Stocks Thriving as Shoppers Seek Value


  • Here are three discount retail stocks to buy as many Americans struggle to make ends meet.
  • Walmart (WMT): WMT is likely to benefit from its rapidly growing ad and e-commerce businesses.
  • The TJX Companies (TJX): TJX has taken market share for many years. 
  • Target (TGT): The Street is becoming much more upbeat on TGT. 
best discount retail stocks to buy - 3 Discount Retail Stocks Thriving as Shoppers Seek Value

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Signs are starting to emerge that a relatively high number of Americans are having trouble paying their bills. In the fourth quarter of last year, credit card debt surged by $143 billion year-over-year. And the number of credit cards and auto loans moving into delinquency is higher now than before the pandemic. And in another sign that working-class Americans are looking for value, McDonald’s (NYSE:MCD) said last month that it would be “laser focused on affordability.” Here are three discount retail stocks to buy as tens of millions of Americans look to spend less.

Walmart (WMT)

Image of Walmart (WMT) logo on Walmart store with clear blue sky in the background
Source: Jonathan Weiss / Shutterstock.com

Last December, investment bank TD Cowen identified Walmart (NYSE:WMT) stock as a buy. It cited the company’s prowess in technology and its successful launch of its e-commerce service, Walmart+. The bank noted that the retail giant’s digital ad revenue consistently grows by 10% or more annually. Meanwhile, its grocery and health and wellness businesses have been expanding.

In January, the retail giant reported that it had launched a new AI-powered search that allows customers to search for products that fit certain events such as a football watch party. Walmart is also using AI to better understand customers’ needs and to provide them with the products that they require.

Very impressively, the firm’s operating income soared 30% in the fourth quarter YOY to $7.3 billion. The shares have a very low enterprise value-to-EBITDA ratio of 13.4 times, along with a significant dividend yield of 1.4%.

Given Walmart’s multiple, positive catalysts and low valuation, it is one of the best discount retail stocks to buy.

The TJX Companies (TJX)

An outside shot of a T.J. Maxx (TJX) store in Romeoville, Illinois.
Source: Joe Hendrickson / Shutterstock.com

On May 2, Swiss bank UBS hiked its rating on TJX (NYSE:TJX) to “buy” from “neutral.” The bank predicts that many consumers will defect to TJX from department stores. Meanwhile, TJX can continue to successfully open multiple different types of stores going forward. UBS set a $132 price target on the name and believes that its price-earnings multiple could eventually jump as high as 30 times from its current 24.3 times.

On May 2, Barron’s identified TJX as one of the discount retailers that has consistently gained market share “for years.” Meanwhile, with Macy’s (NYSE:M) poised to close 150 of its stores, TJX may be the best positioned company to capitalize on this development.

Target (TGT)

tgt stock
Source: Sundry Photography / Shutterstock.com

Two top Wall Street banks recently released very bullish notes on Target (NYSE:TGT) stock.

Citi upgraded the shares to “buy” from “neutral.” The bank believes that the retailer is benefiting from its low prices and can increase its EBIT margin. The bank placed a $180 price target on the name, and reports that the company is a winner within the retail landscape.

Bank of America reported that consumers’ perceptions of the retail behemoth are improving. With Target’s comparable sales starting to rise, the bank expects its gross margin to increase.

In a further indication that the Street is becoming more bullish on the name, the shares have surged over 12% so far this year.

On the date of publication, Larry Ramer did not hold (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

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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