Tag: Walmart Inc. (WMT)

Target vs. Walmart: Which Retail Giant Offers Better Dividend Returns?

Posted on by The INO.com Team

Dividend investing is a cornerstone of many investors’ portfolios, providing a steady income stream and long-term growth potential. Blue-chip stocks are among the most stable and safest investments, but a select few companies excel in maintaining their financial growth and paying consistent, high-yield dividends to investors.

In the realm of blue-chip retail giants, Target Corporation (TGT) and Walmart Inc. (WMT) stand out as formidable players with excellent dividend growth histories. Through strategic investments and acquisitions, robust financial health, and a solid commitment to customer satisfaction, these companies have managed to thrive and offer reliable dividend payouts.

Let’s compare TGT and WMT’s dividend yields, growth rates, and overall financial health to help investors determine which stock offers better dividend potential.

Target Corporation (TGT)

With a $68.17 billion market cap, Target Corporation (TGT) is one of the leading retail corporations in the U.S. that offers a wide variety of products at competitive prices through its extensive network of stores and e-commerce platform, Target.com.

In March, the Minneapolis-based retailer announced plans to invest in its guest experience and long-term growth. The reintroduced Target Circle loyalty program will provide three new membership options, including a free-to-join option, allowing guests to choose how to shop and save. Target Circle has already become one of the largest loyalty programs in retail, with over 100 million members saving millions of dollars annually.

Also, this year, TGT plans to launch and expand its owned brands to offer various options across categories, products, and prices, such as dealworthy, up&up, and Gigglescape. Moreover, Target-owned brands offer quality, value, and innovation, driving more than $30 billion in sales in 2023. Further, the company will invest in the store-as-hubs model over the next decade, planning to build more than 300 new stores and enhance supply chain operations.

Despite significant investments in improving its customer experience and store presence, Target has shown resilience in maintaining a robust financial position. For the first quarter that ended May 4, 2024, TGT’s sales decreased 3.2% year-over-year to $24.14 billion. However, digital comparable sales rose 1.4% year-over-year, and same-day services grew about 9%, led by over 13% growth in Drive Up. It reported net earnings of $942 million, or $2.03 per share, respectively.

As of May 4, 2024, the company’s cash and cash equivalents were $3.60 billion, compared to $1.32 billion as of April 29, 2023.

“Looking ahead, our team will deliver for our guests through lower prices, a seasonally relevant assortment, ease and convenience, as we keep investing in our strategy and efficiency initiatives to get back to growth and deliver on our longer-term financial goals,” said Brian Cornell, chair and chief executive of Target Corporation.

For the second quarter of 2024, Target expects a 0-2% rise in its comparable sales and adjusted EPS of $1.95-$2.35. For the full year, the company projects a 0-2% increase in comparable sales and adjusted EPS of $8.60 to $9.60.

TGT’s solid financial performance and stability translate into attractive returns for investors. During the first quarter, the company paid dividends of $508 million, compared with $497 last year, an increase of 1.9% in the dividend per share.

On March 13, Target’s Board of Directors declared a quarterly dividend of $1.10 per common share, payable June 10, 2024, to shareholders of record at the close of business on May 15, 2024. This will be the company’s 227th consecutive dividend paid since October 1967, when it became publicly held.

TGT pays an annual dividend of $4.40, which translates to a yield of 2.92% at the current share price, which is quite attractive for income-focused investors, providing a solid return on investment. Its four-year average dividend yield is 2.18%. It maintains a payout ratio of around 50%, indicating that the company distributes half of its earnings as dividends, balancing shareholder returns with reinvestment in business growth.

Additionally, Target has a commendable history of consistently increasing its dividend payouts. The company’s dividend payouts have grown at a CAGR of 17.4% over the past three years and 11.4% over the past five years. Notably, TGT has raised its dividends for 55 consecutive years.

In addition to solid dividend growth, Target has demonstrated impressive performance in stock price appreciation. TGT’s stock has gained more than 10% over the past six months and nearly 12% over the past year.

Walmart Inc. (WMT)

With a market capitalization of $540.73 billion, Walmart Inc. (WMT) engages in retail and wholesale business, offering an assortment of apparel, footwear, general merchandise, and groceries at everyday low prices.

Walmart expanded its popular InHome delivery service to an additional 10 million U.S. households, including those in California. In addition to the San Bernardino market, the company expanded its service to include customers in Boston, Detroit, Minneapolis, and Philadelphia, bringing the total scale to more than 50 markets covering about 45 million U.S. homes.

In February, WMT announced an agreement to acquire VIZIO, a prominent American company known for manufacturing consumer electronics. The strategic acquisition of VIZIO and its SmartCast Operating System (OS) will allow Walmart to serve its customers in new ways, including through innovative television and in-home entertainment and media experiences.

Further, this combination is anticipated to boost Walmart’s media arm in the U.S., Walmart Connect, by integrating VIZIO's advertising solutions business with Walmart's extensive reach and capabilities.

WMT, the world’s largest retailer, boasts a robust financial position with steady revenue growth and a solid balance sheet. During the first quarter that ended April 30, 2024, the retailer’s total revenues increased 6% year-over-year to $161.50 billion. Moreover, its global e-commerce sales were up 21%, driven by store-fulfilled pickup & delivery and marketplace.

In addition, the company’s adjusted operating income was $7.10 billion, up 13.7% from the year-ago value, due to higher gross margins and growth in membership income. Its adjusted EPS rose 22.4% year-over-year to $0.60. As of April 20, 2024, WMT’s cash and cash equivalents were $9.40 billion.

Looking ahead, the company expects net sales to increase by 3.5% to 4.5% and operating income to rise by 3% to 4.5% in constant currency (cc) for the second quarter. For the full year, it anticipates to be at the high-end or slightly above its prior guidance (cc) for net sales growth of 3%-4% and operating income growth of 4%-6%.

Walmart’s extensive global footprint and solid financial health provide a stable foundation for continued, attractive dividend payouts. In February, WMT’s Board of Directors declared an annual cash dividend for the fiscal year 2025 of $0.83 per share on a post-stock split basis. It represents a nearly 9% increase from the $2.28 per share paid in fiscal 2024.

“Dividends continue to be a part of our diversified capital returns approach. We're proud to be increasing our annual dividend for the 51st consecutive year. This year’s 9 percent increase is the largest in over a decade, and a sign of our confidence in our growth potential and cash flow,” stated John David Rainey, executive vice president and chief financial officer at Walmart.

WMT’s annual dividend of $0.83 translates to a yield of 1.24% at the prevailing share price. While lower than Target’s yield, the company still provides a steady income stream for investors. Its four-year average dividend yield is 1.53%. Also, it maintains a payout ratio of 33.46%.

Moreover, the company’s dividend payouts have grown at a CAGR of 3% over the past three years and 2.6% over the past five years. Walmart has a consistent history of annual dividend increases, albeit at a slower growth rate than Target.

Shares of WMT have surged nearly 28% over the past six months and more than 34% over the past year.

Bottom Line

Both TGT and WMT represent formidable investment opportunities with robust dividend credentials and solid fundamentals, making them worthy considerations for income-focused investors seeking exposure to the retail sector. However, while comparing Target and Walmart’s dividend potential, Target emerges as the frontrunner, offering a higher dividend yield and a track record of robust dividend growth.

So, TGT is a relatively more attractive investment option for those seeking better dividend potential within the retail industry.

The Impact of Amazon’s (AMZN) Price Cuts on Its Financial Performance

Posted on by The INO.com Team

As summer heats up, North America's largest retailers are diving into aggressive price-cutting campaigns to attract shoppers. Last week, an array of discounts emerged as retailers aimed to ease the financial strain on consumers. For instance, Target Corporation (TGT) announced that it would cut prices on 5,000 items, including diapers and pet food. This followed their February launch of the ‘dealworthy’ discount brand, introducing 400 household and essential products mostly priced under $10. Walmart Inc. (WMT) also revealed that it would lower costs on 7,000 items, marking a 45% increase in price rollbacks. Aldi and The Kroger Co. (KR) have also jumped on the bandwagon, aiming to reduce grocery prices.

In a move to stay competitive, Amazon Fresh, a subsidiary of Amazon.com, Inc. (AMZN), has entered the fray with a promise akin to Prime Day, offering substantial price cuts on 4,000 products, with new deals rotating weekly. The company announced that these price reductions will apply to items both online and at its Amazon Fresh brick-and-mortar grocery stores.

“Increasing our weekly deals across thousands of items and expanding the reach of Prime Savings at Amazon Fresh is just one way that we're continuing to invest in competitive pricing and savings for all of our customers,” said Claire Peters, Amazon Fresh's worldwide vice president.

As reported by CNN, Amazon's sweeping price cuts will cover a variety of categories, including meat, seafood, frozen foods, beverages, snacks, dairy, cheese, and pasta. The discounts will apply to both well-known brands and Amazon’s private-label products, such as the Aplenty grocery line. Additionally, Amazon Prime members will receive an extra 10% off additional items when they shop online.

These widespread price cuts come at a time when inflation has persistently raised grocery costs by 1.1% year-over-year as of April, a slight decrease from March's figures. With restaurant food prices up by 4.1% over the same period, these retailers have a window to draw in budget-conscious consumers looking for grocery deals.

The company’s strategic move to offer significant savings not only aims to draw more customers but also solidify its position in the highly competitive grocery market.

Unlimited Grocery Delivery Subscription, a Treat for your Wallet!

Last month, the online retail giant launched a new, low-cost grocery delivery subscription service exclusively for Prime members. Priced at $9.99 per month (with a discounted rate of $4.99 per month for SNAP/EBT cardholders), this subscription service promises unlimited delivery on orders exceeding $35.

What sets this service apart is its extensive coverage, spanning over 3,500 cities and towns across the United States. Initially trialed in three cities in 2023, the program has now expanded nationwide, showcasing Amazon's commitment to streamline and enhance the grocery shopping experience.

Customers enrolled in this subscription gain access to a vast selection of retailers, including Whole Foods Market, Amazon Fresh, and various local grocery and specialty retailers accessible through Amazon.com. By incorporating popular stores like Cardenas Markets, Save Mart, Bartell Drugs, Rite Aid, Pet Food Express, and Mission Wine & Spirits, Amazon is further solidifying its position as a go-to destination for all grocery needs.

Tony Hoggett, senior vice president of worldwide grocery stores at Amazon, said, “Our goal is to build a best-in-class grocery shopping experience — whether shopping in-store or online — where Amazon is the first choice for selection, value, and convenience. We have many different customers with many different needs, and we want to save them time and money every time they shop for groceries.”

In the context of Amazon's recent price cuts and initiatives to enhance its grocery offerings, this new subscription service adds another layer of convenience and affordability for customers.

How Did Amazon Perform in the March Quarter?

In the first quarter that ended March 31, 2024, net sales increased 12.5% year-over-year to $143.31 billion. Sales at AWS accelerated 17%, reaching $25 billion, topping Wall Street’s expectations of $24.5 billion. This uptick comes after a period of slower growth due to reduced cloud spending, with new demand for generative artificial intelligence boosting AWS's performance.

Operating income surged 200% in the period to $15.31 billion, which outpaced revenue growth and demonstrated the effectiveness of Amazon’s cost-cutting and efficiency strategies. AWS contributed 62% of the total operating profit. In addition, AMZN’s net income more than tripled to $10.43 billion, or $0.98 per share, up from $3.17 billion, or $0.31 per share, a year earlier, beating analysts' average EPS estimate of $0.83.

The impressive earnings growth has been driven by Amazon's widespread cost-cutting, adjustments to its fulfillment operations, and stabilization in cloud spending. CEO Andy Jassy has been implementing a disciplined approach to spending while expanding profitable segments like advertising, cloud computing, Prime memberships, and the third-party marketplace.

For the second quarter, Amazon expects continued profitability growth, projecting operating income between $10 billion and $14 billion, up from $7.7 billion a year earlier. Net sales are forecasted to range from $144 billion to $149 billion, representing growth of 7% to 11%.

Shares of the e-commerce and tech company climbed more than 52% over the past year and nearly 21% year-to-date.

Bottom Line

Amazon’s strategic price cuts are more than just an attempt to lure in customers with the allure of a good deal; they are a calculated move to enhance consumer satisfaction and loyalty. By rotating sales and offering substantial discounts, Amazon gives budget-conscious shoppers a reason to keep coming back, ultimately boosting sales volume and customer engagement.

These discounts cover a wide range of essential grocery and entertaining staples, from meat and seafood to dairy and snacks, with some items marked down by as much as 30%. This tactic ensures that Amazon remains a top choice for food purchases, in addition to household items.

"Amazon is committed to building a best-in-class grocery shopping experience, whether in-store or online, grounded in the values Amazon is famous for: price, selection, and convenience," the company stated in a press release.

This commitment was evident during the recent Memorial Day sale, where Amazon slashed prices on over 50 items, including its own brands and popular electronics from Apple and Sony. The company offered up to 50% off Amazon devices like Fire tablets and Blink cameras, and 32-inch Amazon Fire TVs were discounted by 40%.

Moreover, the launch of subscription service complements these price cuts and enhances its competitive edge in the grocery delivery market. As the e-commerce giant continues to innovate and expand its offerings, its commitment to competitive pricing and customer satisfaction is evident. These efforts are likely to enhance customer loyalty, drive sales growth, and ultimately have a positive impact on AMZN’s financial performance.

Is Walmart (WMT) Stock Split a Catalyst for Growth?

Posted on by The INO.com Team

Consumers have long relied on Walmart Inc. (WMT) for affordable goods, a key feature of the retail chain's offerings. Now, the company’s investors will also be offered 'value deals' as WMT initiates steps to make its equity more accessible.

On January 30, the retail giant declared its intention to effectuate its shares' affordability in line with increasing store managers' salaries and providing annual grants of up to $20,000.

The corporation announced a share-splitting strategy that awards shareholders in possession of WMT stock as of February 22 with three shares for each one owned. This move marks the first of its kind since 1999.

Stock splits often garner significant media attention, particularly when happening at corporations like WMT. The common stock volume would be increased from approximately 2.7 billion to roughly 8.1 billion. As a result, each share will hold a smaller percentage of the company, decreasing its nominal value.

Although this may give an impression of cheaper stock, it's important to note that the size of the overall business, whether calculated by earnings, cash flow, or revenue, remains constant. The stock splitting will not affect any valuation but will divide the company's metaphorical share pie into additional pieces. Hence, investors will maintain the same business percentage ownership as prior to the split.

This does not necessarily imply irrelevant implications for investors concerning WMT's 3-for-1 stock split; rather, it piques interest in the company's motivations for such a move.

WMT proposed that the stock split aims to incentivize employees to invest in their corporation's shares. The company highlighted that over 400,000 employees participate in its established Associate Stock Purchase Plan, enabling them to buy stocks through payroll deductions and benefit from a 15% match on the first $1,800 contributed annually. Regardless, how this split will impact the company's future trajectory and investor sentiment remains to be seen.

CEO Doug McMillon said of the decision: "Sam Walton believed it was important to keep our share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates. Given our growth and our plans for the future, we felt it was a good time to split the stock and encourage our associates to participate in the years to come."

The stock market’s stellar performance in 2023, coupled with better-than-expected January job figures, has triggered a surge in retail investor activity. GenZ investors, having limited trading funds, could be attracted by WMT's strategic decision to split its shares.

There seems to be a correlation between stock splits and an outperforming stock. This trend may be attributable to the momentum leading up to the split, as such occurrences often follow substantial price gains or heightened investor interest. WMT anticipates that this move will spur increased purchasing among its employees, potentially driving the stock price upwards.

However, certain additional factors could also contribute to the surge in WMT's stock price:

WMT’s retail segment epitomizes stability, boasting over 10,000 stores and achieving a same-store sales growth (U.S. segment) of 4.9% in 2023's third quarter, resulting in a new record for its trailing-12-month revenue of $638.79 billion.

On top of this, WMT is pursuing overlooked growth opportunities, notably in the realm of advertising. In partnership with The Trade Desk, a leading advertising technology firm, WMT has seen swift progression in its advertising endeavors, a promising venture given e-commerce competitors' significant advertising revenue over the past year.

Over the past year, WMT’s stock climbed approximately 20% as the company enhanced its online shopping services and offered higher employee remuneration. E-commerce continues to thrive for WMT, demonstrated by a 24% year-on-year increase in U.S. online sales for the quarter that ended October 31, 2023. This boom can be seen throughout the year with similar growth across preceding quarters. WMT’s U.S. e-commerce sales grew 27.2% year-over-year in the first quarter and 24% year-over-year in the second quarter.

Moreover, WMT has announced plans to launch 12 additional stores and upgrade a smaller location to a Supercenter – an indicator of imminent growth.

Furthermore, WMT is set to publish its fiscal fourth-quarter earnings on February 20. Analysts anticipate its EPS to come at $1.63 and revenue at $169.24 billion. The fiscal fourth quarter that ended January of 2023 saw the company report quarterly earnings of $1.71 per share, and net sales reached $162.74 billion. If WMT reports another resilient quarter, it is likely to provoke a further increase in its stock price.

WMT shares sit slightly below $170 and trades above the 50-, 100-, and 200-day moving averages of $159.06, $160.27, and $157.91, respectively, indicating an uptrend.

Jefferies raised WMT’s stock price target to $195 from $190, thereby affirming a buy rating on the shares ahead of the earnings report. It anticipates a modest sales beat for WMT, with cautious guidance for fiscal 2025, factoring in the continued slowdown in inflation.

Bottom Line

WMT is a notable player on Wall Street, and its distinctive position is fueled by not only its status as one of the world's most extensive retail chains but also its resilience during diverse market situations. WMT has been considered a recession-proof stock due to the consistency of its revenues and sales, even amid various economic upheavals. People put away their discretionary purchases during tough times but continue filling their grocery baskets, often seeking cost-effective options, a specialty of WMT.

WMT's history also boasts of 11 two-for-one stock splits, which have created attractive entry points for investors previously unable to access the stocks due to high prices, potentially driving up stock costs with their participation. Employees, too, may find the affordability appealing for their Employee Stock Ownership Plan (ESOP) benefits, prompting additional stock procurement.

Investing in WMT the day after its last stock split in 1999 would have yielded a price return of approximately 268%, comparable with S&P's 274% return. With the inclusion of the dividend, this could have surpassed S&P over an equivalent duration.

Particularly for long-term investors seeking both growth and income, WMT can be a favorable bet, considering its global brand recognition and historically robust financial positioning. This is crucial as the company continually expands its operations.

Moreover, WMT has reliably paid dividends over 50 consecutive years, pointing toward dependable shareholder value creation. The annual dividend stands at $2.28 per share, which translates to a dividend yield of 1.35%, given the existing share prices. Its four-year average dividend yield is 1.57%. WMT's dividend payments have grown at a CAGR of 1.8% and 1.9% over the past three and five years, respectively.

WMT's anticipated stock split will not affect these dividends. Considering a 3-for-1 split, this would adjust the quarterly dividend to $0.19 per share (current $0.57 per share), equating to an annual return of $0.76 per share. With approximately 8.1 billion shares outstanding, WMT would need an annual free cash flow of nearly $6.16 billion for the yearly return. Based on free cash flow of $4.34 billion and net cash provided by operating activities of $19.01 billion for the nine months that ended October 31, 2023, it appears plausible that the dividends will remain adequately covered after the split.

Usually, a business opts for a stock split when the cost of its shares becomes high, creating a psychological barrier for retail investors who may find it impossible to purchase a single share. Nevertheless, almost every brokerage, including WMT's Associate Stock Purchase Plan, now offers the opportunity to buy fractional shares, rendering the nominal value of a single share less significant than before. However, post-split, the attraction lies in owning a larger number of shares at an equivalent total investment rather than a fractional portion.

Moreover, when WMT employees purchase company stock, they essentially become part owners. As such, their personal financial standing becomes interwoven with the company's long-term success, potentially sparking a profound investment in the company's future.

WMT's impending stock split could potentially foster an ‘ownership mentality’ among its workforce. Investors are advised to bear in mind insider ownership when researching stocks. While insider ownership does not guarantee successful investments, it can imply an alignment of interests between insiders and common shareholders. However, investors should always remember to prioritize the business's underlying health.

Nonetheless, WMT's recent stock split – the first in 25 years – may raise eyebrows. Considering that the last split in 1999 coincided with the dot-com burst, could it be possible that WMT is employing the split as a defensive strategy, ideally ensuring sufficient operational capital to weather potential storms? Hence, a certain level of unease may accompany the news of the split taking place at the current low price.

 

Top 4 Christmas Stocks to Buy in 2023

Posted on by The INO.com Team

As the festive season ushers in, thoughts gravitate toward the traditions of exchanging gifts, feasting with family, and warming up by the fireside, all while the holiday shopping spree kick-starts with much vivacity.

The holiday period invariably translates to a considerable economic surge for retailers and related sectors, starting with "Black Friday" – a day marked in retail history for transfiguring from the “red” of losses into the “black” of profits. This year's consumer expenditure reached an unprecedented high, with $9.8 billion splurged on Black Friday deals and an outstanding $12.4 billion on Cyber Monday.

A record-breaking 200.4 million consumers shopped during the five-day holiday weekend, extending from Thanksgiving Day through Cyber Monday, outpacing last year's peak of 196.7 million. As per the National Retail Federation (NRF), the average spend was $321.41 on holiday-related purchases throughout the Thanksgiving weekend. Toys, electronics, and gift cards emerged as the most coveted items.

An unprecedented festive surge is projected this December as retailers anticipate record-breaking consumer expenditure. This period, often correlated with the 'Santa Rally,' generates a stock market surge during the concluding week of December, extending into the New Year. LPL Financial found that since 1950, a Santa Claus rally has occurred around 79% of the time.

These staggering statistics oppose the predictions of some economic analysts who warn of an imminent recession within the U.S. and expect the current equity rally to stumble as the year concludes.

The holiday period shopping traditionally elevates sales for retailers and associated businesses, resulting in potential stock price increases. The year-end rally boosts investors’ portfolios, whereas professional traders often regard it as crucial when calculating their end-of-year bonuses. There is no doubt that the Santa Claus rally this year would be broadly embraced, given the volatilities witnessed.

Investment focus is increasingly geared toward stocks providing substantial opportunities in the immediate future. Some stocks could be more profitable than others if secured before their price rise. Hence, many investors opt for Christmas stocks to capitalize on the bustling holiday shopping season.

Given this backdrop, let us delve into an in-depth analysis of Amazon.com, Inc. (AMZN), Visa Inc. (V), Walmart Inc. (WMT), and Etsy, Inc. (ETSY) now.

Amazon.com, Inc. (AMZN)

Amazon has established itself as a global behemoth, wielding substantial market dominance fostered by its vast network. As we approach the holiday season, there is strong anticipation that the retail stock will experience a considerable rise.

This prediction comes from AMZN’s record-breaking sales in November, with one billion items sold over 11 days of extended promotional deals. This impressive feat was achieved despite the "biggest ever global strike" orchestrated by Make Amazon Pay, an activist campaign that advocated for improved pay and better working conditions for laborers.

According to AMZN, customers purchased more than 500 million products via independent sellers during the holiday shopping festivities and an exponential growth in Prime membership signups throughout this period was witnessed.

The company has disclosed that shoppers saved nearly 70% more on their purchases than the previous year, with promises of "millions more deals" being made available until December 24.

The company attributes much of its success to a large, loyal customer base, who trust the brand and greatly value its services. AMZN's variety of client benefits during the festive season – expeditious delivery, discounts, enticing deals, streamlined return and refund policies, and rewards, enhance repeat purchases and encourage referrals.

With recent inflationary pressures easing, consumer sentiments are showing signs of improvement, bolstering the potential for increased spending. Combining these factors, December could be a highly profitable month for AMZN.

For the fiscal fourth quarter ending December, its revenue is expected to grow 11.2% year-over-year to $165.85 billion, while EPS is expected to increase significantly year-over-year to $0.76.

Wall Street analysts expect the stock to reach $177 in the next 12 months, indicating a potential upside of about 20%. The price target ranges from a low of $145 to a high of $210.

Visa Inc. (V)

V, a leading fintech corporation, is commanding in the global credit and debit card markets. Acting as an essential intermediary between purchasers and vendors, V conducted over 192 billion transactions in 2022 across 160 nations.

The company's significant role has generated substantial profits for V and its shareholders. For the fourth fiscal quarter of 2023, the firm reported revenues of $8.61 billion, a 10.6% year-over-year increase. Its income amounted to $4.68 billion, with earnings per share at $2.27.

V’s unique business model allows consumers desiring to postpone their holiday expenses with minimum risk and maximum benefit. V profits whenever individuals make higher charges on their cards, with both transaction value and quantity contributing to the income. As V does not offer direct loans to consumers, the impact of defaulting is substantially lower.

Expressing high hopes for the company's future, V's CEO Ryan McInerney stated, "There is tremendous opportunity ahead, and I am as optimistic as ever about Visa’s role in the future of payments.”

However, America faces a mounting credit card debt crisis. As of September 2023, the total card balance reached a record high of $1.08 trillion. Strikingly, the average credit card interest rate touched 27%, representing the highest figure in nearly three decades.

As we enter the holiday season, consumer spending on credit cards is expected to rise. Deloitte reports that the average holiday shopper anticipates expending $1,652 this year, the most considerable amount seen in the past three years. Much of this spending will be charged to cards. In an October survey of 1,036 consumers by CardRates.com, 38% indicated that they anticipated carrying holiday credit card debt into the new year.

Although increased consumer debt translates into more risks for V, the potential spending slowdown also threatens the company as it has fewer tools for growth. Despite the company's valuation not being as high as in the past, this could represent an excellent opportunity for those aiming to take advantage of the inevitable credit card spending surge over the festive season.

Analysts expect V’s revenue and EPS for the quarter ending December 2023 to increase 7.7% and 7.3% year-over-year to $8.54 billion and $2.34, respectively. Moreover, Wall Street analysts expect the stock to reach $277.47 in the next 12 months, indicating a potential upside of 8.9%. The price target ranges from a low of $243 to a high of $295.

Walmart Inc. (WMT)

WMT has evolved into a powerful force within the omnichannel market. Strategic acquisitions of companies like Bonobos, Moosejaw, and Parcel and collaborative partnerships with industry heavyweights like Shopify and Goldman Sachs bolstered this transformation. Further expansion efforts, including implementing delivery systems Walmart + and Express Delivery, and investing in Flipkart – a renowned e-commerce platform – are a testament to this ongoing evolution.

The innovative strategies have consolidated WMT's position within the turbulent retail market, enabling it to remain resilient and competitive in an ever-changing industry landscape. WMT ensures its sustainability and competitiveness in this evolving ecosystem by continually adapting and initiating changes.

The retail giant experienced increased customer footfall and elevated spending throughout the third quarter, alongside improvements in operating margin and cash flow. These constructive developments in WMT’s performance indicate ample liquidity to invest in growth and reinforce its dominating market presence.

As WMT approaches the holiday season with substantial customer traffic, it stands poised to generate profitable returns. For the quarter ending January 2024, its revenue is expected to increase 3.9% year-over-year to $169.09 billion, while EPS is anticipated to reach $1.64. Further enhancing its appeal, the company currently offers a dividend yield of 1.49%, making its stock a more attractive option to potential investors.

Wall Street analysts expect the stock to reach $180.79 in the next 12 months, indicating a potential upside of about 18%. The price target ranges from a low of $163 to a high of $210.

Etsy, Inc. (ETSY)

Esteemed as an online destination for unique handcrafted and vintage goods, ETSY is the perfect marketplace for customers searching for original gift ideas, especially during the active winter holiday season. The extensive assortment of products on ETSY – encompassing everything from jewelry and apparel to toys and home décor – caters to its impressive 97.3 million active users through 8.8 million dynamic sellers.

Operating under a distinctive business model that leverages network effects and switching costs generates intrigue. However, sustained growth is crucial in maintaining investor enthusiasm. Despite firmly standing by its unique market position within a vast potential landscape, ETSY's obstacles in augmenting gross merchandise sales (GMS) post-pandemic suggest a potential limitation in product demand.

For the fiscal fourth quarter ending December, its revenue and EPS are expected to increase 1.8% and 17.1% year-over-year to $821.75 million and $1.34, respectively.

With a focus on unique gifts and crafts, ETSY is well-positioned to experience significant stock elevation during the seasonal gifting period, complimented by the ongoing market recuperation and declining inflation trends.

4 Must-Have Holiday Stocks for Your Portfolio

Posted on by The INO.com Team

As the Christmas season approaches, traditionally marked by increased discretionary spending, retailers anticipate a much-needed boost. The consumer discretionary sector has faced considerable challenges in recent years, with many retailers depending on the festive season for over half of their annual sales.

Although post-Thanksgiving sales have evolved beyond their traditional one-day events, the closing weeks of the fourth quarter remain crucial for retailers seeking to improve their financial health. The National Retail Federation anticipates holiday spending this November and December to achieve record levels, projecting growth between 3% and 4% over 2022 to reach between $957.3 billion and $966.6 billion.

Deloitte's annual Holiday Retail Survey projects that 2023 consumer spending will exceed pre-pandemic levels for the first time, with the average consumer predicted to spend $1,652 on gifts, up 14% year-over-year.

Interestingly, there is a commonly observed "Santa Claus Rally" phenomenon in the financial market during this period – a seasonal surge in volume and trading that tends to last until Christmas. LPL Financial found that since 1950, a Santa Claus rally has occurred around 79% of the time.
Year-end holiday shopping, driving sales for retailers and related businesses, can increase stock prices. Investors are generally keen on a year-end rally that boosts their portfolios, while professional traders often consider it an influential factor in determining their year-end bonuses. The occurrence of a Santa Claus rally this year could be welcomed, given the sluggish behavior of stocks since August.

Investment focus is shifting toward stocks presenting the most significant opportunities now, with some manifesting more profitability potential than others if acquired before price surges. Many investors are identifying holiday stocks to capitalize on with the holiday shopping season looming.
Given this backdrop, let us delve into an in-depth analysis of consumer discretionary stocks Amazon.com, Inc. (AMZN), Walmart Inc. (WMT), Target Corporation (TGT), and Etsy, Inc. (ETSY) now.

Amazon.com, Inc. (AMZN)

As the winter holiday season draws near, e-commerce behemoth AMZN, with a market cap of over $1 trillion, is ramping into full festive gear. The Seattle-based firm hosted its recent Prime Day event on October 10 and 11, further revealing plans to enfold 250,000 additional personnel across its global operations in anticipation of the busy year-end shopping frenzy.

AMZN's biannual Prime Days are effective levers for amplifying revenue. The July event yielded over $12 billion worth of sales – a record-breaking feat that crowned it the most successful Prime Day ever. Striving to expand the holiday shopping duration, the company has been progressively ushering its secondary Prime Day event into the fourth quarter.

The impact extends beyond just the Prime Days. The company also greatly benefits from the surge in sales during the Black Friday and Cyber Monday promotions tied to the Thanksgiving holiday, offering substantial financial reinforcements. The company forecasted revenue between $160 billion and $167 billion for the current holiday quarter. However, analysts polled by LSEG were expecting revenue of $166.62 billion, at the higher end of AMZN's guidance.
AMZN has restructured its delivery network in its retail operations to strategically position goods closer to customers, allowing for faster, more cost-effective order fulfillment. The enhancement of its same-day delivery services has positively influenced its profit margins by encouraging shoppers to place orders more frequently and in larger quantities.

For the fiscal fourth quarter ending December 2023, its revenue is expected to increase 11.2% year-over-year to $165.86 billion, while EPS could reach $0.76, up significantly year-over-year.

On the stock market front, shares of AMZN have appreciated over 69% year-to-date and are trading above the 50-, 100-, and 200-day moving averages – an apparent sign of a bullish trend.

Echoing these encouraging prospects, Wall Street analysts expect the stock to reach $176.13 in the next 12 months, indicating a potential upside of 24%. The price target ranges from a low of $145 to a high of $230.

Walmart Inc. (WMT)

Initially established as a conventional brick-and-mortar retailer, WMT has become an influential omnichannel contender. The company’s strategic acquisitions of Bonobos, Moosejaw, and Parcel and its partnerships with industry giants Shopify and Goldman Sachs underscore this evolution. Further efforts, such as introducing delivery programs Walmart + and Express Delivery and investing in Flipkart – an acclaimed online e-commerce platform – exemplify these changes.

These mechanisms have strengthened the retail behemoth's position, allowing it to remain resilient within the dynamic landscape of the retail industry. The company's adaptive initiatives ensure continuous relevancy and competitiveness in this changing ecosystem.

The prominent discount retailer goes the extra mile for the holiday season, employing additional personnel and offering round-the-clock service from Thanksgiving to Christmas to accommodate last-minute shoppers. The company notably profits from Black Friday, Cyber Monday, and Boxing Day promotions, with attractive offers ranging from electronics and toys to clothing.

WMT's in-store and virtual purchases witnessed a substantial escalation during the holiday season, complemented by an upswing in the market.
WMT’s second-quarter financial performance exceeded Wall Street predictions, and the company elevated its full-year guidance. Propelled by robust grocery sales and enhanced online expenditure, the retailer registered a remarkable second-quarter earnings per share of $1.84, while revenue touched $161.63 billion.

The retail giant revealed a 24% year-over-year growth in its e-commerce sales during the second quarter of 2023, with same-store sales observing a 6.4% uptick. WMT anticipates a 4% to 4.5% overall surge in annual sales.

For the fiscal fourth quarter ending January 2024, its revenue is expected to increase 3.6% year-over-year to $158.42 billion, while EPS is anticipated to reach $1.66.

Shares of WMT have gained over 15% year-to-date and trade above the 50-, 100-, and 200-day moving averages, indicating an uptrend. Moreover, Wall Street analysts expect the stock to reach $180.46 in the next 12 months, indicating a potential upside of 9.8%. The price target ranges from a low of $165 to a high of $210.

Target Corporation (TGT)

Boasting a market cap exceeding $51 billion, TGT has demonstrated robust financial health in 2023, successfully safeguarding its profit margins amid a challenging retail environment. The firm maintained solid earnings and cash flow despite subdued consumer spending in fundamental areas like home décor.

As holiday shoppers navigate TGT’s illustrious aisles, they are presented with the retailer's holiday price match guarantee – a strategy aimed at streamlining shopping experiences while offering optimal pricing. Frequently running comprehensive sales on daily essentials and holiday requisites – from electronics to clothing and household goods, TGT facilitates economical purchases, countering rising inflationary pressures.

TGT adopts a strategic stance this festive season by emphasizing affordability in its holiday marketing schemes. Guided by the motto "However You Holiday, Do It For Less," TGT links everyday items within its seasonal collection, providing an affordable range for consumers facing economic challenges.
Recognizing that 75% of TGT customers initiate their digital shopping journeys on mobile platforms, the corporation has augmented its investment in digital channels by 20% in 2023, specifically focusing on media mix optimization throughout the holiday period. This concerted effort towards optimizing digital footprint hones in on social media.

Furthermore, TGT's innovative advertising campaigns encapsulate broad holiday themes like “Lights,” “Magic,” and “Style,” demonstrating their application across various product categories. These aspirational campaigns aim to inspire consumers as they prep for holiday social events, alongside fulfilling their routine shopping needs.

Enhancing its product offering, TGT has introduced thousands of new items this year, expanding from toys priced at $25 to affordable $1 stocking stuffers. The corporation spotlights partnerships with renowned brands, including Fenty Beauty, Kendra Scott, and Mattel and private label introductions like the recent Figmint kitchen range.

For the fiscal fourth quarter ending January 2024, its revenue and EPS are expected to increase 1.2% and 19.4% year-over-year to $31.77 billion and $2.26, respectively.

Wall Street analysts expect the stock to reach $145.03 in the next 12 months, indicating a potential upside of 32%. The price target ranges from a low of $105 to a high of $180.

Etsy, Inc. (ETSY)

Renowned as a premier online hub for handcrafted and vintage goods, ETSY is an ideal platform for consumers looking for inventive gift options, particularly during the bustling winter holiday season. The broad spectrum of products available on ETSY – from jewelry and clothing to toys and home décor – caters to the preferences of its 97.3 million active users offered by 8.8 million energetic sellers.

However, this year has posed significant challenges for ETSY. ETSY grapples with unfavorable financial outcomes, unlike its competitors, who have rebounded from pandemic-induced downturns. The company experienced another decline following the release of its third-quarter earnings report.

ETSY's unique business model – a marketplace that emphasizes handcrafted and vintage items and operates via network effects and switching costs – may be attractive, but ultimately, consistent growth is vital to sustain investor interest. While ETSY insists on its distinct positioning within a large potential market, its struggle to bolster gross merchandise sales (GMS) post-pandemic suggests that the demand for its products may be more limited than anticipated.

Growth in GMS was barely perceptible in the third quarter at just 1.2% year-over-year to $3 billion. GMS per active buyer was down 6% to $127, possibly reflecting the economic challenges.

Moreover, the company estimated GMS for the fourth quarter of 2023 to decline in the low-single-digit range year-over-year. This could deteriorate into a mid-single-digit drop if financial circumstances worsen and stabilize or marginally increase if conditions improve.

CEO Josh Silverman said, "There's no doubt that this is an incredibly challenging environment for spending on consumer discretionary items. It's therefore important to acknowledge that this volatile macro climate will make it challenging for us to grow this quarter."

Yet, amid this financial gloom, bright spots are visible for ETSY. For the fiscal third quarter that ended September 30, 2023, active buyers on the ETSY marketplace witnessed a 4% year-over-year increase, totaling 91.6 million, with growth in U.S. active buyer trends for the first time in seven quarters. The company has reactivated 6 million buyers, marking a 19% year-over-year uptick, and retention rates exceed pre-pandemic levels.

Simultaneously, ETSY's seller base surged 19% to 8.8 million overall. An additional 400,000 sellers have joined the Etsy marketplace in the quarter, bringing its total to 6.7 million. These sellers may use the platform to supplement their income amid inflationary and other economic strains.

However, it is crucial to point out that even though other discretionary retailers are grappling with the prevailing economic climate, ETSY continues to underperform compared to its e-commerce competitors. This inevitably prompts queries regarding when or whether we might witness a resurgence in ETSY’s growth on par with its peers.

For the fiscal fourth quarter ending December, its revenue and EPS are expected to increase 1.7% and 16.2% year-over-year to $820.69 million and $1.33, respectively. Wall Street analysts expect the stock to reach $74.39 in the next 12 months, indicating a potential upside of 16.3%. The price target ranges from a low of $50 to a high of $125.