Although the stock market has rallied upon the news of a positive Moderna (NASDAQ: MRNA) trial vaccine for the coronavirus, I have decided not to focus on this today. This is not because I believe the news to be unimportant, but because this is not the first or last time during this pandemic where medicinal hopes have manipulated the market. Remember Gilead’s (NASDAQ: GILD) remdesivir drug trials?
Anyway, my colleague Mike broached an interesting topic with the team this week, when he discussed the creation of ‘baskets of stocks’, for example: an ‘e-commerce basket’ containing Amazon (NASDAQ: AMZN), Shopify (NYSE: SHOP), and MercadoLibre (NASDAQ: MELI). In the next 24 hours, another potential ‘stock basket’ will be reporting earnings. I’ve decided to call this group the ‘pandemic consumer staple basket, and it consists of The Home Depot (NYSE: HD), Target (NYSE: TGT), and Walmart (NYSE: WMT).
All 3 will be reporting their Q1 earnings today and tomorrow, and investors should take note, because these stocks may be the future of pandemic retail.
The Home Depot
The Home Depot is scheduled to release earnings before the bell on Tuesday, having recently hit an all-time high of $248.32 per share. Amidst the coronavirus pandemic, Home Depot experienced a sharp uptake in sales as consumers flocked to stores in panic-driven buying during the early days of the pandemic. Although you would not expect a huge need for home improvement equipment during isolation, the increased amounts of free time has afforded people more opportunity than ever to work on those home projects they’ve been putting off.
Last quarter, the company reported narrower margins than expected, largely due to an $11 billion investment in integrating its stores and online business. This move couldn’t have come at a better time, as the coronavirus pandemic has proven that e-commerce is king. Home Depot is expected to earn $2.27 per share on $27.23 billion in revenue in this morning’s report, but any discrepancies in these expectations will likely see wild jumps in stock price either up or down. Home Depot stock is currently up 27% year-on-year.
One thing that is certain to retailers is that nothing is certain right now. Target is another store that has proven resilient during this pandemic, surging from $92 per share March lows to $125.20 per share as of May 18. The company, like other retailers, does have physical stores to worry about, but claimed its had continued to rise throughout the shutdown. February’s 3.8% sales bump was attributed to consumers bulk buying essential goods, but this type of shopping will have slowed.
Since lockdown orders intensified, digital sales have become all-important to Target. The company recently provided a financial update to its first-quarter performance, as of Apr 23, stating that it registered a sharp rise in comparable sales of 7%, courtesy of booming digital sales — which have grown more than 100%. The company’s recent investment into same-day delivery options and grocery expansion may prove invaluable when Target reports earnings on Wednesday morning. Analysts expect EPS of $0.73 on revenue of $18.9 billion. Target stock is currently up more than 70% year-to-date.
This member of the Fidelity MSCI Consumer Staples ETF (NYSEARCA: FSTA) is well-known to be among the largest retailers on the planet and will report earnings before the bell today. The retailer has been touted as being among the new DAWN stocks that will thrive during a pandemic: Dominos (NYSE: DPZ), Activision Blizzard (NASDAQ: ATVI), Walmart, and Netflix (NASDAQ: NFLX). This accolade has proven true, with Walmart recently hitting all-time highs of $133.38 before sliding back to $127.66 as of May 18. However, a positive earnings announcement could see it smash past those highs.
Walmart has grown so massive that it is even considered a rival in the e-commerce space to Amazon, having heavily invested in online retail in recent years. The company’s e-commerce arm has proven invaluable in keeping its 11,000+ stores open across 27 countries, as many nations are forced into lockdown restrictions. Investors will be optimistic about the retail giant considering its stock is up 26% year-on-year following consistent revenue growth. Walmart is expected to report earnings of $1.12 per share on $129.24 billion in revenue.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.
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Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.