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One retail stock to buy and one to dump, says Oppenheimer

As governments begin to ease lockdown measures, retail stocks show that consumer spending is starting to pick up.

May US retail sales data registered a 17.7% increase, bouncing back from a 16.4% drop in April, beating analysts’ projections for an 8% growth.

Now, investment bank Oppenheimer highlights its view on winning and losing retail stocks as the sector rebounds from the coronavirus store shutdowns.

“For the traditional brick-and-mortar retail industry, we would recommend avoiding them, but there is a slice of retail we are bullish on and that’s internet retail,” said Ari Wald, Oppenheimer’s head of technical analysis.

The IBUY online retail ETF, which has holdings in Amazon and Alibaba, rallied 30% since the start of 2020 and outperformed the S&P 500. The XRT retail ETF, however, has fallen 9% in 2020.

Online retailers have emerged as the clear winners from the coronavirus-induced lockdown. E-commerce giant Etsy registered growth while brick-and-mortar chain Urban Outfitters remains stuck below its breakdown at $22, having fallen nearly 40% this year.

Etsy retail stock

“We can see that Etsy has broken higher, it’s forming a bullish pennant pattern above $71, we expect that breakout to resume to the upside,” Wald said Monday on CNBC’s “Trading Nation.

Many retailers have been struggling due to increased competition from Amazon and other e-commerce retailers. The pandemic has only accelerated it. However, companies who can reinvent themselves and have constant innovation in their product as well as their e-commerce platform have seen it pay off.

Both Walmart and Target are two companies that have managed to evolve to improve their online and in-store experience. As a result, their earnings estimates remained fairly stable given the global crisis. As we look to 2021 and 2022, that is where analysts expect to see a spike in their earnings estimates.

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    All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
    Galina Mikova

    Galina is a Hubspot-certified Technical Writer with over 10 years of experience in working with Fortune 500, private investment, banking, FOREX and niche tech companies as well as crypto and blockchain startups. She has a solid background in FinTech and blockchain technology.

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