So far the year 2020 has been one of extremes for retailers. Some companies are doing great and we have seen a great number of bankruptcies as well. Since the COVID-19 pandemic started we have seen some stores do well and others have floundered.
One item that has been a major factor seems to be whether the company has a strong online presence or not. But I found a direct link between the gains in the stocks and what type of stores the company operates.
Looking at the Tickeron Screener and the scorecard for nine different retailers, we see the one-year returns for the stocks have varied greatly. All nine of these companies will report earnings during the week of August 17 through 21 and that’s the reason I have grouped them together. We see home improvement retailers Lowes (LOW) and Home Depot (HD) are in the top spot and the third place spot with gains of 69.7% and 43.3%, respectively. Target (TGT) is in the number two spot with a gain of 68.8%.
If we look at the stores at the top of the list, sure two of them are home improvement retailers, but the top four all operate as stand-alone stores. They aren’t in strip malls or traditional malls—they have standalone buildings. Now look at the bottom five. Foot Locker and Nordstrom stores are typically found in traditional malls. Kohl’s, Ross Stores (ROST), and TJX Companies (TJX) all typically have their stores in strip malls or in smaller shopping centers where they are considered an anchor store.
I thought this was a fascinating development and I think it is more than just a coincidence. Yes, the stocks at the top of the list also seem to have pretty strong online operations, but so does Kohl’s. What I really think is going on with the stocks is that they reflect the trend that has been going on for a number of years where the big, enclosed, traditional shopping malls are struggling. We have seen Neiman Marcus, Lord & Taylor, JC Penney, and Brooks Brothers declare bankruptcy. Just this week Stein Mart became the latest retailer to file for bankruptcy.
Many of the companies that have declared bankruptcy in the retail space serve as anchor stores for traditional malls or for strip malls. Many of these stores were struggling before the pandemic. The economic shutdowns that have taken place didn’t cause their troubles, but the shutdowns did accelerate their demise.
Unfortunately there is likely to be a snowball effect as the anchor stores leave, the smaller retailers will struggle as well and it will likely lead to more bankruptcies.
Getting back to the upcoming earnings reports and the image from the Tickeron Screener, the group as a whole has a short-term positive outlook. There are three “strong buy” ratings, five “buy” ratings, and only one “sell” rating (Foot Locker). The overall fundamental ratings aren’t nearly as bad as I would have expected. All nine stocks have more bullish indicators than bearish indicators and that was shocking to me.
The two biggest areas of concern are in the Valuation Rating and the Profit vs. Risk Ratings. Each of those categories shows three stocks with bearish signals in that column.
The technical picture is even stronger than the fundamental picture. There are only six bearish signals across the whole board and three of those are for Foot Locker—thus the “sell” rating on the scorecard.
The AROON Indicators and the MACD Indicators are both showing a number of bullish signals for the group.
Continuing with the standalone concept versus the mall and shopping center stores, the EPS estimates for the coming reports seem to follow my line of thinking. We see Lowes and Home Depot are expected to see earnings growth while Target and Wal Mart are expected to see small declines in earnings, but remain profitable.
Four of the five mall and shopping center oriented companies are expected to lose money in the quarter and all five reported profits in the same period last year. Foot Locker is the exception again as it is expected to earn $0.25, but that is considerably lower than the $0.66 the company earned last year.
LOW saw its Momentum Indicator move above the 0 level on February 06, 2024. This is an indication that the stock could be shifting in to a new upward move. Traders may want to consider buying the stock or buying call options. Tickeron's A.I.dvisor looked at 82 similar instances where the indicator turned positive. In of the 82 cases, the stock moved higher in the following days. The odds of a move higher are at .
The Moving Average Convergence Divergence (MACD) for LOW just turned positive on February 02, 2024. Looking at past instances where LOW's MACD turned positive, the stock continued to rise in of 47 cases over the following month. The odds of a continued upward trend are .
LOW moved above its 50-day moving average on January 30, 2024 date and that indicates a change from a downward trend to an upward trend.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where LOW advanced for three days, in of 362 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 339 cases where LOW Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
The RSI Indicator has been in the overbought zone for 2 days. Expect a price pull-back in the near future.
The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 18 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where LOW declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
LOW broke above its upper Bollinger Band on February 28, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is seriously undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (0.000) is normal, around the industry mean (8.981). P/E Ratio (18.233) is within average values for comparable stocks, (30.375). Projected Growth (PEG Ratio) (3.326) is also within normal values, averaging (2.960). Dividend Yield (0.018) settles around the average of (0.035) among similar stocks. P/S Ratio (1.627) is also within normal values, averaging (84.135).
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 75, placing this stock better than average.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. LOW’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
a company, which engages in the retail sale of home improvement products
A.I.dvisor indicates that over the last year, LOW has been closely correlated with HD. These tickers have moved in lockstep 82% of the time. This A.I.-generated data suggests there is a high statistical probability that if LOW jumps, then HD could also see price increases.