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Nomura Highlights Top Picks For 2016: Amazon, TJX, Nike, Coach

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Nomura Highlights Top Picks For 2016: Amazon, TJX, Nike, Coach
  • According to Robert Drbul of Nomura, the consumer is in a "better position to spend."
  • Drbul added low gas and oil prices will also leave consumers with ‘extra cash to spend' and the low-income consumer should "continue to benefit."
  • The analyst named Amazon.com, Inc. (NASDAQ: AMZN), Coach Inc (NYSE: COH), Nike Inc (NYSE: NKE), and TJX Companies Inc (NYSE: TJX) as his top picks for 2016.

Heading into 2016, the consumer is in a "healthier position" as the US macro environment remains "quite positive," according to Robert Drbul of Nomura. Accordingly, the analyst sees several retailers benefiting in 2016.

In a report published Thursday, Drbul argued that the consumer is in a "better position" to spend. The analyst also highlighted: 1) "strong" growth in job creation, 2) unemployment trending lower, 3) real wage growth rising, 4) a "higher" level of consumer confidence, and 5) an improvement in household balance sheets.

Drbul continued that low gas and oil prices will leave American consumers with extra cash. The analyst estimated that every $0.10 decline in gas prices generates an incremental $14 billion of disposable for consumers. Meanwhile, gas prices have fallen around $0.60 year over year – thereby generating an incremental disposable income of $21 billion in the fourth quarter, or $84 billion on an annualized basis.

Related Link: Nike Unveils Giant Sales Goal, Says Jordan To Move Beyond Basketball

Top Picks

The analyst named Wal-Mart Stores, Inc. (NYSE: WMT) and J C Penney Company Inc (NYSE: JCP) as two retailers that will be a "major beneficiary" from lower oil and gas prices.

For some investors, the inclusion of Coach Inc (NYSE: COH) into Drbul's top picks may come as a surprise following the stock's poor 2015 performance. The analyst argued that despite recent "challenges" in the overall textiles, footwear & apparel space, Coach will benefit as management executes on its multi-year transformation into a lifestyle brand. As such, the company's comps are expected to turn positive by the fourth quarter of 2016.

Nike is also a top pick within the textiles, footwear & apparel space given the analyst's high degree of confidence in the company's ability to continue improving its operations towards its "ambitious" 2020 plans.

Drbul highlighted that the off-price model is "one of the most lucrative" in retail, especially as retailers struggle from heightened inventory, un-seasonable weather trends, and other factors. Accordingly, TJX Companies will benefit from its "robust" global sourcing operation. In fact, the analyst expects the company to return to double-digit earnings per share growth in 2016.

Drbul named Amazon as his top E-Commerce pick, despite the stock's triple-digit percentage return year-to-date. The analyst suggested that the stock has further momentum given its "sizeable lead" in the retail space, "relentless" innovation, geographical expansion, and growth also coming from its AWS segment.

Latest Ratings for AMZN

DateFirmActionFromTo
Oct 2020Morgan StanleyMaintainsOverweight
Oct 2020Morgan StanleyMaintainsOverweight
Oct 2020MizuhoMaintainsBuy

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