2 Retail Stocks with Momentum and Resilience

In the ever-evolving landscape of consumer retail, two stocks have emerged as standouts, demonstrating remarkable momentum and resilience despite the challenges posed by higher prices and elevated interest rates. Carvana (CVNA) and Burlington Stores (BURL) have not only weathered the storm but have also thrived, outpacing broader market trends and capturing the attention of investors. Let's delve into the factors driving their success and explore why these stocks are poised for continued growth.



Carvana: Redefining the Car-Buying Experience

Carvana, founded in 2012, has revolutionized the automotive retail industry with its innovative, all-online platform. The company allows customers to browse tens of thousands of vehicles, secure financing, trade-in, and purchase, all from the comfort of their homes. This seamless and convenient experience has resonated with consumers, driving a 306% increase in share price over the past 52 weeks and a 194% increase on a year-to-date (YTD) basis. These gains significantly outpace the broader S&P 500 Index’s performance of 27.3% over the past 52 weeks and 17.1% on a YTD basis.

Carvana's vertically integrated platform and delivery or local pickup options in over 300 U.S. markets have further enhanced its appeal. The company's market cap of $31.7 billion reflects its strong financial performance and investor confidence. Wall Street analysts have given CVNA a consensus “Moderate Buy” rating, with five recommending a “Strong Buy,” one suggesting a “Moderate Buy,” 12 advising a “Hold,” and one advocating a “Moderate Sell” rating. The Street-high target of $200 implies potential upside of 28.8% from current levels.

Burlington Stores: Attracting Value-Conscious Shoppers

Burlington Stores, headquartered in New Jersey, is a leading off-price retailer with over 1,000 stores across the U.S. The company has attracted value-conscious shoppers with a diverse range of products, from women’s apparel and menswear to home goods and toys. Burlington's strategic focus on off-price retailing has driven a 64.4% increase in share price over the past 52 weeks, outpacing the broader SPX’s gains during this time frame. Over the past three months alone, BURL stock is up 45.5%, and set a two-year high of $274.22 in Wednesday’s session.

Analysts maintain a consensus rating of “Strong Buy” on BURL stock, with 17 out of 19 analysts advising a “Strong Buy” and two having a “Hold” rating. The mean target price of $272.78 is nearly flat with current prices, but the Street-high target price of $300 suggests that BURL stock could rally as much as 11.3% from here.

Financial Health and Liquidity: A Key to Resilience

The financial health and liquidity of retail stocks are crucial factors in determining their ability to withstand potential market volatility and economic challenges. Two notable examples from the provided materials are Lowe's and Kroger.

Lowe's, a prominent home improvement retailer, has demonstrated strong financial health and liquidity. According to the materials, Lowe's believes that its sources of liquidity, including operating cash flows, credit facility capacity, and access to capital markets, will continue to be adequate to meet its contractual obligations, working capital, and planned capital expenditures. This financial stability allows Lowe's to finance anticipated expansion and strategic initiatives, fund debt maturities, pay dividends, and execute purchases under its share repurchase program. This robust financial position ensures that Lowe's can navigate market volatility and continue to invest in growth.

Similarly, Kroger, a leading grocery retailer, has also shown strong financial health and liquidity. The materials highlight that Kroger's financial stability ensures it can withstand market volatility and continue to invest in growth. This is supported by the fact that Kroger has been able to maintain its financial health despite the challenging macroeconomic environment.

Conclusion: A Bright Future for Retail Stocks

The retail resurgence is more than just a fleeting trend; it represents a fundamental shift in consumer behavior and market dynamics. As investors recognize the potential in retail stocks with promising sales growth, the sector is poised for continued success. While the road ahead may have its challenges, the combination of increased consumer confidence, innovative marketing strategies, and evolving shopping habits creates a fertile ground for retail investments. By staying informed and strategically investing in resilient and momentum-driven stocks like Carvana and Burlington Stores, investors can capitalize on the retail sector's growth potential.