Undervalued Retail Stocks: Poised for a Rebound in 2024

The retail landscape in 2024 is characterized by a strong U.S. consumer, a steepening yield curve, and a fiscal deficit that could boost consumer spending. These market trends and catalysts present an opportunity for investors to capitalize on undervalued retail stocks that are poised for a rebound. In this article, we will analyze two retail stocks that exhibit strong fundamentals and are well-positioned to benefit from these favorable market conditions.

Target Corporation (TGT)

Target Corporation is a major U.S. general merchandise retailer that offers a wide range of products, including apparel, beauty, groceries, electronics, and home goods. The company's strategic initiatives, such as lowering regular prices on more than 2,000 items and enhancing its digital capabilities, position it well for future growth.



In terms of forward non-GAAP P/E, TGT is trading at 15.41x, which is 8.6% lower than the industry average of 16.85x. Additionally, its forward EV/EBITDA multiple of 9.26 is 14.3% lower than the industry average of 10.81. These multiples suggest that TGT's stock is relatively undervalued compared to its peers.

TGT's sales increased marginally year-over-year to $25.23 billion in the third quarter of 2024, and its operating income came in at $1.17 billion. The company reported net earnings of $854 million and $1.85 per share. Analysts expect TGT's revenue and EPS for the fiscal first quarter (ending April 2024) to increase 2.3% and 1% year-over-year to $25.10 billion and $2.04, respectively. This indicates that TGT is experiencing steady growth in sales and earnings.

Shares of TGT have surged 5.9% over the past month to close the last trading session at $132.40. This recent performance suggests that the market is recognizing the company's potential and may indicate a rebound in the stock's price.

PriceSmart, Inc. (PSMT)

PriceSmart, Inc. owns and operates U.S.-style membership shopping warehouse clubs in the United States, Central America, the Caribbean, and Colombia. The company provides basic and private label consumable and non-consumable products under the Member's Selection brand, including groceries, cleaning supplies, health and beauty aids, meat, produce, deli, seafood, and poultry.



In terms of forward non-GAAP EV/Sales, PSMT is trading at 0.54x, which is 66.9% lower than the industry average of 1.65x. Additionally, its forward EV/EBITDA multiple of 8.84 is 18.2% lower than the industry average of 10.81. These multiples suggest that PSMT's stock is significantly undervalued compared to its peers.

In the fourth quarter that ended on August 31, 2024, PSMT's total revenue increased 9.8% year-over-year to $1.23 billion. Its operating income stood at $49.21 million. The company's net income and net income per share grew 89% and 91.8% year-over-year to $29.07 million and $0.94. Analysts expect PSMT's revenue and EPS for the fiscal first quarter (ended November 2024) to increase 6.3% and 9.7% year-over-year to $1.24 billion and $1.36, respectively. The company has topped the consensus revenue estimate in each of the four trailing quarters, which is remarkable.

The stock gained 16.9% over the past six months to close the last trading session at $94.57. This recent performance suggests that the market is recognizing the company's potential and may indicate a rebound in the stock's price.

In conclusion, the retail landscape in 2024 presents an opportunity for investors to capitalize on undervalued retail stocks that are poised for a rebound. Target Corporation (TGT) and PriceSmart, Inc. (PSMT) exhibit strong fundamentals and are well-positioned to benefit from favorable market conditions. Investors should consider these retail stocks as potential additions to their portfolios.