Retail has been on incredible run lately.
Since the XRT S&P Retail SPDR hit bottom along with the rest of the market on March 23, the ETF has surged nearly 65% on hopes of a swift recovery in the wake of the coronavirus pandemic.
Despite the surge, the ETF is still underperforming the broader S&P 500 index with the index down -4.5% for the year and the XRT down -5.85% year-to-date.
Still, the retail ETF includes some names that have seen phenomenal gains since the bottom.
Wayfair (NYSE: W) is up 483% since March 23. Children’s Place (NASDAQ: PLCE) is up nearly 184%. Etsy (NASDAQ: ETSY) has gained 143%. Boot Barn (NYSE: BOOT) has added 128%. Stitch Fix (NASDAQ: SFIX) shares are up 88%. And Tractor Supply (NASDAQ: TSCO) has jumped nearly 57%.
While all of these stocks have seen incredible rallies, Piper Sandler senior technical research analyst Craig Johnson says there are two in the group that could still see gains.
The first on Johnson’s list is Wayfair.
Wayfair shares jumped 14% on Wednesday after Piper Sander analyst Peter Keith issued a bullish note on the stock. Keith reiterated his Overweight rating and boosted his price target on Wayfair shares to $225 – 26.7% higher than the price as of this writing.
“We believe the last two months have improved Wayfair’s standings with suppliers, and allowed for significant new customers acquisition,” Keith wrote in the note. “We see shares as significantly undervalued for a high-growth, asset-light company that should be profitable going forward.”
Johnson noted that Wayfair’s chart shows a solid trend reversal.
“You’ve got a very high short interest, first and foremost,” Johnson said, “but you’ve also reversed a pretty meaningful downtrend in the stock.”
“You’re getting a little bit of a short-term consolidation, which, to me, is just a pause. We’re not seeing a change in momentum in this stock,” Johnson added. “Even though it’s had a very good run and it’s up about 88% or so year-to-date, I still think there’s more to go and I would still be a buyer of Wayfair.”
Johnson’s second pick is Tractor Supply.
“This is a stock that still looks constructive,” Johnson said, adding that the chart is “showing positive momentum.”
“Despite a nice run, I would still be buying Tractor Supply in here,” Johnson said.
Raymond James analyst Matthew McClintock said in a recent note, “We believe rural markets are and will continue to reap the benefits of consumers moving/vacationing away from their more urban counterparts, which ideally fits the rural nature of Tractor Supply’s store base.”
McClintock rates Tractor Supply shares a Strong Buy and bumped their price target from $115 to $135 – 10% higher than the current price.
“Tractor Supply was already a strong company with excellent fundamentals prior to the coronavirus crisis,” said Quo Vadis president John Zolidis. “We believe it is reasonable to believe that secular shifts (less competition, more people moving to rural locations, superior economics in rural locations) together with new strategic initiatives (accelerated investment in digital) potentially reset Tractor Supply’s earnings power in a way not yet appreciated in consensus forecasts or the equity’s valuation.”