One retail stock to buy, and one to avoid, according to Oppenheimer

Oppenheimer sees winners and losers in the retail sector as it struggles to survive after weeks of coronavirus store shutdowns. 

“For the traditional brick-and-mortar retail industry, we would recommend avoiding them, but there is a slice of retail we are bullish on and that’s internet retail,” said Ari Wald, Oppenheimer’s head of technical analysis.

The IBUY online retail ETF, which holds Amazon and Alibaba, has rallied 30% this year and outperformed the S&P 500. The XRT retail ETF has fallen 9% in 2020.

Wald said two stocks highlight the divergence between online and brick-and-mortar retail stocks – e-commerce player Etsy and retailer Urban Outfitters.

“We can see that Etsy has broken higher, it’s forming a bullish pennant pattern above $71, we expect that breakout to resume to the upside,” Wald said Monday on CNBC’s “Trading Nation.”

Urban Outfitters is stuck below its breakdown at $22, Wald noted, and has fallen nearly 40% this year.

“That really just shows how wide ranging the trends are in this space, and why we think investors and traders both need to be selective,” said Wald, who spoke a day before the government releases retail sales data for May. The May numbers, being released at 8:30 a.m. ET Tuesday, are expected to rebound 9% after a 16.4% drop in April, according to FactSet.

The underperformance in certain retail stocks such as Kohl’s and Macy’s should continue, said Michael Bapis, managing director at Vios Advisors at Rockefeller Capital Management.

“They’ve been under pressure for years due to Amazon and other e-commerce retailers. The pandemic just accelerated it. We think you’ve got to be with companies who can reinvent themselves and have constant innovation in their product as well as their e-commerce platform and in-store platform,” Bapis said during the same segment.

He picks Walmart and Target as two companies that have managed to evolve to improve their online and in-store experience.

“Whether the pandemic continues and resurfaces its head, or if it goes away, they’re positioned to take advantage of both of them,” Bapis said. “Their earnings estimates have not fallen that much. They’re fairly normal given what just happened and as we look to 2021 and 2022, that’s when we see a spike in their earnings estimates.”

Disclosure: Vios Advisors holds WMT. Vios and Bapis hold TGT. 


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