Customer sentiment is on the rise as the unemployment rate improves, and the worst of the coronavirus is past us. Add in the fact that the holiday season is approaching and customers have all the more reason to feel good about spending money.

The question is which retail stocks are most likely to benefit from improving customer sentiment. If the virus continues to linger or even worsen, companies that provide the option of buying online will emerge from the holiday period as big winners. However, it is difficult to predict how bad the pandemic will become given several uncertainties including the development of a vaccine, the virus’ spread, and if people can continue ‘social distancing’.

Below, we provide a look at five retail stocks worth investing in based on improving customer sentiment: Best Buy (BBY), RH (RH), Bed Bath & Beyond (BBBY), 1-800 Flowers (FLWS), and At Home Group (HOME).

Best Buy (BBY)

Just about everyone can find something useful at BBY stores, regardless of whether it is the holiday period or not. BBY sells electronics, appliances, entertainment software, home office products, and more.

Take a look at BBY’s POWR Ratings and you will find the stock has “A” grades in the Peer Grade, Buy & Hold Grade, and Trade Grade components. BBY is ranked above every other stock in the Specialty Retailers space.

The company’s flawless balance sheet is highlighted by its net cash position, a feat few retailers have accomplished. Furthermore, BBY has a reasonable forward P/E ratio under 16. BBY’s online sales spiked more than 240% in the second quarter. This trend will likely continue if the pandemic worsens through the holiday period.

RH (RH)

This luxury home furnishings retailer sells items in a wide array of categories ranging from bath ware to furniture, textiles, lighting, décor, and more. The elevating consumer sentiment means Americans are confident enough to spend on these home-related items even if they cost several hundred or several thousand dollars.

Take a look at the RH POWR Ratings and you will find the stock has “A” grades in the Trade Grade and Industry Rank components. RH is ranked in the top 10 of nearly 70 publicly traded companies in the Home Improvement & Goods space.

The average analyst price target for RH is $408.83, indicating it has nearly 10% upside. With a rapidly growing operating profit, RH is in a fantastic position heading into the holiday season during which the red hot housing market is likely to maintain its momentum.

As long as RH revenue continues to increase by 10% every year, this stock will be strongly coveted both in the short-term and the long-term.

Bed Bath & Beyond (BBBY)

BBBY is a retailer that conducts business throughout the United States and Canada. BBBY sells home furnishings along with domestic merchandise.

Check out BBBY’s POWR Ratings and you will find it has “A” grades in the Industry Rank, Trade Grade, Peer Grade, and Buy & Hold Grade components. BBBY is ranked 12th of nearly 70 publicly traded companies in the Home Improvement & Goods space.

Now that BBBY is cutting unprofitable assets and zeroing in on its web-based sales, the company is in a perfect position to benefit from the rising consumer sentiment. At the moment, 20% of BBBY’s sales are on the internet yet this number has the potential to spike if a second wave of the virus appears.

1-800 Flowers (FLWS)

As the top e-commerce seller of flowers, FLWS is in a prime position to benefit from renewed consumer confidence and a reluctance to shop at brick-and-mortar stores. In fact, FLWS is likely to grow even more in the months and years ahead as the company continues to expand its offerings to include gifts, garden merchandise, and gourmet food.

FLWS has an “A” POWR Rating Trade Grade. The stock is ranked in the top half of those in the Internet category. The analysts insist FLWS is undervalued, setting a price target for $34, meaning the stock might pop 28%. Look for FLWS to move back toward the $32 mark it hit in this past September.

At Home Group (HOME)

HOME is one of the best home décor providers in the world. Examples of HOME products include housewares, seasonal décor, art, mirrors, and furniture. The unstoppable housing market is spiking demand for HOME products all the more.

Check out HOME’s POWR Ratings and you will find the stock has an “A” Trade Grade component. HOME is ranked in the top half of 34 stocks in the Specialty Retailers segment.

HOME has a forward P/E ratio of 12.36, indicating it is undervalued at its current trading level of $21. The country’s hot housing market combined with renewed positive consumer sentiment should help HOME return to its September high of $23.33.

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BBY shares were trading at $119.04 per share on Thursday morning, up $0.35 (+0.29%). Year-to-date, BBY has gained 38.47%, versus a 8.23% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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