With retail earnings in focus, Oppenheimer analyst names favorite play in the space

Business

Retail is in full focus this week.

In earnings reports Tuesday morning, Walmart and Home Depot beat estimates. Major players such as Target, Kohl’s, Macy’s and Foot Locker will release results in coming days. July retail sales are also out Tuesday. All that data should reveal whether pent-up demand from the consumer was enough to overshadow the spread of the delta variant.

But while the calendar is loaded with earnings, Oppenheimer head of technical analysis Ari Wald looked instead to a name that isn’t reporting this week as his favorite play in the space.

“One standout for us is the automotive retailing sub industry,” Wald told CNBC’s “Trading Nation” on Monday. “We recently added AutoZone … to our OpCo Trifecta list. Those are stocks that … have both technical, fundamental and portfolio tailwinds behind it.”

“For AutoZone, on a relative basis the stock was a notable underperformer from 2019. We think it bottomed in the first quarter of this year, and the strength that we’ve seen since the first quarter, in our view, is reversing the downtrend that had been at play. I think you see the slope for the 200 day curling higher as an argument for that reversal,” said Wald.

AutoZone is up nearly 40% this year. Its next earnings report is at the end of September.

Michael Binger, president of Gradient Investments, turned to the DIY home improvement sector instead, highlighting Home Depot and Lowe’s as two favorites.

“We think housing starts and sales, even though they’ve slowed a little bit, are still very strong. All these millennials who are purchasing homes right now, we feel that’s a secular tailwind for quite some time. Home Depot and Lowe’s are prime beneficiaries of what’s going on out there,” Binger said during the same interview.

Home Depot reported better-than-expected earnings Tuesday, but same-store sales came in slightly short of estimates as fewer people visited its shops to buy items for do-it-yourself projects. Lowe’s earnings are set for Wednesday morning.

“We like these stocks, we own them and we would buy them right here before they report,” Binger said.

Disclosure: Gradient Investments holds HD, LOW.

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