Consumers are currently grappling with the worst inflation in roughly 40 years, as they now have to spend more on purchases, ranging from personal care and home improvements to vacations. Prices were 8.6% higher from the year-ago period in May.
Despite cooling consumer confidence, “Purchasing intentions for cars, homes, and major appliances held relatively steady,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.
Strong growth in employment and nominal wages are supporting consumption amid rising prices. The economy had added 390,000 jobs in May, better than expected despite fears of an economic slowdown. According to Fitch Ratings, employment growth will likely continue at above-trend rates heading into 2023, which should boost consumer spending.
Amid this backdrop, Wall Street analysts expect consumer goods stocks Amazon.com, Inc. (AMZN), General Motors Company (GM), and Sea Limited (SE) could rally more than 60% in the near term.
Amazon.com, Inc. (AMZN)
The retail giant AMZN needs no introduction. The company operates through three segments: North America; International; and Amazon Web Services (AWS).
AMZN announced the general availability of AWS Mainframe Modernization, a new service that makes it faster and easier for customers to modernize mainframe-based workloads by moving them to the cloud to enjoy AWS’s superior agility, elasticity, and cost savings. This is expected to boost the company’s growth and profitability.
AMZN’s net sales increased 7.3% year-over-year to $116.44 billion in the first quarter ended March 31, 2022. Net cash provided by investing activities and financing activities amounted to $906 million and $1.99 billion, respectively. The company’s cash and cash equivalents came in at $36.39 billion, while its current assets stood at $133.88 billion as of March 31, 2022.
The consensus EPS estimate of $2.69 for the fiscal year 2023 (ending December 2023) indicates a 230% improvement year-over-year. The consensus revenue estimate of $610.06 billion for the same year reflects a 16.4% increase from the prior year.
The stock has declined 7.8% over the past month to close its last trading session at $106.21.
Of the 38 Wall Street analysts that rated AMZN, 37 rated it Buy, while one rated it Hold. The 12-month median price target of $177.58 indicates a 67.2% potential upside. The price targets range from a low of $107.00 to a high of $232.00.
General Motors Company (GM)
General Motors Company designs, builds and sells trucks, crossovers, cars, and automobile parts and accessories worldwide. The company operates through GM North America; GM International; Cruise; and GM Financial segments.
On June 15, GM announced more than $81 million investment into the company’s Global Technical Center in Warren, Michigan, to prepare the campus to build the Cadillac CELESTIQ. The CELESTIQ will be the first production vehicle to be built at GM’s Global Technical Center.
On May 31, GM Defense LLC announced the expansion of its global offerings to Canada by leveraging the existing relationships of GM Canada along with the advanced technologies of its parent company. Leveraging GM’s $35 billion corporate investment in transformational technologies, GM Defense might support international growth with its defense and government customers.
In the first quarter ended March 31, GM’s total revenue increased 10.8% year-over-year to $35.98 billion. Its automotive operating cash flow grew 249.2% year-over-year to $1.64 billion. The company’s adjusted GMI EBIT and adjusted GM Financial EBIT came in at $328 million and $1.28 billion, up 6.5% and 8.6%, respectively, from the prior-year period.
The $39.35 billion consensus revenue estimate for fiscal 2022 third-quarter ending September 2022 represents a 47% rise from the same period in 2021. Analysts expect GM’s EPS for the next quarter to increase 12.7% year-over-year to $1.71.
GM has plunged 29.8% over the past three months, closing its last trading session at $31.76.
However, the 12-month median price target of $58.77 indicates an 85.04% potential upside. The price targets range from a low of $44.00 to a high of $87.00. Of the 15 Wall Street analysts that rated GM, 12 rated it Buy, two rated it Hold, while one rated it Sell.
Sea Limited (SE)
Sea Limited is a leading global consumer internet company founded in Singapore. SE operates three core businesses across digital entertainment, e-commerce, and digital payments and financial services, known as Garena, Shopee, and SeaMoney, respectively.
For the fiscal first quarter ended March 31, 2022, SE’s revenue increased 64.4% year-over-year to $2.90 billion. Its gross profit rose 81.3% from the year-ago value to $1.17 billion. As of March 31, 2022, the company’s cash and cash equivalents stood at $7.68 billion.
Analysts expect SE’s revenue for the fiscal year 2022 (ending December 2022) to come in at $13.30 billion, representing a 33.6% rise from the previous year. Street expects the company’s EPS for fiscal 2023 to grow 35% year-over-year.
Over the past month, the stock has declined 21.4% to close its last trading session at $66.86.
Of the 15 Wall Street analysts that rated SE, 13 rated it Buy, while two rated it Hold. The 12-month median price target of $149.07 indicates a 123% potential upside. The price targets range from a low of $86.00 to a high of $220.00.
AMZN shares were trading at $107.22 per share on Friday morning, up $1.01 (+0.95%). Year-to-date, AMZN has declined -35.69%, versus a -20.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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