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5 Retail Stocks Ready to Break Out

William Roth

U.S. equities are suffering from bouts of volatility on Friday as investors contend with major technical resistance levels. The 26,000 threshold on the Dow Jones Industrial Average and the 2,800 level on the S&P 500 are proving intractable, resulting in sharp intra-day pullbacks.

To be sure, a pause for breath is deserved here after a historic rally out of the late December lows: The S&P 500 is up nearly 20% in a smooth, unbroken rise. If only all rallies were this impressive. And there are nagging questions about the health of the global economy, with a weaker-than-expected ISM manufacturing and consumer sentiment reports on today.

But with central banks dovish again, and the IPO market reopening with ridesharing icon Lyft preparing to file under the LYFT ticker on the Nasdaq, there are plenty of reasons to remain excited. In fact, a number of industry groups that have been left behind over the past two months look ready for a catch-up surge.

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A number of retailers are on the list. Here are five retail stocks to check out:


JCPenney (JCP)


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JCPenney (NYSE:JCP) shares are coming back to life, rising nearly 60% off of their late December lows as the beleaguered retailer goes through yet another strategy restructuring by exiting the appliance and furniture businesses. But management is cutting the fat, with inventory down 13% year-over-year and expectations for positive free cash flow in fiscal 2019.

The company will next report results on May 30 before the bell. When the company last reported on Feb. 28, earnings of 18 cents per share matched estimates on a 9.5% decline in revenues.


Target (TGT)


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Target (NYSE:TGT) shares are threatening to climb up and over their two-month uptrend channel, setting the stage for a run at the 200-day moving average that was lost back in November. Analysts at Citigroup recently resumed coverage, targeting a move above the 200-day moving average. Analysts at Tigress cited improved operating efficiencies and a differentiated value proposition as a reason to reiterate their buy rating back in January.

The company will next report results on Mar. 5 before the bell. Analysts are looking for earnings of $1.53 per share on revenues of $23.1 billion. When the company last reported on Nov. 20, earnings of $1.09 missed estimates by 2 cents on a 5.7% rise in revenues.


Nordstrom (JWN)


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Nordstrom (NYSE:JWN) shares are coming back to life, pushing back up and over their 50-day moving average to exit a five-month downtrend channel. The decline marked a return to the lows seen back in early 2018 as shares remain mired in a sideways channel going back to late 2015. The stock has been consistent, however, not missing revenue expectations for six straight quarters.

The company will next report results on May 30. When the company last reported on Feb. 28, earnings of $1.48 per share beat estimates by 6 cents on a 4.6% drop in revenues.


Gap (GPS)


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Gap (NYSE:GPS) shares are surging higher, up more than 20% for the week, thanks to an announcement by management that it will split off its growing Old Navy brand into its own business. Current shareholders will get a stake in the new company, which is becoming large enough and differentiated enough that management thought it was best to let it fly on its own.

The company will next report results on May 30 after the close. When the company last reported on Feb. 28, earnings of 72 cents per share beat estimates by 3 cents on a 3.2% decline in revenues.


L Brands (LB)


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L Brands (NYSE:LB), the company behind Victoria’s Secret, is enjoying an upside breakout after a head-fake move to the downside setting up an exit from a tight three-month consolidation range. Watch for a possible test of the November/December highs, which would be worth a gain of roughly 25% from here.

The company was upgraded to overweight by analysts at Barclays on confidence in management’s forward guidance numbers and reasonable expectations of earnings upside driven by new merchandising initiatives. The company will next report results on May 29 after the close. Analysts are looking for a break-even result on revenues of $2.6 billion. When the company last reported on Feb. 27, earnings of $2.14 per share beat estimates by 7 cents on a 0.6% rise in revenues.

As of the time of this writing, William Roth did not hold a position in any of the aforementioned securities.

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