Analysts recommend these stimulus stocks.
Americans will soon receive another round of individual stimulus payments of up to $1,400, and a large portion of those payments is headed straight into the stock market. A recent Deutsche Bank survey found American investors between the ages of 18 and 54 plan to invest between 37% and 50% of their stimulus payments. If the previous stimulus round is any indication, the new payments will likely provide a shot in the arm for many businesses and stocks. Here are several Bank of America-recommended stocks that could get a boost from the $1,400 stimulus.
Walmart (ticker: WMT)
When Americans received $1,200 stimulus payments last year, 84% of recipients earning less than $75,000 spent at least some of their payment on food, according to the U.S. Census Bureau. Given the stimulus payments are targeted mostly at lower earners, discount grocery chain Walmart could be one of the biggest winners. Walmart shares have held up relatively well in the past year, gaining more than 20%. Analyst Robert Ohmes says the stimulus checks should help boost Walmart’s fiscal first-quarter, same-store sales. Bank of America has a “buy” rating and a $180 price target for WMT stock.
Ford Motor (F)
In 2020, Ford ramped up its investment in next-generation auto technology. The company is committing $29 billion to autonomous and electric vehicle technology through 2025, and its electric Mustang Mach-E has already single-handedly taken about 12% of Tesla’s (TSLA) EV market share since its December launch, according to Morgan Stanley. Ford has consistently been among the most widely held stocks among Robinhood users, and many young investors will likely put a large portion of their stimulus directly into the red-hot stock market by buying Ford. Bank of America has a “buy” rating and a $14 price target for F stock.
PROG Holdings (PRG)
PROG is the market leader in the lease-to-own industry, specializing in credit-challenged customers. Analyst Jason Haas says stimulus payments should provide a short-term boost for PROG’s gross merchandise volume. In the longer term, PROG’s transition from brick-and-mortar to online sales is a key growth driver. The company projects e-commerce GMV will account for a low-to-mid-teen percentage of the company’s total GMV in 2021. Haas says most of these new online sales will be incremental rather than a cannibalization of brick-and-mortar sales. Bank of America has a “buy” rating and an $80 price target for PRG stock.
Leading Chinese EV company NIO is another favorite among younger retail investors. In 2020, the first round of stimulus payments started going out in mid-April. In the six weeks that followed, NIO’s stock price rose 33%, presumably driven in large part by young retail investors. NIO management has guided for first-quarter delivery growth of at least 421%, and analyst Ming Hsun Lee says an expanding product portfolio, new model launches and an improving user experience should all be near-term growth drivers. Bank of America has a “buy” rating and a $70 price target for NIO stock.
Not only has Amazon survived the health crisis, its online retail and cloud services businesses have thrived. Amazon’s revenue was up 38% in 2020. The first place many Americans will turn if they are looking to splurge with a portion of their stimulus payments is Amazon.com. Analyst Justin Post says investors should be prepared for Amazon’s e-commerce revenue growth to slow in the first half of the year. However, he says a recovery in IT spending could boost Amazon Web Services’ cloud services revenue. Bank of America has a “buy” rating and a $4,150 price target for AMZN stock.
Expedia Group (EXPE)
Expedia is one of the world’s largest pure-play online travel stocks. The travel market shut down almost completely in 2020, but Post anticipates a major rebound in 2021 due to pent-up travel demand. After a year of being cooped up inside, travelers around the world are going stir-crazy at this point. Investors can anticipate many Americans will use a portion of their stimulus payments to make summer travel plans. Expedia is Post’s top 2021 stock pick in the travel and transportation space. Bank of America has a “buy” rating and a $169 price target for EXPE stock.
Southwest Airlines (LUV)
Sticking with the travel theme, Southwest Airlines is well-positioned to capitalize on pent-up demand for travel in 2021. Despite the optimistic outlook, the airline industry still faces plenty of challenges in the near term. Analyst Andrew Didora says investors should prioritize airlines that have strong balance sheets and relatively high exposure to leisure travel rather than business travel. Southwest finished 2020 with more than $1 billion in net cash, and it’s Didora’s top pick among the “big four” U.S. airline stocks. Bank of America has a “buy” rating and a $53 price target for LUV stock.
Seven stimulus stocks to buy with your $1,400:
— Walmart (WMT)
— Ford Motor (F)
— PROG Holdings (PRG)
— NIO (NIO)
— Amazon (AMZN)
— Expedia Group (EXPE)
— Southwest Airlines (LUV)
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