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Wall Street analysts worry these stocks are caught in the deepening US-China trade war

Key Points
  • CNBC did a deep dive through the most recent Wall Street research to see which stocks concern analysts the most in the ongoing U.S.-China trade dispute.
  • Stocks that may have an adverse reaction to the newest tariff include Dollar Tree, Abercrombie & Fitch, Rio Tinto, O'Reilly Automotive, Michaels Companies, Advanced Micro Devices, & Nvidia.
  • Retail is widely believed to be one of the sectors most impacted because the latest round of tariffs target clothing and other consumer goods.


A man enters a Dollar Tree discount store in Garden City, New York.
Shannon Stapleton | Reuters

Wall Street analysts are scrambling to asses the damage in the latest fallout in the trade war between the U.S. and China.

President Donald Trump recently announced that a new 10% tariff would go into effect on $300 billion worth of Chinese goods beginning September 1.

The S&P 500 is down around 2% since then and analysts fear the ratcheting up of trade tensions along with the new tariff will lead to trouble for a wide range of stocks they cover.

CNBC did a deep dive through the most recent Wall Street research to see what stocks analysts fear will be most hurt by the latest tariff. They include names such as Dollar Tree, Abercrombie & Fitch, Rio Tinto, O'Reilly Automotive, Michaels Companies, Advanced Micro Devices, & Nvidia.

Retail is widely believed to be one of the sectors most impacted because the latest round of tariffs target clothing and other consumer goods according to many analysts.

This week, Dollar Tree was the subject of a downgrade by Deutsche Bank analysts. The firm said that while it liked the discount retailer, it couldn't ignore the looming tariff threat.

"We still view [Dollar Tree] as a high quality retailer with a well regarded management team ... However, we can't ignore choppy execution at Family Dollar, and our refreshed tariff math ... shows material downside risk to estimates, with [Dollar Tree]  among the most vulnerable companies in our coverage," they said.

The new tariff couldn't come at a worse time for multinational semiconductor companies like Advanced Micro Devices & Nvidia.

"Supplier shipment times already in the critical window," Mizuho analysts said.

"The sudden announcement does not leave much time for suppliers to build inventories or pull-in as shipment times are 2-4 weeks and the tariff start is 4 weeks away. ... We believe normal sea shipping times are 2 weeks from China to the West coast to 4 weeks to the East coast NY ports," the analysts said.

"Unless the U.S administration gives a waiver to shipments already enroute before the Sep-1st start date or where orders have been placed, theoretically we could see tariff impact on many of the shipments start sooner."

Recently, analysts at Credit Suisse attended an investor day for auto parts retailer O'Reilly Automotive. While the brokerage said it came away impressed from the meetings, it admitted it still couldn't recommend the stock.

"The near to medium term story includes a challenging recipe of using price increases to offset tariffs and SG&A cost pressures, but with added uncertainty now on elasticity and how the consumer will respond to the next rounds of price increases. That, combined with consensus 2020 estimates that embed improving operating margins, and the stock's premium valuation, keeps us on the sidelines," they said in their note to clients.

Here's what else analysts are saying about stocks caught in the U.S.-China trade war:

Deutsche Bank- Dollar Tree, downgraded to hold from buy

"We now find risk/reward balanced, especially with renewed concerns around tariffs. On the one hand, we still view DLTR as a high quality retailer with a well regarded management team at the helm, as well as rock solid trends at the Dollar Tree segment. However, we can-not ignore choppy execution at Family Dollar, and our refreshed tariff math for a 10% List 4 impact shows material downside risk to estimates, with DLTR among the most vulnerable companies in our coverage.

According to TipRanks, Dollar Tree is a Moderate Buy consensus with an average analyst price target of $114 (22% upside potential).

Wedbush- Abercrombie & Fitch, Neutral rating

"We see outsized risk at Abercrombie & Fitch, Zumiez, and Express, which according to our analysis, have the highest estimated EPS impacts under our coverage from the proposed 10% tranche 4 tariffs at 13.5%, 19.5%, and 123.0% of FY19 Consensus EPS, respectively. We also see incremental risk should China retaliate by tightening control over foreign retailers driving revenues in China such as ANF, which has significant international revenue exposure at 36% of sales, and a rapidly growing market share in China."

According to TipRanks, Abercrombie & Fitch is a Hold consensus with an average analyst price target of $22 (27% upside potential).

Jefferies- Rio Tinto, downgraded to hold from buy

"We acknowledge the argument that Trump's tariffs could be a catalyst to spark a real trade deal. However, the possibility that these tariffs lead to a further escalation of the trade wars to the point where global demand for metals is significantly impacted has clearly risen. .. .As we have discussed in our research, the RMB devaluation is something we had been concerned about and is a negative for commodity prices - especially iron ore and coal."

According to TipRanks, Rio Tinto is a Hold consensus with an average analyst price target of $57 (9% upside potential).

Credit Suisse- O'Reilly Automotive, Neutral rating

"We also came away with an appreciation for how it's managing through external challenges such as tariffs and weather. That said, the near to medium term story includes a challenging recipe of using price increases to offset tariffs and SG&A cost pressures, but with added uncertainty now on elasticity and how the consumer will respond to the next rounds of price increases. That, combined with consensus 2020 estimates that embed improving operating margins, and the stock's premium valuation, keeps us on the sidelines."

According to TipRanks, O'Reilly Auto is a Strong Buy consensus with an average analyst price target of $441 (19% upside potential).

Bank of America- Michaels Companies, Underperform rating

"For Underperform-rated arts & crafts retailer MIK, China represents its largest source country, and the List 4 tariffs will likely result in incremental cost pressure."

According to TipRanks, Michaels Companies is a Hold consensus with an average analyst price target of $10 (47% upside potential).

Mizuho- Advanced Micro Devices, Neutral rating; Nvidia, Buy rating

"We note some of the key suppliers that could see impact with laptops (INTC, AMD - though INTC saw a pull in ahead of tariff), gaming consoles (AMD and NVDA). and smartphone RF chain. The sudden announcement does not leave much time for suppliers to build inventories or pull-in as shipment times are ~2-4 weeks and the tariff start is ~4weeks away. Supplier Shipment times already in the critical window. We believe normal sea shipping times are ~2weeks from China to the West coast to ~4weeks to the East coast NY ports. Unless the U.S administration gives a waiver to shipments already enroute before the Sep-1st start date or where orders have been placed, theoretically we could see tariff impact on many of the shipments start sooner."

According to TipRanks, Advanced Micro Devices is a Moderate Buy consensus with an average analyst price target of $34 (18% upside potential).

According to TipRanks, Nvidia is a Moderate Buy consensus with an average analyst price target of $187 (23% upside potential).