These stocks could rally if Biden's $1,400 stimulus checks are approved

Published Wed, Feb 10 202111:00 AM EST

With Democrats edging closer to passing President Joe Biden's $1.9 trillion stimulus plan, Wall Street's analysts are keeping a close eye on the stocks and industries that could be set for an upswing. Brokerages from Stifel to Deutsche Bank write that Americans will likely spend what are expected to be $1,400 stimulus checks much in the same way they did before. As such, many have advised their clients to double down on equity of popular stay-at-home names like fast-service takeout restaurants or pet shops. Others who are less focused on Biden's near-term goals still recommend a handful of infrastructure or renewable energy plays. "As the debate over the $1.9 trillion Biden stimulus plan is heating up, while individual provisions are going to be important, what is more important is to take a step back and recognize a fundamental shift in US policy that is occurring," wrote Ed Mills, managing director and Washington policy analyst at Raymond James. "Economic crises are once again political crises, and we are increasingly likely seeing an elevated social safety net being crafted by the Biden Administration." Though the final income cutoff is up for debate, Deutsche Bank says a sudden influx of $1,400 checks could lead to another jump in shares of Dollar General . The firm upgraded the stock to buy from hold on Tuesday and said that additional stimulus will allow the discount retailer to post strong same-store sales figures two years in a row. "We recognize that investor focus remains on recovery stocks, yet we note that DG shares are now back to levels experienced in summer 2020, having fallen 11% off their highs," wrote Paul Trussell, managing director at Deutsche Bank. "At these levels, we expect DG to outperform other 'staple' stocks and likely the market overall." The brokerage has a 12-month price target on Dollar General of $241. The company's share price was $203.49 at Tuesday's close. Stifel food-industry analyst Chris O'Cull thinks more stimulus could prompt better sales at quick-service chain Taco Bell. The company, a subsidiary of Yum! Brands , is likely seeing a sales acceleration even without a family-oriented menu, he wrote. "Taco Bell has less of a family-meal skew, which has weighed on its performance relative to other QSR categories," O'Cull wrote on Monday, referring to quick-service restaurants. "Still, the brand continued to comp positively, and based on consolidated Yum domestic comps up mid-teens, likely accelerated meaningfully in January alongside improving consumer mobility and the distribution of stimulus checks," he wrote. Stifel has a $115 price target and a buy rating on shares of Yum. Shares of the company closed at $103.12 on Tuesday. The coronavirus pandemic's impact on pet ownership will also continue to benefit retailers like Petco, according to Wells Fargo. Analyst Zachary Fadem, who has an overweight rating on Petco , on Monday touted the stock, reiterated his $30 price target and highlighted four potential catalysts ahead. "1) Added government stimulus benefits could present additional consumer wallet flexibility; 2) prolonged COVID-driven lockdowns could result in further increases in household pet ownership; 3) inflation in pet food and feed input costs; and 4) consumer behavior likely fluctuates around the distribution of the COVID-19 vaccination." His target implies a 12% rally from Tuesday's close.

A customer carries a dog near a Petco Animal Supplies shopping bag outside a store in New York.

Angus Mordant | Bloomberg | Getty Images

Brokerages from Stifel to Deutsche Bank write that Americans will likely spend what are expected to be $1,400 stimulus checks much in the same way they did before.

As such, many have advised their clients to double down on equity of popular stay-at-home names like fast-service takeout restaurants or pet shops.