The Black Friday trade: Wall Street's stock winners for the holiday season

Published Wed, Nov 24 202112:05 PM ESTUpdated Wed, Nov 24 20212:50 PM EST

Consumers are on track to spend big this holiday season and Wall Street analysts have their eyes set on certain retail stocks they believe will outperform. This year is poised to see the strongest holiday shopping season in more than two decades, according to Cowen. The firm expects 11% to 13% year-over-year holiday sales growth. The projected record consumer spending levels come even in the face of higher prices, labor shortages and supply disruptions. "The lean inventory profile across the industry has not curtailed demand, which has led to higher average selling prices and improved gross margins even after absorbing incremental higher freight costs," Cowen's John Kernan said in a recent note. Spending is already at 58% of 2018 levels, compared with 48% by this time last year, according to Barclays' credit card transaction analysis. "Holiday spending is off to a blistering pace in 2021," Barclays' Ryan Preclaw said in a note Monday. "Even a rather sharp fade at the end could still leave us with the biggest holiday spending growth of the recent past." Some pandemic-driven shopping trends from 2020 should stick around this year. Consumers still prefer online shopping and are shopping earlier in the holiday season, according to a Goldman Sachs survey. In fact, 25% of consumers who intend to holiday shop this year have plans to complete their checklist by Black Friday, Goldman's survey found. Meanwhile, categories like experiences and apparel, including athletic attire, are expected to see the biggest gains from last year, Goldman said. Companies that benefit from these shopping trends and those that manage supply and labor challenges best could emerge from the holiday season as winners. Take a look at five top picks on the Street. Amazon is an analyst favorite this season. The company maintains roughly a 40% share of U.S. e-commerce, according to JPMorgan. The retail giant's expanded fulfillment network, elevated seasonal hiring and early holiday promotions should cement its leading position, the firm said. "AMZN remains our top overall idea," JPMorgan's Doug Anmuth said in a note Wednesday. Amazon is the most popular destination for holiday shopping, Goldman's consumer survey found, with 34.6% of participants naming the company as their planned top holiday shopping retailer. Big-box retailers Walmart and Target are also Wall Street favorites for the holiday season. Walmart is the second most popular top shopping destination behind Amazon in Goldman's survey, while Target showed the greatest share growth. Meanwhile, Target is one of Cowen's top picks for the holidays. Like Amazon, Walmart and Target both ramped up season hiring and pulled forward their Black Friday promotions, "which should reduce risk of untimely deliveries or limited inventory availability," JPMorgan's Anmuth said. Several firms are bullish on Etsy for the holidays. The online marketplace stands to benefit from the supply chain environment, analysts say. Shoppers can "look to Etsy sellers for more reliable, later shipping as other e-commerce companies face supply chain issues the mom & pop sellers on Etsy can avoid," Loop Capital Markets' Anthony Chukumba said in a Monday note. Plus, Dick's Sporting Goods could emerge as a holiday winner. Consumers are planning to spend more this year on athletic footwear and apparel, according to Goldman's survey. Dick's Sporting Goods is a top pick at Cowen for holiday season share gainers. "Athleisure and athletic footwear trends are robust, and we think the casualization trend in apparel and footwear is accelerating into FY22," Cowen's Kernan said. —CNBC's Michael Bloom contributed reporting.

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Consumers are on track to spend big this holiday season and Wall Street analysts have their eyes set on certain retail stocks they believe will outperform.