These retail stocks are cheap as the economy shows signs of strength

Published Mon, Jun 5 20233:22 PM EDTUpdated Mon, Jun 5 20235:35 PM EDT

The economy is showing signs of resiliency, which could mean big gains for some retail stocks. There are also some names in the space trading on the cheap. CNBC Pro used FactSet data to screen the S & P 1,500 consumer discretionary distribution and retail industry group, along with its consumer staples counterpart, to find the stocks trading at a discount relative to the industry average. CNC Pro then filtered for names that met the following criteria: Average rating of buy or overweight. Upside to average price target of at least 30%. Market cap of $500 million or more. Among the stocks that made the cut are Etsy , Target and Ulta Beauty . Etsy trades at a relative forward price-to-earnings multiple of 0.54. Analysts are also generally bullish on the stock with an average rating of overweight and a consensus price target implying upside of 46%. Shares of the e-commerce seller have tanked 28% year to date. Last month, the company issued mixed revenue guidance for the second quarter. Target, meanwhile, trades at a relative valuation ratio of 0.70, with analysts on average expecting a 36% gain over the next 12 months. The company in May reported better-than-expected first-quarter earnings , even though revenue barely budged year over year. The company also faced backlash over some LGBTQ+ themed merchandise. Evercore ISI analyst Greg Melich said May 26: "We think Target will get through this, and while the situation remains fluid, we believe the risk is less than what AB InBev has seen with the recent Bud Light fiasco, which has seen volumes fall ~25%." "The controversy surrounds a fraction of a seasonal assortment which totals ~2,000 SKU, a small portion of the 80,000+ in the store. So, the sales dollars [are] relatively insignificant," Melich added. TGT YTD mountain TGT in 2023 Ulta also made the list with a relative forward P/E of 0.89 and a price target that implies upside of more than 30%. Shares of the cosmetics maker are down more than 10% in 2023. Other stocks that made our list include Bath & Body Works , Chefs' Warehouse , Signet Jewelers and Victoria's Secret . Bottom line: For investors looking to bet on a resilient economy, these stocks could be a way of doing it at a discount.