Mastercard SpendingPulse, which provides data on national retail sales across all payment types, announced that U.S. retail sales (excluding automotive) grew 7.6% year-over-year this holiday season (from November 1 through December 24). According to the data, e-commerce penetration continued to increase, which is a positive signal for Amazon (NASDAQ:AMZN). Moreover, consumers looked for value deals, which puts Costco (NASDAQ:COST) in the spotlight.
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Mastercard SpendingPulse reported that online sales increased 10.6% year-over-year. Meanwhile, e-commerce sales accounted for 21.6% of total retail sales in 2022, compared to 20.9% in 2021.
The report also highlighted that consumers looked for value offerings and lucrative deals due to the high inflation. What’s more surprising is that in-person dining pushed restaurant sales higher. Generally, restaurants witness lower sales and profitability during Q4 as inclement weather impacts in-person dining.
Mastercard’s (NYSE:MA) senior advisor said that consumers diversified their purchases during this holiday to “accommodate rising prices.” Given the pressure on consumer spending amid high inflation and interest rates, the current year’s holiday sales growth rate came in below the 8.5% increase registered in the prior year.
Against this backdrop, let’s find out what TipRanks’ data indicates for AMZN and COST stocks.
Is Amazon a Buy, Hold, or Sell?
Amazon’s stock has dropped about 49% year-to-date and is trading near its 52-week low of $82.25. A slowdown in its growth rate and cost headwinds dragged AMZN stock lower. Nevertheless, the pullback could be a buying opportunity for long-term investors as the company continues to invest in its cloud business. Moreover, growing e-commerce penetration and AMZN’s leadership position in the e-commerce space bode well for growth.
Amazon stock is a Strong Buy on TipRanks. It has received 34 Buy and three Hold recommendations. Meanwhile, analysts’ average price target of $140.03 implies a solid 64.24% upside potential.
TipRanks’ data shows that hedge funds capitalized on the correction in AMZN stock and bought 26.3M stock last quarter. Meanwhile, AMZN has a “Perfect 10” Smart Score on TipRanks. (Stay abreast of the best that TipRanks’ Smart Score has to offer.)
What is the Prediction for Costco Stock?
Costco has delivered solid comparable sales in 2022 despite macro and inventory issues hurting the retail sector. Costco’s value proposition continued to drive consumers towards its stores amid inflationary pressure. However, valuation concerns have weighed on COST stock. Meanwhile, the company faces tough year-over-year comparisons in the coming quarters, which could negatively impact its sales growth rate.
Nevertheless, Costco’s high membership renewal rates (which stood at 92.5% for the U.S. and Canada at the end of Q1 and 92.4% worldwide), expected increase in membership fees, and value pricing will likely support its growth.
COST stock has received 18 Buys and five Holds for a Strong Buy consensus rating on TipRanks. Moreover, analysts’ average price target of $557.14 implies an upside potential of 20.42%.
However, our data shows that COST has negative signals from insiders and hedge fund managers. Insiders sold COST stock worth $3.6M last quarter. Moreover, hedge funds reduced their holdings by 1.8M shares. Overall, COST stock carries a Neutral Smart Score of six.
Bottom Line
Amazon is poised to benefit from the growing penetration of e-commerce sales in overall retail. Further, its “Perfect 10” Smart Score and low price make it attractive at current levels. On the other hand, Costco could continue to outshine its peers on the back of its value pricing and deliver healthy comparable sales.
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