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Mizuho launched coverage on Tuesday of 15 companies in the Consumer Hardlines and Consumer Internet verticals. The firm took an optimistic view for the balance of 2024 due to the expectation for a stable spending backdrop. Top picks include Lowe’s (NYSE:LOW) within core Consumer Hardlines and large caps, Wayfair (NYSE:W) within our Consumer Internet coverage, and Mister Car Wash (NYSE:MCW) within small caps.
Analyst David Bellinger pointed to broader spending measures that at firming up, despite some pressures on consumers. Mizuho’s outlook embeds a tepid retail spending environment characterized by low single-digit growth in comparison to the latest adjusted retail sales data for February at just +2.2% year-over-year.
“The underpinnings of healthy employment and real wage growth support our view, despite the cumulative effect of inflation on purchasing power and more discretionary areas of spending,” noted Bellinger.
As for the Federal Reserve, Mizuho thinks consumer spending is strong enough to not warrant any immediate Fed actions, but also views investor expectations for rate cuts into 2025 as serving as a positive factor to support a bullish stance on home improvement retailers Home Depot (HD) and Lowe’s (LOW).
Overall, Mizuho took a more selective risk-on approach to its stock recommendations. Buy-rated names included Home Depot (HD), Lowe’s (LOW), Wayfair (W), AutoZone (AZO), O’Reilly (ORLY), Five Below (FIVE), Mister Car Wash (MCW), and Valvoline (VVV). The overall top picks included Lowe’s (LOW) within core Consumer Hardlines and large caps, Wayfair (W) within Consumer Internet coverage, and Mister Car Wash (MCW) within small caps coverage. Meanwhile, Neutral ratings were doled out on Advance Auto Parts (AAP), CarMax (KMX), Floor & Decor (FND), Tractor Supply (TSCO), and Chewy (CHWY). The only stock that Mizuho started off with a bearish view was Stitch Fix (SFIX). Bellinger and team warned that SFIX’s deteriorating customer base puts the longer-term viability of the business model into question. The firm initiated coverage on SFIX with an Underperform rating.