Buy Anti-Amazon Stock At Home

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While most investors remain focused on major tech works and new markets such as e-commerce and the cloud, in which Amazon.com Inc. (AMZN) and other known actions come to mind, bargain hunters may want to consider big-box retailer At Home Group Inc. (HOME), dubbed the anti-Amazon selection in a recent Barron report.

‘Treasure Hunt’ feels hard to replicate online
While shares of Seattle-based e-retail giant Amazon have climbed nearly 35% YTD despite the massive sell-off of big technologies and weaker-than-expected earnings released last week, Shares of Plano, Texas-based At Home Group have underperformed the market in 2018, a 13% drop from the market.%

At Home executes a 100% brick-and-mortar strategy, with its low-cost stores in size averaging 110.00 square feet. The retailer has gained a rise in fast fashion for home decoration, leading indoor and outdoor decoration products such as carpets and furniture, bedding and kitchen and garden products. Working closely with suppliers, the company seeks to bring the latest trends and items to stores. About 40% of the products sold by At Home have been available on the market for less than a year, according to CEO and President Lee Bird, as cited by Barron’s.

Jefferies analysts are optimistic about the traditional retailer’s shares, writing that At Home’s “treasure hunt” feeling is hard to replicate online. Analyst Jonathan Matuszewski says the concept is particularly appealing to Millennials, who comprise about 30% of At Home customers and have the highest revenue growth in the U.S.

Analyst Jefferies sees home as a significant competitive threat against home improvement stores, discounters and other home decor specialists.

Meanwhile, the overall market is expected to grow steadily in the coming years. Wells Fargo senior analyst Zachary Fadam expects the home decor market, estimated at $ 200 billion in 2017, to grow by 2% annually in the coming years.

Big Box Retailer to withstand tariffs, headwinds on housing construction
Going forward, while $ 1.7 billion at home still accounts for a small percentage of the market, with $ 1.1 billion in sales over four quarters and little brand recognition, its growth opportunities are significant. Bird says the retailer could eventually have more than 600 stores in the U.S. As At Home increases its marketing spend, targeted at 3% of sales in 2019, it should increase its brand recognition by 11% currently, to catch up with Target Corp. (TGT) at 41% and TJX’s (TJX) Home Goods at 32%, Jefferies noted.

Bulls are also bullish on at Home’s Insider Perks loyalty program. The company’s response to Amazon Prime garnered 2.7 million members in its inaugural year.

At Home has recorded 17 consecutive quarters of frontline growth of at least 20%. The Street is targeting 23% sales growth this year, including new store openings and a 22% rate in 2019.

While the Bears continue to cite tariffs and a downward cycle in the homebuilding space, Bird says the duties will not have a material impact on earnings in the current or next fiscal year. Jefferies, which sees shares gaining nearly 78% to reach $ 47 within 12 months, says suppliers will be willing to cut prices and “swallow a share of fees,” given that At Home is “one of their fastest growing accounts.”

The value approach and low prices should protect against an economic downturn, Bird noted. Wells Fargo Bulls agree, citing At Home’s price to forward multiple earnings of 18 times, more than 50% lower than other high-growth retailers, including Ollie’s Bargain Outlet Holdings (OLLI), Five Below (FIVE) and National Vision Holdings (EYE).

 


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