Whether through increased retail sales by stimulus or unprecedented flexibility to address various near-term investor concerns, the Trump tax reform positions the retail industry exceptionally well in 2018 and we are forced to acknowledge this by raising our sector rating to Positive from Negative
The AMZN competitive threat becomes slightly less worrisome as many traditional retailers will likely have more room to invest in price.
We are upgrading LOW and TGT to Overweight and Equal Weight, respectively: The upgrade for both names is based upon similar reasons, which come down to: 1) expected beneficiary of said retail stimulus, and 2) improved flexibility to make necessary investments without negatively impacting EPS results. We still maintain many of our prior longer-term concerns regarding both companies but simply believe that there are too many tailwinds to ignore over the next twelve months.
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