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Attention, shoppers: ‘Amazon effect’ is creating bargain stocks

An AmazonFresh Pickup location in Seattle.

There are many companies being unfairly punished by the “Amazon effect,” analysts at Jefferies Equity Research said in a report.

And that means there are opportunities for investors to scoop up stocks at bargain prices, according to the New York-based firm.

The “Amazon effect,” in which traditional retailers are being hurt by Amazon’s online sales, has been going on for years and will continue for many more. But things seem to be coming to a head this year, as shares of food retailers and manufacturers of venerable food brands have tanked. The retail industry was sent reeling when Amazon.com Inc. AMZN, +0.18% last month announced the acquisition of Whole Foods Inc. WFM, +0.00%

The Jefferies analysts based their conclusions on qualitative assessments, using market share, sales growth and other measures. They said forward price-to-earnings valuations for companies in industries considered “vulnerable” to Amazon were 46% lower than those “resistant” to the online-retailing giant. That suggests “real opportunity” for certain ‘misclassified’ stocks,” Jefferies said.

Here are four stocks the Jefferies analysts believe have been overly discounted because of perceived risk from Amazon:

Company Ticker Jefferies rating Closing price - July 18 Jefferies price target Implied 12-month upside based on Jefferies price target Total return - 12 months
Wal-Mart Stores Inc. WMT, +0.20% Buy $76.20 $88 15% 6%
Hain Celestial Group Inc. HAIN, +2.52% Buy $40.13 $50 25% -23%
Foot Locker Inc. FL, -1.15% Buy $48.58 $80 65% -16%
Advance Auto Parts Inc. AAP, +2.34% Buy $100.30 $130 30% -39%
Source: Jefferies Equity Research, FactSet

You can click on the tickers for more news coverage, ratings, valuation ratios, financial statements and filings.

The Jefferies team considered many factors, including proximity of Whole Foods stores to competing food retailers. For example, Jefferies analyst Chris Mandeville said that if Amazon takes an...


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