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We recently published a list of the 12 Cheap Retail Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Walgreens Boots Alliance, Inc. (NASDAQ:WBA) stands against other cheap retail stocks to buy right now.
Will Trump’s Tariffs Impact Retail Stocks?
The Trump administration proposed 25% tariffs on goods imported from Canada and Mexico and 10% tariffs on Chinese-imported goods. Analysts believe these tariffs will affect retail stocks and the goods manufactured in the tariffed countries, at least theoretically. While tariffs on Mexico and Canada have been delayed, they have kicked in for China, according to Yahoo! Finance. This has led to several retailers moving sourcing out of China to contain costs.
Simeon Siegel, retail analyst at BMO Capital Markets, appeared in an episode of Yahoo! Finance’s Opening Bid podcast. Talking about the potential effect of Trump’s tariffs on retail stocks, he was of the opinion that we are focusing on tariffs more than is required. Taking a purely business perspective, he reasoned that a tariff is nothing more than a cost input going up, quite like how the cost of cotton, shipping, or labor can rise.
When such cases materialize, companies take steps to deal with the rising costs, but they don’t become all-encompassed by them. Siegel posited that the uncertainty surrounding this scenario is dramatically more concerning than the actual severity. Approaching the situation as an analyst, he said that he is focusing on companies with the pricing power and capability to deal with rising costs, regardless of why the costs are increasing. Healthy brands with healthy businesses are thus the way to approach this conversation.
Big Tech’s Massive CapEx Plans: Will They Affect Retailers?
Big Tech’s massive capex plans dictate the potential spending of a cumulative $325 billion in capital expenditures and investments in 2025, primarily due to a strong commitment to building AI infrastructure. While it does not seem evident, Morgan Stanley is of the opinion that retail stocks might be the overlooked winners of these significant AI investment plans. AI “hyperscalers” are invested in a spending race, which might prove to be a tailwind hidden in plain sight for the retail sector, which is already evolving due to the technological leap surrounding AI, automation, and data.
Equity analyst Simeon Gutman said that while retailers may not be as invested in pursuing AI infrastructure investments as tech companies, “the tech capex boom suggests retailers are on the verge of and should benefit from a technology inflection.” The announced $325 billion may not be an initiative taken to directly impact the retail sector, but Morgan Stanley predicts that it may result in a capex boost amidst retailers in a position to afford it. The boom may present big-box retailers with significant investing opportunities to improve and augment automation, in-store experiences, and advertising. Consequently, market share gains may materialize for retailers in the best position to invest.