Back To School: 2 Stocks To Profit From Record-High College Shopping

We are halfway through August, and parents and young people around the country are preparing to pack up and head off to college. So Zacks is here to look at two companies with huge exposure in the college shopping market that also happen to have high Zacks Ranks.

As most students and parents know, going back to school shopping can be very expensive. For elementary and high school students the costs are enormous. But parents and kids headed back to college or for the first time know that the costs are much higher. In fact, overall back to school spending for college students is almost double that of K-12.

Notebooks, backpacks, and new clothes are expensive, but laptops, speakers, futons, and microwaves cost a whole lot more.

K-12 back to school spending is projected to jump 8% to $29.5 billion, according to a National Retail Federation survey. However, college kids and their families are expected to spend a total of $54.1 billion on back to school related shopping, which is up from $48.5 billion in 2016.

The 2017 college spending projections place this year ahead of the previous high water mark reached in 2012. The staggering figure is due in part to a rise in college enrollment, along with reviewed consumer confidence—but also because big-ticket purchases and the sheer amount of goods just add up.

Now, let’s take a look at two big-name companies with high Zacks Ranks that could turn college student spending into major profits.

Best Buy (BBY)

Best Buy (NYSE:BBY) is a Zacks Rank #2 (Buy) that scored an “A” for Value and a “B” for growth in our Style Score system. The electronics powerhouse has a market cap of $18.5 billion and a forward PE of 15.61.

Best Buy’s estimated earnings growth rate for the current year is 9.2%, which is far above the industry average of 3%. Shares of Best Buy have skyrocketed from $32.32 a share a year ago to rest at over $60 per share today, which is only a few dollars below its 52-week high.

Best Buy’s massive climb has been spurred in part by the company’s commitment to grow its online sales. In the most recent quarter, the company’s domestic online comparable sales jumped by 22.5% from the year-ago period.

The company—which sells computers, printers, TVs, tablets, video game consoles and more—could really cash in on the back to college market. Based on the National Retail Federation report, electronics will be the top spending sector out of all of the back to school related categories at $12.8 billion.

Wal-Mart (WMT)

Wal-Mart (NYSE:WMT) is a Zacks Rank #2 (Buy) and sports an overall VGM grade of “A.” The we-sell-everything retailer’s current market cap sits at $244 billion, and the company is coming off a solid second-quarter earnings report.

Wal-Mart beat earnings and revenue expectations, and even showed that it can contend in retail’s war against Amazon (NASDAQ:AMZN). The company posted adjusted earnings of $1.08 per share, which just topped the Zacks Consensus Estimate and prior-year quarter’s adjusted earnings of $1.07.

On top of that small beat, the company posted revenues that were up 2.1% year-over-year to $123.4 billion, which also surpassed our Zacks Consensus Estimate. Walmart U.S. same-store sales climbed 1.9%, while Sam’s Club comparable store sales gained 1.2%.

Maybe more importantly, management noted that the company’s online sales and GMV climbed 60% and 67%, respectively.

Shares of Wal-Mart dipped on Thursday despite its strong report, but that seems to have more to do with the overall market than Wal-Mart. The company’s stock currently sits $2 below its 52-week high of $81.99 a share.

Bottom Line

Back to school college shopping is a big-time moneymaker for many retail outlets around the country. Best Buy and Wal-Mart are both major names with large exposure in this highly coveted early fall spending spree.

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