As inflation hits consumer spending, several stocks will not only weather the storm, but are poised to rise, according to Barclays. The consumer-related names were chosen based on Barclays’ view that spending growth, once the key driver of economic expansion during Covid, is now fading to normal or worse. The firm also believes that high global inflation will take some time to ease and that food inflation, in particular, may be stickier than other inflation trends. In addition, tighter financial conditions may affect the housing sector more than expected, Barclays said. Home prices are still higher than a year ago, but gains slowed from the rapid pace recorded in June, according to mortgage software, data and analytics firm Black Knight. Barclays’ note on Tuesday comes after retail sales rose 1% in June. However, the figures are not adjusted for inflation. “While June retail sales may make consumers look more resilient than previous estimates suggested, the strength came primarily from gasoline, non-store retail and auto sales, which our economists believe they are likely to translate into a sizeable slowdown after accounting for inflation,” analysts led by Terence Malone wrote. In addition, high-frequency credit card data from Barclays shows a slowdown in spending in June by both high- and low-income consumers. “Households are finally reacting to higher prices and tighter financial conditions,” the analysts said. Stock Picking In compiling this list, Malone’s team asked analysts at the bank’s firm which stocks they would hold during this period of declining consumer spending. Barclays analysts rate all selected stocks overweight. Here are five names that made the cut. Expedia: $157 price target Barclays analysts see upside for Expedia thanks to the Internet travel company’s alternative lodging platform, VRBO, as well as its $750 million reduction in fixed costs during Covid, which analysts believe will likely help expand its margin. Barclays has a $157 per share price target on the stock, implying a 52.7% upside from Monday’s close. McDonald’s: $285 price target. Barclays likes the fast-food chain’s unique liquidity, size and scale in the industry, as well as its strong fundamental growth in comparable store sales, relatively modest balance sheet leverage and real estate holdings. Shares of McDonald’s could rally 7.8% from Monday’s close, according to Barclays’ price target. Ross Stores: $85 price target The discount department store is among retailers that Barclays believes have strong brands or sell strong brands, or are in a growing secular segment of retail, such as off-price . Shares of Ross Stores are up 3.2% since Monday’s close, according to the bank’s price target. PepsiCo: $183 price target Barclays said beverage companies like PepsiCo “still enjoy rational pricing,” which could support its shares. The bank sees a 3.4% rise for the drinks and snacks giant, based on Monday’s closing price and Barclays price target. Take-Two Interactive Software: $171 price target Barclays called the technology stock’s valuation “too cheap to ignore” and noted that the video game sector is relatively well positioned given the high value per dollar you offer. According to Barclays’ price target, Take-Two Interactive could rise 34% from here. —CNBC’s Michael Bloom contributed to this report.
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