Consumer discretionary stocks appear to be among the winners from the ongoing Trump trade following the U.S. presidential election. The market rally is broadly based, but this sector stands out. The reason is simple: expectations have changed for the better.
Consumer discretionary companies manufacture or deliver nice-to-have but not must-have products and services. Some of these companies weathered the one-two punch of inflation and interest rates because they appeal to more affluent consumers. However, in recent months, many of those winners lowered their top or bottom-line forecasts based on expectations of weak consumer demand.
However, with expectations for an administration that will be more accommodating to businesses and consumers, investors are starting to wade back into this sector. In this special presentation, we're looking at seven consumer discretionary stocks that have caught this wave and are projected to post earnings growth that will justify a higher share price.
Quick Links
- Netflix
- Marriott International
- Royal Caribbean
- Flutter Entertainment
- adidas
- Birkenstock
- Mohawk Industries
#1 - Netflix (NASDAQ:NFLX)
For a stock that doesn’t pay a dividend, Netflix Inc. (NASDAQ: NFLX) has certainly rewarded investors with a strong total return of around 172% in the last five years. Many investors know that came with a sharp downturn at the beginning of 2022, but the last two and a half years have been smooth sailing for the streaming giant.
The turnaround is based largely on the company’s adoption of an ad-supported tier and, more importantly, the revenue that comes with it. To the company’s delight, subscribers aren’t balking at having their streaming interrupted. In fact, a recent survey by Deloitte noted that almost 40% of consumers under 41 would like to interact with the advertisements.
And with the company’s foray into live sports, even premium subscribers will have to watch ads. Plus, the company says that as part of its programming strategy, even premium subscribers may have their content interrupted by a few commercials in the coming years.
The Netflix analyst forecasts on MarketBeat give the stock a Moderate Buy rating with a $748.55 price target. This suggests that many investors believe NFLX stock, which trades at 40x forward earnings, is too expensive. But the company’s ad-supported tier now has over 40 million subscribers—that’s larger than the total subscriber base of both Peacock and Apple TV+. It's the clear winner in streaming and is justifying its premium price.
About Netflix
Netflix, Inc provides entertainment services. It offers TV series, documentaries, feature films, and games across various genres and languages. The company also provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, TV set-top boxes, and mobile devices.
Read More - Current Price
- $909.05
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 10 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $807.70 (11.1% Downside)
#2 - Marriott International (NASDAQ:MAR)
Marriott International Inc. (NASDAQ: MAR) is another stock that analysts believe may be overvalued. As of November 11, 2024, MAR stock was trading for $284.40 per share, and analysts were forecasting a price target that was 8.9% lower. There’s some concern over the company’s mixed third-quarter 2025 earnings report. However, analysts' forecasts have been mixed since the company’s report.
MAR stock trades at around 29x forward earnings, which is about the sector average. And the company has a broad portfolio of premium brand names that all cater to a more affluent consumer who is likely to continue to prioritize travel. In the company’s latest earnings report, Marriott management said its strong pipeline (i.e. new construction) was a key reason for its forecast of unit growth in a range of 4% to 5% in 2025.
In the last five years, MAR stock has delivered a 117% total return to investors. That includes the company’s dividend, which was suspended in 2020 but has since returned. Not only that, but the company has been aggressively increasing at an annualized three-year growth rate of approximately 59%.
About Marriott International
Marriott International, Inc engages in operating, franchising, and licensing hotel, residential, timeshare, and other lodging properties worldwide. It operates its properties under the JW Marriott, The Ritz-Carlton, The Luxury Collection, W Hotels, St. Regis, EDITION, Bvlgari, Marriott Hotels, Sheraton, Westin, Autograph Collection, Renaissance Hotels, Le Méridien, Delta Hotels by Marriott, Tribute Portfolio, Gaylord Hotels, Design Hotels, Marriott Executive Apartments, Apartments by Marriott Bonvoy, Courtyard by Marriott, Fairfield by Marriott, Residence Inn by Marriott, SpringHill Suites by Marriott, Four Points by Sheraton, TownePlace Suites by Marriott, Aloft Hotels, AC Hotels by Marriott, Moxy Hotels, Element Hotels, Protea Hotels by Marriott, City Express by Marriott, and St.
Read More - Current Price
- $283.96
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 14 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $266.25 (6.2% Downside)
#3 - Royal Caribbean (NYSE:RCL)
The advice to be greedy when others are fearful took on a new meaning early in 2020. That's particularly true if you were investing in a cruise line like Royal Caribbean Cruises Ltd (NYSE: RCL). The entire industry was in limbo, and many cruise lines had to take on significant debt to survive.
But it’s safe to say the industry is back, and it’s baby boomers who are leading the way. Cruise Lines International Association (CLIA) recently reported that 24% of cruise line passengers are baby boomers, tied with GenX. The former group has more discretionary income for travel. And that’s reflected in the fact that 84% of baby boomer travelers said they planned to take another cruise.
Royal Caribbean is a solid option to play this sector. The company's most recent earnings report showed it met revenue expectations. Royal Caribbean reported a load factor of 111%, showing strong demand and capacity utilization. That is reflected in the company’s strong earnings growth, which it expects to continue into 2025.
At 19x forward earnings, RCL stock has an attractive valuation and analysts have been raising their price targets since the report was released. Plus, in July, the company reinstated its dividend that was suspended in 2020.
About Royal Caribbean Cruises
Royal Caribbean Cruises Ltd. operates as a cruise company worldwide. The company operates cruises under the Royal Caribbean International, Celebrity Cruises, and Silversea Cruises brands, which comprise a range of itineraries. As of February 21, 2024, it operated 65 ships. Royal Caribbean Cruises Ltd.
Read More - Current Price
- $238.43
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $239.75 (0.6% Upside)
#4 - Flutter Entertainment (NYSE:FLUT)
Sports betting has become a dominant form of entertainment among many demographics. And Flutter Entertainment plc (NYSE: FLUT) is a name to watch. Flutter is domiciled in Ireland, but investors will know the company’s premiere online sportsbook FanDuel, which operates in the United States.
The company has been showing strong revenue growth since states began legalizing sports betting in 2018. In fact, if you back up to 2014, the company has increased revenue by over 10 times. In the short term, that growth may slow down, but only 38 states have legalized sports betting—Florida, Texas, and California are among the holdouts. Alongside its rising revenue, the company is also gradually expanding its margins.
Of course, sports betting is a highly regulated industry. But the biggest obstacle is competition. Flutter’s FanDuel doesn’t have a moat in any sense. However, many bettors place bets on more than one sportsbook, so it’s not a zero-sum game.
The Flutter Entertainment analyst forecasts on MarketBeat give the stock a $282.54 price target. That’s an upside of 13.4% from its closing price on November 11. And analysts are raising their targets before the company reports earnings on November 12.
About Flutter Entertainment
Flutter Entertainment plc operates as a sports betting and gaming company in the United Kingdom, Ireland, Australia, the United States, Italy, and internationally. The company operates through four segments: UK & Ireland, Australia, International, and US. It offers sports betting, iGaming, daily fantasy sports, online racing wagering, and TV broadcasting products; sportsbooks and exchange sports betting products, and gaming products; and online sports betting.
Read More - Current Price
- $264.78
- Consensus Rating
- Buy
- Ratings Breakdown
- 17 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $301.53 (13.9% Upside)
#5 - adidas (OTCMKTS:ADDYY)
There are several consumer discretionary stocks in the sportswear category. And adidas AG (OTCMKTS: ADDYY) is one that looks ready for a turnaround. ADDYY stock is down about 40% from its all-time high in 2021. The company had a public split with Kanye West’s Yeezy, which discontinued production in 2022.
But the German-based company’s revenue is showing strong year-over-year gains, particularly in China. The adidas brand has posted gains of 14% and the company’s gross margin is a healthy 51%. And while footwear sales led the charge, adidas is also seeing growth in its lifestyle and performance businesses. And, excluding Yeezy business, e-commerce sales were up an impressive 25%.
This is causing analysts to raise their price targets for the stock. As of this writing, 14 out of 28 analysts gave the stocks a Buy or Strong Buy rating with a consensus price target of $139.79, which is approximately 17% upside.
About adidas
adidas AG, together with its subsidiaries, designs, develops, produces, and markets athletic and sports lifestyle products in Europe, the Middle East, Africa, North America, Greater China, the Asia-Pacific, and Latin America. It offers footwear, apparel, and accessories and gear, such as bags and balls under the adidas brand; golf footwear and apparel under the adidas Golf brand; and outdoor footwear under the Five Ten brand.
Read More - Current Price
- $122.76
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#6 - Birkenstock (NYSE:BIRK)
Birkenstock Holding plc (NYSE: BIRK) was a much-anticipated initial public offering (IPO) in October 2023. Just over one year since its public debut, BIRK stock is up about 14% despite a 20% drop in the three months ending November 11, 2024.
The reason is earnings, which came in a little lighter in the company’s most recent quarter. That’s spooking investors who are concerned that the company known for its iconic luxury sandals may be facing a weary consumer.
But Birkenstock’s business model is one that delights in leaving retailers wanting more. The Wall Street Journal wrote that the brand “typically ships retailers about 75% of what they would like to order.” That’s creating a scarcity that increases the urgency to buy.
Analysts clearly see the stock’s dip as a buying opportunity. The stock maintains a Moderate Buy rating with a $66.40 price target, representing a 42% increase in the stock price.
About Birkenstock
Birkenstock Holding plc manufactures and sells footwear products. It also offers sandals, shoes, closed-toe silhouettes, skincare products, and accessories. The company sells its products through e-commerce sites and a network of owned retail stores, as well as business-to-business channels. It operates in the United States, Brazil, Canada, Mexico, Europe, APMA, and internationally.
Read More - Current Price
- $60.40
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 15 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $68.31 (13.1% Upside)
#7 - Mohawk Industries (NYSE:MHK)
One of the obvious signals that the economy is hitting on all cylinders will be a strong recovery in the housing market. If you believe that a recovery is on deck for 2025, Mohawk Industries Inc. (NYSE: MHK) should be on your watchlist.
Mohawk is the self-proclaimed global leader in flooring products. Its products run the gamut, including ceramic tiles, carpets, laminate, wood, and resilient floor types.
The stock shot higher during the relocation and renovation boom of 2020 and 2021. However, it fell sharply and seemed to bottom out in October 2023. Revenue remains lower year-over-year, but the company has been reducing its debt, which has boosted its margins and earnings per share. The company is expecting revenue and earnings to be under short-term pressure from the hurricanes that affected a significant portion of the United States in late summer.
The Mohawk analyst forecasts on MarketBeat have a consensus price target of $162.08, which is 10% higher than its current price.
About Mohawk Industries
Mohawk Industries, Inc designs, manufactures, sources, distributes, and markets flooring products for residential and commercial remodeling, and new construction channels in the United States, Europe, Latin America, and internationally. It operates through three segments: Global Ceramic, Flooring North America, and Flooring Rest of the World.
Read More - Current Price
- $119.16
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $159.17 (33.6% Upside)
Consumer discretionary stocks are sometimes referred to as cyclical stocks. They tend to outperform during bull markets and underperform in bear markets. This last year has been a little different. Some stocks, including some in this presentation, have managed to perform well as consumers have continued to spend. Travel and hospitality stocks are a good example of this.
MarketBeat has several tools that can help you identify consumer discretionary stock winners like the ones in this presentation. First, you can find a list of the top 50 Consumer Discretionary stocks by market capitalization under the Stock Lists tab.
You can also use our Stock Screener and sort by sector. When you use the screener, you can also filter for technical or fundamental metrics that are important to you. For example, to find the stocks in this presentation, we looked for companies that were projected to have earnings growth of at least 10% in the next 12 months.
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