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5 Consumer Discretionary Stocks to Buy for the Rest of 2023
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Wall Street has been in negative territory in the last three months after witnessing an impressive bull run for the first seven months of this year. However, last week, the bourses gave their best performance so far this year.
The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — rallied 5.1%, 5.9% and 6.6%, respectively. The Dow registered its best week since October 2022 while both the S&P 500 and the Nasdaq Composite recorded their best week since November 2022.
The consumer discretionary sector has flourished so far in 2023. This sector is generally recognized as being growth-oriented. Notably, growth sectors are highly sensitive to the movement of the market interest rate and are inversely related. We expect this trend to continue for the rest of 2023 as the ongoing quarter is characterized as the holiday season.
The consumer discretionary sector comprises businesses that sell goods and services, which are considered non-essential by consumers. These are the products that consumers can avoid without any major consequences to their well-being. In fact, these goods are desirable only if the available income of an individual is sufficient to purchase them.
The fundamentals of the U.S. economy remain strong. The GDP grew at an astonishing 4.9% in third-quarter 2023. Consumer spending remains solid, and the inflation rate has been gradually declining since June 2022.
Our Top Picks
We have narrowed our search to five consumer discretionary stocks that have strong growth potential for the rest of 2023. These stocks have seen positive earnings estimate revision in the last 60 days. Each of our picks carries either a Zacks Rank # 1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
Live Nation Entertainment Inc. (LYV - Free Report) is benefiting from pent-up demand for live events, robust ticket sales and the sponsorship and advertising business. LYV remains optimistic about its growth prospects in 2023.
For concerts, LYV stated that it has already sold more than 117 million tickets (as of June 2023), up 20% from the 2022 levels. In terms of tickets, LYV is likely to benefit from the market pricing trend. Also, the emphasis on new client and venue additions bodes well.
Zacks Rank #1 Live Nation Entertainment has an expected revenue and earnings growth rate of 21.9% and 57.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 16.1% over the last 90 days.
InterContinental Hotels Group plc (IHG - Free Report) owns, manages, franchises, and leases hotels in the Americas, Europe, Asia, the Middle East, Africa, and Greater China. IHG also provides the IHG Rewards loyalty program.
IHG operates hotels under the Six Senses, Regent, InterContinental Hotels & Resorts, Vignette Collection, Kimpton Hotels & Restaurants, Hotel Indigo, EVEN Hotels, HUALUXE, Holiday Inn, Holiday Inn Express, Holiday Inn Club Vacations, avid, Staybridge Suites, Atwell Suites, Candlewood Suites, voco, and Crowne Plaza.
Zacks Rank #1 InterContinental Hotels has an expected revenue and earnings growth rate of 58.3% and 30.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 60 days.
Hilton Worldwide Holdings Inc.’s (HLT - Free Report) performance was attributable to the upward trend in travel and tourism. HLT benefits from its focus on unit expansion, hotel conversions, strategic partnerships and loyalty programs.
HLT expects positive development trends to continue on the back of new development and conversion opportunities. For third-quarter 2023, management anticipates system-wide RevPAR to increase in the 4-6% band on a year-over-year basis.
Zacks Rank #2 Hilton Worldwide Holdings has an expected revenue and earnings growth rate of 15.8% and 24.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the last seven days.
Lululemon Athletica Inc. (LULU - Free Report) is on track with the Power of Three X2 growth plan. Comps growth was aided by robust traffic trends in stores and e-commerce. LULU has been witnessing improved margin trends driven by the overall improvement in product margin, mainly stemming from lower freight expenses. LULU is capitalizing on the importance of physical retail and the convenience of online engagement. LULU provided a robust outlook for fiscal 2023.
Zacks Rank #2 Lululemon Athletica has an expected revenue and earnings growth rate of 18.1% and 20.5%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days.
Electronic Arts Inc. (EA - Free Report) develops, markets, publishes, and distributes games, content, and services for game consoles, PCs, mobile phones and tablets worldwide. EA’s popularity is primarily driven by its franchises, which will continue to fuel the top line.
EA has benefitted from continued live services growth and healthy player engagement. Live services are benefiting from strength in franchises, including Apex Legends, Madden NFL, FIFA and The Sims. EA SPORTS FC and EA SPORTS NHL 24 present a significant growth opportunity. For fiscal 2024, EA has a strong pipeline that includes five new releases throughout the year.
Zacks Rank #2 Electronic Arts has an expected revenue and earnings growth rate of 3% and 25.3%, respectively, for the current year (ending March 2024). The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the last seven days.
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5 Consumer Discretionary Stocks to Buy for the Rest of 2023
Wall Street has been in negative territory in the last three months after witnessing an impressive bull run for the first seven months of this year. However, last week, the bourses gave their best performance so far this year.
The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — rallied 5.1%, 5.9% and 6.6%, respectively. The Dow registered its best week since October 2022 while both the S&P 500 and the Nasdaq Composite recorded their best week since November 2022.
The consumer discretionary sector has flourished so far in 2023. This sector is generally recognized as being growth-oriented. Notably, growth sectors are highly sensitive to the movement of the market interest rate and are inversely related. We expect this trend to continue for the rest of 2023 as the ongoing quarter is characterized as the holiday season.
The consumer discretionary sector comprises businesses that sell goods and services, which are considered non-essential by consumers. These are the products that consumers can avoid without any major consequences to their well-being. In fact, these goods are desirable only if the available income of an individual is sufficient to purchase them.
The fundamentals of the U.S. economy remain strong. The GDP grew at an astonishing 4.9% in third-quarter 2023. Consumer spending remains solid, and the inflation rate has been gradually declining since June 2022.
Our Top Picks
We have narrowed our search to five consumer discretionary stocks that have strong growth potential for the rest of 2023. These stocks have seen positive earnings estimate revision in the last 60 days. Each of our picks carries either a Zacks Rank # 1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
Live Nation Entertainment Inc. (LYV - Free Report) is benefiting from pent-up demand for live events, robust ticket sales and the sponsorship and advertising business. LYV remains optimistic about its growth prospects in 2023.
For concerts, LYV stated that it has already sold more than 117 million tickets (as of June 2023), up 20% from the 2022 levels. In terms of tickets, LYV is likely to benefit from the market pricing trend. Also, the emphasis on new client and venue additions bodes well.
Zacks Rank #1 Live Nation Entertainment has an expected revenue and earnings growth rate of 21.9% and 57.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 16.1% over the last 90 days.
InterContinental Hotels Group plc (IHG - Free Report) owns, manages, franchises, and leases hotels in the Americas, Europe, Asia, the Middle East, Africa, and Greater China. IHG also provides the IHG Rewards loyalty program.
IHG operates hotels under the Six Senses, Regent, InterContinental Hotels & Resorts, Vignette Collection, Kimpton Hotels & Restaurants, Hotel Indigo, EVEN Hotels, HUALUXE, Holiday Inn, Holiday Inn Express, Holiday Inn Club Vacations, avid, Staybridge Suites, Atwell Suites, Candlewood Suites, voco, and Crowne Plaza.
Zacks Rank #1 InterContinental Hotels has an expected revenue and earnings growth rate of 58.3% and 30.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 60 days.
Hilton Worldwide Holdings Inc.’s (HLT - Free Report) performance was attributable to the upward trend in travel and tourism. HLT benefits from its focus on unit expansion, hotel conversions, strategic partnerships and loyalty programs.
HLT expects positive development trends to continue on the back of new development and conversion opportunities. For third-quarter 2023, management anticipates system-wide RevPAR to increase in the 4-6% band on a year-over-year basis.
Zacks Rank #2 Hilton Worldwide Holdings has an expected revenue and earnings growth rate of 15.8% and 24.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the last seven days.
Lululemon Athletica Inc. (LULU - Free Report) is on track with the Power of Three X2 growth plan. Comps growth was aided by robust traffic trends in stores and e-commerce. LULU has been witnessing improved margin trends driven by the overall improvement in product margin, mainly stemming from lower freight expenses. LULU is capitalizing on the importance of physical retail and the convenience of online engagement. LULU provided a robust outlook for fiscal 2023.
Zacks Rank #2 Lululemon Athletica has an expected revenue and earnings growth rate of 18.1% and 20.5%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days.
Electronic Arts Inc. (EA - Free Report) develops, markets, publishes, and distributes games, content, and services for game consoles, PCs, mobile phones and tablets worldwide. EA’s popularity is primarily driven by its franchises, which will continue to fuel the top line.
EA has benefitted from continued live services growth and healthy player engagement. Live services are benefiting from strength in franchises, including Apex Legends, Madden NFL, FIFA and The Sims. EA SPORTS FC and EA SPORTS NHL 24 present a significant growth opportunity. For fiscal 2024, EA has a strong pipeline that includes five new releases throughout the year.
Zacks Rank #2 Electronic Arts has an expected revenue and earnings growth rate of 3% and 25.3%, respectively, for the current year (ending March 2024). The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the last seven days.