Company / Analytics

Analytics, 17 September 2021

Top Consumer Discretionary Stocks to Watch Today

The broader US stock market remains under pressure, and investors looking to diversify their portfolios may look to consumer discretionary stocks. The US August retail sales figures released this week gained by 0.7%, even though economists expected a decline of 0.8%. This should likely place top consumer discretionary stocks at the top of investors’ radars. Even with fears that the pandemic will slow down economic growth globally, the consumer industry remains a viable bet, thanks to the diverse range of markets that consumer discretionary companies cover. These include stay-at-home sectors like e-commerce and gaming to more conventional sectors like the automotive market.

Here are some top consumer discretionary stocks investors could consider.

Understanding consumer discretionary stocks

Companies in the consumer discretionary sector sell goods and services that are considered nonessential, such as appliances, cars, and entertainment. Prominent examples include Home Depot Inc. (HD), McDonald’s Corp. (MCD), and Nike Inc. (NKE). Consumer discretionary companies tend to be more sensitive to the overall business cycle because consumers are more likely to reduce or postpone their discretionary purchases when times are tough. By contrast, companies in the consumer staples sector focus on essential items such as food and beverages.

Consumer discretionary stocks are represented by the Consumer Discretionary Select Sector SPDR ETF. As of August 19, 2021, this sector had underperformed the broader market, providing investors with a total return of 21.1% compared to the Russell 1000’s total return of 32.9% over the past 12 months.

But consumer demand, in general, remains at a high – this is despite the August retail sales report. Retailers such as Weber have reported seeing a major uptick in orders for its latest portable gas grill, and the company reported that they can barely keep with the demand. Meanwhile, retailers like Walmart are also aggressively expanding their market share today. According to a research note from investment bank Deutsche Bank, the company’s Walmart+ subscription service boasts a subscriber base of 32 million.

Some top consumer discretionary stocks in the market at the moment include GameStop Corporation, Amazon, Marine Products Corporation, Door Dash Inc, and Dutch Bros Inc.

GameStop Corporation

GameStop is a consumer discretionary stock that focuses on consumer electronics and video game retail. GameStop is arguably one of the biggest video game retailers in the world and boasts thousands of stores worldwide. The company also boasts an impressive e-commerce platform.

In 2021, GameStop’s stock price skyrocketed due to a short squeeze orchestrated by retail investors, kicking off the meme stock craze that continues to sweep the market. The stock currently trades at $204.20 - at the time of writing – and has enjoyed year-to-date gains of over 950%.

Last week, the company reported its second-quarter financials for 2021. Notably, it generated net sales of $1.183 billion during the quarter, up by 25.5% year-over-year. GameStop also ended the quarter with $1.78 billion in cash. Furthermore, it also continues to invest in long-term growth initiatives that include expanding the company’s product catalog, enhancing its fulfillment network capabilities and technology, and also adding talent across the organization. Besides, the company entered into a lease of a new 530,000 square-foot fulfillment center in Nevada, positioning the company’s fulfillment network to span both coasts of the continental U.S.

Amazon.com Inc.

Amazon.com Inc. is a multinational conglomerate that focuses on e-commerce, digital streaming, and cloud computing. The company is known for its disruption of well-established industries through technological innovation and mass scale. It is now one of the largest online marketplaces in the world. Its streaming service Amazon Prime Video and Twitch are its go-to services for entertainment and is used by millions of people.

This week, Amazon announced that it will be partnering with Deliveroo to offer its Prime customers free delivery on takeout orders over a certain amount for a year. It has millions of Amazon Prime members in the U.K. and Ireland who will get access to the lower tier of the Deliveroo Plus service. The partnership comes after regulators at the Competition and Markets Authority investigated Amazon’s investment in Deliveroo to see if it presented any competition concerns.

Marine Products Corporation

Marine Products Corporation manufactures and distributes its premium-branded Chaparral luxury sterndrive and outboard boats. The company sells its products to a network of 170 domestic and 86 international independent authorized dealers. It is also a leading manufacturer of recreational powerboats for sale to a broad range of consumers worldwide.

In late July, the company reported its second-quarter financials. Firstly, it generated net sales of $67.26 million, increasing by 64.8% compared to a year earlier. Secondly, it enjoyed an increase in unit sales for all of its product categories due to continued high dealer and retail demand during the quarter. Gross profit also increased by a whopping 86.5% year-over-year at $14.61 million. All things considered, will you add MPX stock to your portfolio?

DoorDash Inc.

DoorDash Inc. primarily operates via its online food delivery platform of the same name. By DoorDash’s estimates, its delivery network consists of over 450,000 merchants, 20 million consumers, and 1 million employees. The likes of which span the U.S., Canada, Australia, and Japan. With DoorDash’s services becoming more vital than ever amidst the current pandemic, DASH stock would be in focus.

DASH stock currently trades at $ 224.19, after gaining by over 50% year-to-date. Notably, this trend is expected to continue given the latest update regarding the company’s shares. This week, Bank of America upgraded DASH stock to a Buy rating. Analyst Michael McGovern cited the company’s 5-year growth driven by “the rapid shift of local commerce to delivery via mobile apps”.

Dutch Bros Inc.

Another interesting stock to watch is Dutch Bros Inc. Dutch Bro’s identifies as a high-growth operator and franchisor of drive-thru coffee shops. The company offers a vast array of unique and highly customizable cold and hot beverages. With over 450 locations across 11 U.S. states, BROS would be an upcoming name in the beverage industry now.

More importantly, the company just went public this week and was trading at $43.94 at the time of writing. The company began trading on the New York Stock Exchange on Wednesday. Its share prices skyrocketed out the gate by 48% to a value of $34.01.

The firm eventually hit a valuation of $5.6 billion. Overall, time will tell if BROS can find its footing in the U.S. beverage industry. For now, at least, investors appear to be bullish on BROS stock given its current price point.

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