It may not have been a surprise to see the consumer discretionary sector of the S&P 500 get hammered last year amid talk of a looming recession while the Federal Reserve jacked up interest rates to push back against inflation.
But the stock market always looks ahead. Following a decline of 19.4% for the S&P 500
SPX
in 2022 and a 37.6% drop for the benchmark index’s consumer discretionary sector, this may be the time to begin looking for bargains.
And now, analysts at Jefferies have lifted the sector to a “bullish” rating.
In a note to clients on Jan. 10, Jefferies’ global equity strategist, Sean Darby, wrote: “A Goldilocks scenario might be unfolding for the U.S. consumer — falling inflation but steady employment conditions.”
He sees consumer confidence improving, in part because “households are still sitting on [about] $1.4 trillion of Covid savings.”
Darby pointed to a list of 18 consumer discretionary stocks favored by Jefferies analysts that was published on Jan. 6. Those are listed below, along with three stocks in the sector the analysts rate “underperform.”
The ratings of the Jefferies analysts for individual stocks is based on their 12-month outlooks for the companies, in keeping with Wall Street tradition.
So we have added another list further down, showing which companies in the S&P 500 consumer discretionary sector are expected by analysts polled by FactSet to increase sales the most through 2024.
The Jefferies 18
Here are the 18 consumer discretionary stocks recommended by Jefferies analysts with “buy” ratings on Jan. 6, sorted by how much upside the firm sees for the shares from closing prices on Jan. 9:
| Company | Ticker | Jan. 9 price | Jefferies price target | Implied 12-month upside potential | Three-year estimated sales CAGR through 2022 | Two-year estimated sales CAGR through 2024 |
| Topgolf Callaway Brands Corp. | MODG | $20.76 | $56 | 170% | 32.8% | 10.0% |
| Bloomin’ Brands Inc. | BLMN | $22.08 | $35 | 59% | 2.4% | 3.7% |
| Coty Inc. Class A | COTY | $9.38 | $14 | 49% | -7.1% | 3.7% |
| MGM Resorts International | MGM | $37.64 | $56 | 49% | -0.1% | 6.6% |
| Chewy Inc. Class A | CHWY | $40.13 | $57 | 42% | 28.0% | 10.6% |
| Planet Fitness Inc. Class A | PLNT | $82.36 | $115 | 40% | 10.4% | 13.9% |
| Molson Coors Beverage Co. Class B | TAP | $50.21 | $69 | 37% | 0.5% | 1.4% |
| Fox Factory Holding Corp. | FOXF | $99.90 | $135 | 35% | 28.1% | 6.6% |
| Hasbro Inc. | HAS | $63.70 | $85 | 33% | 9.1% | 3.6% |
| Hostess Brands Inc. Class A | TWNK | $23.10 | $30 | 30% | 14.2% | 5.0% |
| Lowe’s Cos. Inc. | LOW | $199.44 | $250 | 25% | 10.6% | -1.9% |
| Walmart Inc. | WMT | $144.95 | $175 | 21% | 4.9% | 3.3% |
| Dollar General Corp. | DG | $241.05 | $285 | 18% | 10.9% | 6.7% |
| Church & Dwight Co. Inc. | CHD | $82.25 | $97 | 18% | 7.0% | 4.6% |
| McDonald’s Corp. | MCD | $267.25 | $315 | 18% | 2.4% | 4.0% |
| Estee Lauder Cos. Inc. Class A | EL | $261.63 | $304 | 16% | 2.8% | 5.8% |
| Mondelez International Inc. Class A | MDLZ | $67.24 | $75 | 12% | 6.3% | 4.1% |
| Tapestry Inc. | TPR | $41.25 | $45 | 9% | 3.3% | 3.2% |
| Sources: Jefferies, FactSet | ||||||
Click on the tickers for more information about the companies.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
The two right-most columns on the table show estimated compound annual growth rates (CAGR) for the companies over the past three calendar years and expected sales CAGR for two years through calendar 2024, based on the companies’ financial reports and consensus estimates among analysts polled by FactSet.
(We used calendar-year numbers, some of which are estimated by FactSet for prior years, because some companies have fiscal years or even months that don’t match the calendar.)
The stock pick with the highest 12-month upside potential, based on Jefferies’ price target, is Topgolf Callaway Brands Corp.
MODG.
This company has the highest estimated three-year sales CAGR on the list, and has the third-highest projected sales CAGR through 2024, after Planet Fitness Inc.
PLNT
and Chewy Inc.
CHWY.
On Jan. 6, the Jefferies analysts also listed three stocks in the sector they rated “underperform.” Here they are, sorted by how much the analysts expect the stocks to decline over the next 12 months:
| Company | Ticker | Jan. 9 price | Jefferies price target | Implied 12-month upside potential | Three-year estimated sales CAGR through 2022 | Two-year estimated sales CAGR through 2024 |
| Lululemon Athletica Inc. | LULU | $298.66 | $200 | -33% | 26.3% | 14.6% |
| Williams-Sonoma Inc. | WSM | $122.17 | $98 | -20% | 14.1% | -0.3% |
| Harley-Davidson Inc. | HOG | $43.25 | $39 | -10% | -2.8% | 4.4% |
| Sources: Jefferies, FactSet | ||||||
Screen of consumer discretionary sales growth
A look head at which companies are expected to increase sales the most over the next two years might serve as a good starting point for your own research.
Bear in mind that some of the companies in travel-related industries suffered declining sales for three years through 2022 because of the coronavirus pandemic. Some of those are on this new list of 20 stocks in the S&P 500 consumer discretionary sector expected to show the highest two-year sales CAGR through calendar 2024:
| Company | Ticker | Two-year estimated sales CAGR through 2024 | Three-year estimated sales CAGR through 2022 | Share “buy” ratings | Jan. 9 price | Consensus price target | Implied 12-month upside potential |
| Las Vegas Sands Corp. | LVS | 59.2% | -32.6% | 79% | $52.78 | $53.53 | 1% |
| Norwegian Cruise Line Holdings Ltd. | NCLH | 39.6% | -9.3% | 44% | $13.78 | $16.96 | 23% |
| Carnival Corp. | CCL | 35.2% | -14.7% | 30% | $9.47 | $10.11 | 7% |
| Tesla Inc. | TSLA | 34.3% | 49.7% | 64% | $119.77 | $232.43 | 94% |
| Wynn Resorts Ltd. | WYNN | 29.3% | -17.5% | 53% | $94.33 | $96.07 | 2% |
| Royal Caribbean Group | RCL | 28.4% | -6.8% | 53% | $57.29 | $66.43 | 16% |
| Chipotle Mexican Grill Inc. | CMG | 13.4% | 15.9% | 71% | $1,446.74 | $1,778.81 | 23% |
| Amazon.com Inc. | AMZN | 12.2% | 22.1% | 92% | $87.36 | $133.76 | 53% |
| Booking Holdings Inc. | BKNG | 11.9% | 3.9% | 63% | $2,208.41 | $2,307.67 | 4% |
| Aptiv PLC | APTV | 11.9% | 6.4% | 70% | $97.98 | $117.23 | 20% |
| Starbucks Corp. | SBUX | 11.2% | 7.2% | 42% | $104.74 | $103.44 | -1% |
| Etsy Inc. | ETSY | 11.1% | 45.3% | 50% | $120.99 | $124.04 | 3% |
| Hilton Worldwide Holdings Inc. | HLT | 10.1% | -2.9% | 38% | $129.08 | $146.17 | 13% |
| Expedia Group Inc. | EXPE | 9.0% | -0.9% | 50% | $93.77 | $125.65 | 34% |
| NIKE Inc. Class B | NKE | 8.1% | 5.8% | 62% | $124.85 | $126.15 | 1% |
| Marriott International Inc. Class A | MAR | 7.5% | -1.2% | 30% | $152.53 | $172.81 | 13% |
| BorgWarner Inc. | BWA | 7.1% | 15.3% | 53% | $42.24 | $46.93 | 11% |
| Tractor Supply Co. | TSCO | 6.8% | 19.0% | 61% | $217.48 | $232.34 | 7% |
| Yum! Brands Inc. | YUM | 6.7% | 6.4% | 47% | $129.76 | $137.79 | 6% |
| Dollar General Corp. | DG | 6.7% | 10.9% | 67% | $241.05 | $267.54 | 11% |
| Source: FactSet | |||||||
Among the companies on this list that didn’t suffer sales declines from 2019 levels, Tesla Inc.
TSLA
is expected to achieve the highest two-year sales CAGR through 2022.
Dollar General Corp.
DG
is the only company to appear on this list based on consensus sales growth estimates and the Jefferies recommended list.
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