Are These The Best Consumer Discretionary Stocks To Invest In The Second Half Of 2022?
Consumer discretionary stocks are those that represent companies in the stock market that sell non-essential goods and services. These can include things like apparel, electronics, media, and automobiles. Consumer discretionary stocks are often seen as being more sensitive to economic fluctuations than other types of stocks. This is because when consumers are feeling confident about the economy, they are more likely to spend money on discretionary items.
Conversely, when the economy is weak, consumers may cut back on spending, causing consumer discretionary stocks to decline. As a result, these stocks can be more volatile than other types of stocks. For instance, let’s take a look at consumer discretionary firms like Nike, Inc. (NYSE: NKE) and Etsy Inc. (NASDAQ: ETSY). Shares of NKE stock are down over 28% year-to-date. Though in the last month of trading NKE stock has rallied back over 12%. Meanwhile, shares of ETSY have fallen over 44% year-to-date, though the stock has recovered more than 38% in the last month of trading activity.
In light of this, consumer discretionary stocks can also offer the potential for higher returns in a strong economy. For these reasons, consumer discretionary stocks can be an attractive option for investors who are willing to accept more risk. If you’re keen on consumer discretionary stocks, here are three for your watchlist this month.
Consumer Discretionary Stocks To Watch Today
- The Walt Disney Company (NYSE: DIS)
- Netflix, Inc. (NASDAQ: NFLX)
- Lululemon Athletica Inc (NASDAQ: LULU)
The Walt Disney Company (DIS Stock)
First, let’s look at a company that needs little to no introduction, Walt Disney Company (DIS). The Walt Disney Company is one of the largest entertainment and media conglomerates in the world. In detail, the company has operations in four business segments; parks & resorts, media networks, studio entertainment, consumer products & interactive media. The company has a history of strong financial performance, and its stock price has steadily risen over the past few years.
Moving along, earlier this month, Walt Disney Company announced stronger-than-expected Q3 earning results. In the report, Disney posted earnings of $1.09 per share on revenue of $21.5 billion. Analysts’ consensus estimates for this quarter were earnings of $0.94 per share on revenue of $20.1 billion. Additionally, the company notched a 26.3% increase in revenue during the same period a year prior.
Bob Chapek, Chief Executive Officer at Disney commented in his letter to shareholders, “We had an excellent quarter, with our world-class creative and business teams powering outstanding performance at our domestic theme parks, big increases in live-sports viewership, and significant subscriber growth at our streaming services. With 14.4 million Disney+ subscribers added in the fiscal third quarter, we now have 221 million total subscriptions across our streaming offerings,” As of Wednesday shares of DIS stock closed the day trading at $122.81 per share. Do you think now is the time to add DIS stock to your watchlist?
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Netflix (NFLX Stock)
Following that, let’s dive into streaming giant Netflix (NFLX). For starters, Netflix Inc. is a streaming entertainment company. Netflix’s primary business is a subscription-based streaming service offering online streaming from a library of films and television series, including those produced in-house. Netflix is headquartered in Los Gatos, California. For a sense of scale, the company currently has over 200 million paid memberships across 190 countries worldwide. Netflix subscribers enjoy TV series, documentaries, feature films, and mobile games across a wide range of genres and languages. In July, the streaming giant reported a beat for its Q2 2022 earning results.
In specific, Netflix posted earnings per share of $3.20, on $7.97 billion in sales for Q2. This is compared to wall street consensus earnings estimates of $2.95 per share per, on sales of $8.03 billion. These numbers reflect an 8% year-over-year increase in earnings. What’s more, sales also advanced by 9% for the quarter. Meanwhile, Netflix posted a loss of 970,000 subscribers for the second quarter. This came in below expectations of a loss of 2 million subscribers for this quarter. The company reported that this is due to increased competition in the marketplace, and price hikes.
Co-CEO of Netflix Reed Hastings stated in his press release to shareholders, “Q2 was better than expected on membership growth, and foreign exchange was worse-than-expected (stronger US dollar), resulting in 9% revenue growth (13% constant currency). Our challenge and opportunity is to accelerate our revenue and membership growth by continuing to improve our product, content, and marketing as we’ve done for the last 25 years, and to better monetize our big audience. We’re in a position of strength given our $30 billion-plus in revenue, $6 billion in operating profit last year, growing free cash flow, and a strong balance sheet.“ Since this earnings release, shares of NFLX stock have rebounded by over 26% in the last month of trading. On Wednesday, NFLX stock closed at $241.15 per share. With that, do you think NFLX is a good buy right now?
Lululemon Athletica (LULU Stock)
Next up, we’re going to discuss Lululemon Athletica (LULU). For the uninitiated, Lululemon Athletica is a Canada-based athletic apparel company. Lululemon Athletica designs manufactures and retails athletic apparel, footwear and accessories for men, women, and children. The company’s products are sold through its stores, e-commerce platforms, and third-party retailers. For a sense of scale, Lululemon Athletica has over 500 stores across North America, Europe, Asia, Australia, and New Zealand.
Just last month, LULU announced that it will be increasing its international presence, and launching stores in Spain. Specifically, the company is set to open these new stores in September. lululemon will open its first Spanish retail locations in Madrid, Barcelona, Calle Serrano, and Paseo de Gracia respectively. André Maestrini, Executive Vice President, International stated, “We’re looking forward to connecting with Spanish guests, through our website and at our first retail stores opening in Madrid and Barcelona. The strength of our model across product innovation, guest experience, community, and culture provides a unique advantage as we introduce lululemon to our newest market.”
With that, LULU stock has rebounded by over 15% in the last month, closing Wednesday’s trading day at $329.80 a share. With that being, is LULU stock a good addition to your portfolio now?