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5 Solid Stocks to Buy on a Steady Rise in Consumer Sentiment

Wall Street has been witnessing volatility for the past couple of weeks after a solid January that saw major indexes hitting all-time highs. Inflation rose in January and the Federal Reserve indicated that a rate cut in March is unlikely, which has left investors somewhat concerned.

However, consumer sentiment is still high as Americans now believe that the economy is still on solid ground and will have a softer landing than expected earlier as inflation has declined sharply over the past year.

The University of Michigan's preliminary index of consumer sentiment came up with a reading of 79.6 in February, up from January’s final reading of 79. The survey's gauge of one-year inflation expectations came in at 3% in February after falling to 2.9% in January.

Although inflation increased marginally in January, denting investors’ confidence, the overall sentiment remains upbeat as other economic data remain positive.

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The U.S. GDP grew 3.3% in the final quarter of 2023. Also, retail sales fell 0.8% in January, which has raised optimism that the Federal Reserve will ultimately go for a rate cut in May, if not March.

Markets are pricing in at least five quarter percentage point rate cuts this year, with the first to come in May. Lower interest rates bode well for the broader economy as it lowers borrowing costs.

Thus, the economy is poised to do well once the rate cuts come into effect.

Our Choices

We have narrowed our search to five consumer discretionary stocks such as Cimpress plc CMPR, Dolby Laboratories, Inc. DLB, Netflix, Inc. NFLX, Lululemon Athletica Inc. LULU and Ralph Lauren Corporation RL, which have strong potential for 2024.

These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

Cimpress plc is an online supplier of high-quality graphic design services and customized printed products to small businesses and consumers. CMPR’s product offerings include business cards, brochures and websites, e-commerce platforms, calendars, address labels, note pads and signage, among others.

Cimpress’ expected earnings growth rate for the current year is 145.1%. The Zacks Consensus Estimate for current-year earnings has improved 12.3% over the past 60 days. CMPR currently has a Zacks Rank #2.

Dolby Laboratories, Inc. develops audio and imaging technologies that revolutionize entertainment for user-generated content, TV shows, films, music, and gaming. A majority of DLB’s revenues is derived from the licensing of audio technologies. Dolby Laboratories operates on various licensing models, including a two-tier model, an integrated licensing model, a patent licensing model, recoveries and collaboration arrangements.

Dolby Laboratories’expected earnings growth rate for the current year is 4.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. DLB currently has a Zacks Rank #2.

Netflix, Inc. is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping Netflix sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.

Netflix’s expected earnings growth rate for the current year is 40.7%. The Zacks Consensus Estimate for the current-year earnings has improved 6% over the past 60 days. NFLX currently sports a Zacks Rank #1.

Lululemon Athletica Inc. designs, manufactures and distributes athletic apparel and accessories for women, men and female youth. LULU offers a line of apparel assortment, including fitness pants, shorts, tops and jackets designed for a healthy lifestyle and athletic pursuits, such as yoga, training, and running, as well as other sweaty and general fitness under the lululemon athletica brand name.

Lululemon Athletica’s expected earnings growth rate for the current year is 23.8%. The Zacks Consensus Estimate for the current-year earnings has improved 0.4% over the past 60 days. LULU presently carries a Zacks Rank #2.

Ralph Lauren Corporation is a major designer, marketer and distributor of premium lifestyle products in North America, Europe, Asia, and internationally. RL offers products in the apparel, footwear, accessories, home furnishings, and other licensed product categories.

Ralph Lauren’s expected earnings growth rate for the current year is 21.2%. The Zacks Consensus Estimate for the current-year earnings has improved 7.2% over the past 60 days. RL presently sports a Zacks Rank #1.

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Dolby Laboratories (DLB) : Free Stock Analysis Report

Netflix, Inc. (NFLX) : Free Stock Analysis Report

Ralph Lauren Corporation (RL) : Free Stock Analysis Report

lululemon athletica inc. (LULU) : Free Stock Analysis Report

Cimpress plc (CMPR) : Free Stock Analysis Report

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