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3 Consumer Discretionary Stocks Ready to Run

Saturday, February 13, 2021 | MarketBeat Staff
3 Consumer Discretionary Stocks Ready to Run

The consumer discretionary sector is one of the most diverse groups ranging from restaurants and specialty retailers to automakers and media companies. This can make it tough to choose which stocks will outperform considering all of these companies compete for our discretionary income.

With the economy expected to heal as the year progresses and people likely to spread their spending wings in unison, a mix of recovery plays may be best. Here are three consumer cyclical companies that look to be poised for a nice run in 2021.

What are YETI's Growth Prospects?

YETI (NYSE:YETI) is more of a play on the current pandemic economy given the nature of its products. The maker of coolers, drinkware, and other products designed for outdoor enthusiasts is benefitting from America's rediscovery of the great outdoors. As restrictions on indoor activity persist, people will continue to embrace hiking trails, campsites, and beaches as a way to get out of the house. This should result in similar growth to what YETI experienced in 2020 when sales grew 19% topping the $1 billion mark.

While that's certainly a lot of canteens, tumblers, and camping chairs, YETI has its sight on other product areas to spur the next wave of growth. The company recently launched a new lineup backpacks, duffel bags, and luggage that are expected to reach stores this month.

The luggage category is particularly interesting.  The strengthening of the trusted YETI brand combined with the potential for travelers to return to the friendly skies later this year points to this being an underappreciated growth catalyst.

Increasing brand awareness and an expanding product lineup will help YETI build off its recent performance. It has a presence in major retail outlets like Lowe's, Cabela's, and Dick's Sporting Goods that is well complemented by a growing direct-to-consumer business. And after entering its first six international markets over the last few years, YETI has just scratched the surface as far as overseas expansion. Its non-U.S. sales account for only 6% of total sales.

YETI's recent pullback from $80ish to its supportive 50-day moving average represents a great buy opportunity to buy a consumer stock that is showing no signs of cooling off.

Will it be Smooth Sailing for Malibu Boats?

Staying outdoors, Malibu Boats (NASDAQ:MBUU) stock looks to have a smooth ride ahead. On January 13th Malibu shares jumped above $80 in huge volume on the back of an upgrade from BMO Capital which gave the stock an $97 price target.

Support from the Street has since been strong on the heels of the company's second-quarter earnings report. Sales rose 8.6% to $195.6 million amid increased demand for recreational boats.

Amid limited recreational outlets, higher interest for boating and fishing during the pandemic from both new and existing customers has provided a major boost to the marine industry—and especially for Malibu Boats which has gained market share on account of its diverse, premium portfolio.

For the full year, management is forecasting sales to be up more than 35% and its adjusted EBITDA margin to expand to above 20%. Over the long haul it is targeting 15% annual profit growth. With an increased stable of boating enthusiasts that have invested in the boating game and are unlikely to drop the activity as the economy reopens, Malibu has the momentum to meet or exceed these goals.

The technical analysis is also on the side of Malibu Boats. Earlier this week a bullish symmetrical continuation triangle pattern formed on the chart pointing to a potential move to $89 to $92 over the next few weeks. With the stock trading around $76, traders have a chance to coast to some nice short-term gains.

 What is a Good Gaming Stock?

Since making its market debut in September 2020, Corsair Gaming (NASDAQ:CRSR) stock has performed well—and there is more where that came from. While much of the attention deservedly goes to the video game and console makers, Corsair is an under loved way to play the explosive growth in the global video game market.

Corsair Gaming makes the high-performance gear that gamers and streamers consider essential to the gaming experience. Casual and professional video game players alike don’t think twice about buying Corsair's headphones, controllers, speakers, keyboards, and mice as part of their investment. This has amounted to a 26% annual revenue growth rate over the last four years.

Corsair Gaming is estimated to control roughly 18% of the $36 million global gaming peripherals market making it the lead dog in the space. Its products are supported by gaming consoles and content creators in 75 countries and there is plenty of room for growth as the gaming market continues to explode worldwide.

The era of eSports and competitive gaming is well upon us. According to Newzoo, there are 2.6 billion gamers globally that spend $149 billion on gaming-related products. Corsair Gaming has the inside track in the race to win gamers' dollars as console, PC, and mobile gaming continues to take off.

The stock has received nice support from its near-term trend line in its early trading days and the recent lower volume pullback is yet another chance to buy. The January 27th volume spike that pushed Corsair Gaming towards $50 showed strong support from buyers that will likely be game-on for a while.

 

 

Featured Article: What is Depreciation?


7 Hotel Stocks Just Waiting For the Vaccine

Like any group of stocks related to travel and tourism, hotel stocks saw a steep drop in share prices in 2020. The leisure and hospitality sector that once had 15 million employees has lost 4 million jobs since February.

Many major cities will be feeling the ripple effects of the Covid-19 pandemic for years. However, there is ample evidence that shows the pandemic may be coming to an end. The number of new cases is dropping. The number of those getting vaccinated is rising. And even in the cities with the most restrictive mitigation measures, the slow process of reopening is beginning.

All of this can’t come fast enough for individuals who rely on the travel and tourism industry for their livelihood. Hotel chains had at least some revenue coming in the door. And when earnings season concludes, the more budget-friendly hotel chains may realize revenue that is 75% of its 2019 numbers. But that is not enough to bring the hotels to anywhere near full employment. Particularly with hotels that have bars and restaurants that have remained closed or open at limited capacity.

Many economists are optimistic that travel may begin to look more normal by the summer of this year. And the global economy may deliver 6.4% GDP growth this year. With that in mind, the hotel chains with the best fundamentals and the broadest footprint will be in the best position as the economy reopens.

View the "7 Hotel Stocks Just Waiting For the Vaccine".


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
YETI (YETI)1.7$85.48-3.5%N/A109.59Buy$86.75
Malibu Boats (MBUU)1.7$83.11-2.4%N/A25.97Buy$84.71
Corsair Gaming (CRSR)1.4$32.02+1.4%N/AN/ABuy$44.67
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