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Consumer Confidence Boosts Discretionary Stocks in 2024 Rally

A recent report highlights a significant rebound in consumer confidence, evident through the rise in consumer discretionary stocks. As the sector shows promising growth heading into 2025, individual stocks like Lululemon and Crocs show both challenges and potential for recovery.

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AI Rating:   7

Analysis of Sector Trends and Individual Stocks

The report discusses a surge in consumer discretionary stocks, with the Consumer Discretionary Select Sector SPDR Fund (NASDAQ: XLY) gaining 31% in 2024. This positive momentum indicates a revival of consumer confidence, which could lead to increased spending and further stock price appreciation in the sector.

Lululemon Athletica Inc. (NASDAQ: LULU)

Lululemon's stock has risen over 57% in the quarter, but it still marks a decline of more than 21% for the year. The stock's price drop is attributed to inventory issues and slower growth in China. Despite a 2% decline in comparable sales YoY, the company has reported higher YoY revenue and earnings growth over the last four quarters. With earnings projected at approximately $16 and a forward price-to-earnings (P/E) ratio around 28, the stock may be undervalued, potentially leading to a price adjustment towards the target of $451.

Crocs Inc. (NASDAQ: CROX)

Crocs has seen a 19% increase in 2024, with the stock recently down about 13% over the past three months. The company boasts $12.87 earnings per share (EPS) guidance for the year, with a low forward P/E of 8.62, suggesting a stable price around $110. Analysts are optimistic due to Crocs’ focus on debt reduction and share buybacks, with $1.1 million already repurchased and $549 million remaining for buyback authorization.

Yeti Holdings Inc. (NYSE: YETI)

YETI stock is down 13% for the year, despite a 19.7% rise recently. Although revenue and earnings are up YoY, rapid growth post-2021 has become unsustainable. With a current trading price of $44.80 and projected earnings suggesting a potential gain of 10%, along with plans for a share buyback worth $200 million, the stock shows a cautious optimism heading into 2025.

Conclusion

Overall, the consumer discretionary sector is showing recovery potential as consumer confidence rises, impacting stocks like Lululemon, Crocs, and YETI positively in the coming year.

Stocks:  LULU CROX YETI