Consumer stocks are looking strong heading into 2024 — and that bodes well for a slate of retail stocks. December ‘s reading of the Conference Board’s consumer confidence index showed that Americans are more optimistic about business conditions and the labor market. Stocks are also poised to end the year higher, with all three major indexes notching gains as 2023 winds down. The S & P 500 is up more than 23% on the year, aided by improving investor sentiment after the Federal Reserve signaled it would cut interest rates three times in 2024 . “Consumer stocks have been on a tear in the past few weeks and got a jolt from the latest Fed commentary,” Telsey Advisory Group’s Dana Telsey wrote in a Tuesday note. “We have even started to see some positive indicators for discretionary spending, as several companies have seen sequential improvement.” However, the short-term outlook may remain mixed as “it will take time for rates to adjust to spark increased spending,” Telsey added. She noted that the sector is still poised for growth as companies innovate further and provide greater consumer value. Still, the strong consumer sentiment has fostered analyst optimism toward the sector. Here’s a look at some of Wall Street analysts’ top consumer picks for 2024. Costco has been a favorite among analysts in 2023. Jefferies named the stock a top pick in the discount retail space, and Bank of America analyst Robert Ohmes raised his price target to $740 from $655. This implies upside of 11.3% from Thursday’s close. “We reiterate our Buy rating and expect COST to gain share in the current environment as consumers continue to adjust to higher prices, making COST’s value proposition more attractive,” Ohmes wrote in a report Monday. Costco shares are up 45% in 2023, and they hit an all-time high earlier this week. COST YTD mountain Costco stock has climbed about 45% from the start of the year. Telsey’s top picks include Dollar Tree , Five Below and Target . All three stocks have outperform ratings from the firm. Telsey forecast “multi-year earnings growth” for Dollar Tree, due to new frozen products as well as the company’s “Dollar Tree Plus!” initiative. The company recently brought back chief executive Todd Vasos , with plans to slow store openings. Telsey has a $160 price target on Dollar Tree stock, representing about 19% upside. Shares are down 5% in 2023. DLTR YTD mountain Dollar Tree stock has slipped about 6% from the start of the year. On Target, Telsey also has a $160 per share price target, which implies nearly 15% upside from Thursday’s close. “At Target, we believe the margin recovery story should continue to play out in 2024, as the company laps the pressure last year from elevated supply chain costs and heavy markdowns to clear excess inventory,” Telsey said. Shares of Target are down 6.5% in 2023. TGT YTD mountain TGT YTD performance In its 2024 consumer outlook, Canaccord Genuity is bullish on e.l.f. Beauty . Analyst Susan Anderson rates the stock a buy and has a price target of $153 per share, or about 5% upside from Thursday’s close. Shares are up 162% in 2023. “ELF still has plenty of juice left in the tank after seeing an impressive +160% runup through mid-December vs. the Russell 2000 up around +13%,” Anderson said. “The core e.l.f. beauty brand still trails the #1 and #2 mass beauty brands in shelf space by a significant amount, providing significant runway for growth.” — CNBC’s Michael Bloom contributed reporting.
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