It’s easy to give up on the top consumer stocks right here, with a potential recession on the way that threatens to test the resilience of spenders. That said, one could argue that beaten-down consumers are ready for a bounce-back eventually, even though a recession may still be several months away. Even if the worst has yet to hit consumer spending, I don’t expect macro pressures will weigh down the broader basket of names evenly.
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Therefore, in this piece, we’ll use TipRanks’ Comparison Tool to check out a trio of Strong Buy-rated consumer discretionary stocks that may have what it takes to grind higher as the market shifts focus on the health of the consumer.
Mattel (NASDAQ:MAT)
Mattel is the American toy company that’s best known for its timeless Barbie and Hot Wheels brands. The stock’s stuck in a multi-year rut and is currently sitting down around 55% from its 2013 all-time high of $48 and change. Mattel’s sales have slumped steadily over the past decade as the firm struggled to bring out the best in its brands.
Undoubtedly, the toy market is quite competitive, especially in the new, tech-driven age. Still, Mattel has the tools and brands to turn the tides, potentially back to all-time highs. The hit record-breaking success of the Barbie film seems to have made Barbie a must-have toy again. Though the luster from the hit flick probably won’t last forever, it may help jolt sales for a few quarters and help the firm offset consumer-spending headwinds.
However, how much of the Barbie movie enthusiasm has been built in is a mystery. The stock has appreciated around 33% from its March 2023 low, and at 17.9 times forward price-to-earnings, the stock trades at a premium to the leisure industry average of 15.4 times. I think the “Barbie boost” still has legs and could help propel MAT stock toward $24 per share, today’s average analyst price target. As such, I am bullish.
What is the Price Target for MAT Stock?
Mattel’s a Strong Buy, with five Buys and one Hold rating assigned in the past three months. The average MAT stock price target of $24.00 entails 16.65% upside potential.
Papa John’s Pizza (NASDAQ:PZZA)
Papa John’s stock has been on the mend in recent months, now up around 20% from its June 2023 low. Still, the stock’s miles away (around 40%) from its November 2021 peak of $140 and change. Many consumers may have gotten a bit sick of pizza after pandemic lockdowns were lifted, but they may be closer to getting their appetite back. As a recession comes knocking, Papa John’s may have what it takes to continue its rebound.
At the end of the day, a pizza order is a relatively affordable way to feed a large family, and in that regard, I view Papa John’s and other hard-hit pizza play as having a great value proposition and potential resilience in the face of consumer-facing headwinds. Given this, I’m staying bullish on the stock.
At writing, shares trade at 29.7 times forward price-to-earnings, a bit higher than the restaurant industry average of 24.4 times. I view the premium as warranted, given Papa John’s stands out as a more recession-resilient offering than the likes of a pricier and fancier dine-in peer.
What is the Price Target for PZZA Stock?
Papa John’s is a Strong Buy, with six Buys and one Hold. The average PZZA stock price target of $98.67 entails a 21.8% gain from here.
Planet Fitness (NYSE:PLNT)
Planet Fitness is a great consumer stock that I don’t think will be heavily impacted by a shallow recession. I don’t see gym-goers canceling memberships, especially low-cost ones like those provided by Planet Fitness, en masse if there’s a slight downtick in consumer spending.
Further, PLNT stock has already taken a hit, now down around 30% from its 2021 high. The company set a three-year plan in June, which included targeting 13-14% revenue growth and 17-18% EBITDA growth. Earlier today, the company lowered that revenue forecast to 12%, causing shares to slip by 6.1%. However, it’s a realistic plan that I believe isn’t fully factored into the stock quite yet. Analysts are upbeat, and so is the company’s CEO, Chris Rondeau, who bought 10,000 shares earlier this summer.
Indeed, it’s always a good sign when the top boss is eating his own cooking. It makes me that much more bullish on the name.
As the economy feels some pressure, look for Planet Fitness to drive membership growth at the expense of its pricier peers. At 38.1 times trailing price-to-earnings, PLNT stock trades at a premium to the leisure industry average of 15.4 times. Such a premium seems more than warranted, though, given its more favorable position relative to rivals and expected growth.
What is the Price Target for PLNT Stock?
Planet Fitness is a Strong Buy, with 12 Buys, one Hold, and one Sell. The average PLNT stock price target of $85.54 implies 37.95% upside from here.
Conclusion
The looming threat of a recession may cast a shadow over consumer stocks, but opportunities still exist. Plus, it’s not hard to imagine many consumers feeling a tiny bit better these days, with the stock market recovery in full swing and the pace of layoffs — especially in the tech sector — slowing down.
The Strong-Buy-rated discretionary stocks Mattel, Papa John’s, and Planet Fitness each present unique value propositions that may defy broader market trends. Out of the three stocks mentioned, analysts expect the most upside from PLNT.
