With the weather cooling down for the winter holiday season, now may be the time to tune your radio to the three best Christmas stocks to buy. Fundamentally, as people slow down to reflect on what’s important in life – family, friends, and a general belief in the greater good – they may be more inclined to give their equity holdings a nice lift.
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Known as the Santa Claus rally, the seasonal trend – with possible explanations stemming from broader feelings of optimism to more specific frameworks such as end-of-year tax considerations – can have a discernibly positive influence on the equities market. Therefore, investors may want to position themselves now into the so-called best Christmas stocks to buy.
Moreover, last year’s nod from Jolly Old Saint Nicholas left some investors with coal in their stockings. However, the mood this year seemingly represents a paradigm shift. Given the bad taste that some felt one year ago, bitter market participants may be looking to even the score. Cynically, that could turn out to be a brilliant catalyst for the three best Christmas stocks to buy mentioned below.
Lowe’s (NYSE:LOW)
Admittedly, home improvement retailer Lowe’s doesn’t exactly light up the holiday mood. When you think about the popular brand, many times, it’s because something unpleasant happened: your picket fence got blown over by a strong gust of wind or an unexpected failure caused your toilet to overflow, among other terrible things. Of course, we all want Santa to show up, but Murphy’s Law is never too far away.
Yet, the unpredictability of Mother Nature, especially with recent storms in the U.S. Eastern region, underscores a universal truth: weather conditions don’t care about our social gatherings and festivities. While it’s never fun to deal with these challenges, Lowe’s offers a reliable platform to acquire necessary tools and materials.
Further, inclement weather conditions and national emergencies have been known to bolster the home improvement retail industry. This is not just empty speculation.
On the financial front, investors should be encouraged by the consistency and predictability of the underlying business. For example, Lowe’s gross margin comes in at 33.7% as of its most recent quarter. That’s roughly in line with historical norms, both pre- and post-pandemic. And if you need a little more coaxing, Lowe’s offers a dividend yield of 2.06%.
What is the Price Target for Lowe’s Stock?
Turning to Wall Street, LOW stock has a Moderate Buy consensus rating based on 14 Buys, 10 Holds, and zero Sell ratings. The average LOW stock price target is $225.25, implying that shares are trading at about fair value.
Mondelez International (NASDAQ:MDLZ)
While Mondelez International doesn’t quite excite the senses for investors, as a play on the best Christmas stocks to buy, the confectionery specialist – which owns compelling brands such as Oreo – delivers the goods. On a fundamental level, the company stands poised to benefit from the trade-down effect or consumers seeking cheaper alternatives to previously purchased goods and services.
As you know, while the Federal Reserve has aggressively raised interest rates throughout 2022 and into the current year, inflation remains stubbornly elevated compared to pre-pandemic norms. Further, several companies across different industries are feeling the pinch of consumers tightening their belts, leading to mass layoffs. That, unfortunately, creates a self-fulfilling cycle of spending cuts for people and enterprises.
Under this scenario, getting your culinary delights from the grocery aisle – as opposed to an expensive retail food establishment – may be more palatable. Even better, Mondelez appears to be well-suited for this fading environment, making it one of the best Christmas stocks to buy.
Specifically, its gross margin has been rising (to 38.7% as of the most recent quarter). Therefore, the brand may be enjoying pricing power, meaning that consumers are flocking to Mondelez despite the broader impact of inflation. Also, MDLZ carries a dividend yield of 2.2%, providing a confidence boost.
What is the Price Target for Mondelez Stock?
Turning to Wall Street, MDLZ stock has a Strong Buy consensus rating based on 19 Buys, one Hold, and zero Sell ratings. The average MDLZ stock price target is $79.50, implying 12.4% upside potential.
PayPal Holdings (NASDAQ:PYPL)
With the top two ideas for the best Christmas stocks to buy, they present relatively sensible market acquisitions. However, if you want to dial up the risk-to-reward profile, you may consider digital payments specialist PayPal Holdings. A company that has been doing financial technology (fintech) before that term became popularized, PayPal naturally commands a strong market presence when it comes to payment alternatives.
However, PayPal was slow to respond to the buy now, pay later (BNPL) phenomenon. It was only in recent years that the company released its BNPL offering called Pay in 4. Conspicuously, though, such solutions emerged early last decade. With tech measured on an accelerated scale, to lose years to the competition represents a massive no-no.
That said, business leaders can’t afford to cry over spilled milk. Having learned from its mistakes, PayPal arguably stands in a position to leverage its global footprint to shake up the BNPL market. Even better, this year’s strong Black Friday sales, in large part, stemmed from BNPL use, according to The Wall Street Journal.
PayPal has an opportunity to shine. For investors, what makes PYPL enticing is its valuation. Right now, PYPL trades at only about 2.4x trailing-year sales. However, the software application industry runs an average revenue multiple of 4.07x.
What is the Price Target for PayPal Stock?
Turning to Wall Street, PYPL stock has a Moderate Buy consensus rating based on 20 Buys, 14 Holds, and zero Sell ratings. The average PYPL stock price target is $74.32, implying 21.5% upside potential.
The Takeaway: Load Up on the Best Christmas Stocks to Buy
While last year’s Santa Claus rally may have been a dud, renewed sentiment, along with the general rise of the festive mood, could translate to broader gains. Still, these specific ideas may benefit the most from the seasonal trend.
