Six consumer stocks poised for growth in 2024, according to UBS
Published: 15:51 05 Sep 2024 EDT
UBS is bullish on several consumer stocks for the rest of 2024, according to a new report from the investment bank.
Analysts highlighted six companies they believe have strong growth potential, emphasizing what they see as compelling investment opportunities due to their ability to outperform peers, driven by factors such as robust top-line growth (like Colgate-Palmolive), margin recovery and stabilization (Target), record bookings (Royal Caribbean), positive sales momentum (Domino’s), and the potential for market expansion (On Holding AG).
UBS sees these companies as well-positioned in an environment that demands sustainable growth and earnings upside.
Analysts have singled out Colgate-Palmolive Co (NYSE:CL), Target Corp (NYSE:TGT), Royal Caribbean Cruises Ltd (NYSE:RCL), Domino's Pizza Inc (NYSE:DPZ), Ulta Beauty Inc (NASDAQ:ULTA), and On Holding AG (ONON) as “high-conviction” stocks with a Buy rating.
Colgate-Palmolive is noted for its strong position in the Household and Personal Care.
“CL’s top-line growth will continue to screen as best-in-class relative to Staples peers,” analysts noted.
UBS believes that Colgate's potential for top and bottom line revisions makes it a standout, especially in an environment where sustainable growth is a necessity.
In the food retail sector, Target stands out. "TGT is a top pick and we see positive upside skew," wrote UBS, pointing to the retailer's margin recovery and expected stabilization of its discretionary business. The firm predicts Target’s operating margins will exceed 6% by 2026.
Analysts selected Royal Caribbean as a top leisure stock, driven by record bookings for 2024 and 2025. "RCL has a record booked position for 2024, at record pricing levels,” noted UBS, adding that the company is already taking bookings for 2025 with increasing pricing trends.
In the restaurant sector, Domino’s is favored due to strong unit growth and positive traffic. "We see the ability to maintain US sales momentum," UBS wrote, anticipating earnings beats in 2025.
Ulta Beauty is another pick, with UBS stating: "Risk-reward for Ulta skews significantly to the upside.”
Lastly, UBS praised On Holding AG, noting its underappreciated potential to expand beyond running shoes, which could drive significant outperformance in 2024 and beyond.
