The holidays are here, and many companies are hoping to use the busy shopping season to generate strong revenue and close out 2020 on a high note. And despite the Covid-19 pandemic, this year’s holiday sales are forecast to be exceptionally strong. Credit card company Mastercard (NYSE:MA) is predicting that holiday sales this year will rise 2.4% compared to Christmas 2019. So what are the best stocks to buy in preparation for this boom?
Don’t get me wrong, it’s great to see so many companies flourishing even in the midst of a pandemic. But for investors, the options can seem daunting when deciding what stocks to buy for this upcoming holiday season. In this article, we narrow the field.
Let’s look at seven stocks to buy for the holidays:
- Amazon (NASDAQ:AMZN)
- Etsy (NASDAQ:ETSY)
- Lululemon Athletica (NASDAQ:LULU)
- Peloton (NASDAQ:PTON)
- DoorDash (NYSE:DASH)
- Best Buy (NYSE:BBY)
- Dollar General (NYSE:DG)
Stocks to Buy for the Holidays: Amazon (AMZN)
Who needs elves when you’ve got Amazon? The holiday season is when the world’s largest online retailer truly shines (and earns a lot of revenue).
Christmas is to Amazon what tax season is to accountants — an intense period of time in which it must meet skyrocketing demand for its services before a set deadline. And Amazon delivers during the holidays. Literally. From Black Friday at the end of November through New Year’s Day, it’s go, go, go at Amazon fulfillment centers all over the world. And the global pandemic has forced more consumers to shop online than ever before, resulting in expectations for heightened deliveries during the holidays this year.
A recent report in The New York Times estimates that three billion packages will be shipped in the U.S. alone this holiday season, around 800 million more than were delivered last year between Thanksgiving and New Year’s. In a typical Christmas period, shipping volumes rise 30% to 40% higher than at other times of the year. But this year, amid Covid-19 lockdown measures, shipments of goods could easily be 50% higher, or more.
This all adds up to a windfall for Amazon, which has done exceptionally well throughout the pandemic and is positioned for a strong start to 2021. AMZN stock has been trending downward since peaking in early September at $3,552.25. Now, the stock sits at just over $3,100 a share. Investors should see this dip as a buying opportunity.
Crafts are a part of Christmas, and Etsy has emerged as the leading online destination for people who love making crafts.
Of course, Etsy is more than crafts. An e-commerce company, Etsy also sells jewelry, bags, clothing, home décor, furniture, toys, art, tools and vintage items. And while the items sold on Etsy proved popular with consumers while they sheltered in place at home during the pandemic, they should prove to also be popular during the holidays — either as gifts or for use while families spend time together around the Christmas tree. (Searches for “family games” on Etsy’s website are up 50% in December.) In fact, many sections of Etsy’s website are focused exclusively on Christmas.
A successful Christmas will cap off what has been a banner year for Etsy. Third-quarter financial results released at the end of October showed worldwide sales were up 128% compared to the same period of 2019. Etsy now has nearly four million active sellers on its website. The success has been reflected in the company’s share price, which is up 418% from its March low and now trades around $170 a share. With the holidays boosting the company’s sales, ETSY stock is likely to continue running higher well into 2021.
Lululemon Athletica (LULU)
What do you get that special person in your life who is likely to continue working from home for the foreseeable future? Sweatpants and other casual clothing, of course. And no casual clothing is more comfortable or popular right now than Lululemon Athletica.
Fueled by rising demand for its casual apparel, the company outperformed expectations on three of its four most recent earnings reports. In its most recent quarter, Lululemon beat its earnings target by 35%. LULU reported earnings per share of $0.74, instead of the anticipated $0.55.
Now, the company is hoping for a great holiday sales period as its clothing items are wrapped and placed under Christmas trees across the U.S. and beyond. Lululemon has made it onto numerous “best gifts” lists. It all bodes well for LULU stock, which is up 140% from its March low at $347.50 per share. In another sign of how bullish Wall Street is on Lululemon, Raymond James recently slapped a $500 price target on the stock.
We’ve all got to work off the turkey and stuffing somehow. And with gyms and fitness clubs closed around the country at least until the Covid-19 vaccine becomes widely available, many people will be looking to work out at home after overeating during the holidays. Consider that the number one New Year’s resolution is to lose weight and get into shape, and Peloton’s home exercise bikes and treadmills look like a great gift. Indeed, demand for Peloton exercise bikes is so great, the company is warning customers about shipping delays.
PTON stock has fallen about 13% since October, as we’ve gotten closer to a roll out of the Covid-19 vaccine. However, gyms and fitness centers are not likely to open in the near term, and many people who have Peloton fitness equipment have found they enjoy working out at home. For these reasons, the stock likely still has room to move higher.
The share price has risen 345% since March and now trades at $118.79.
After just going public in a blockbuster initial public offering (IPO), food-delivery company DoorDash is likely to perform very well during the holidays. After all, once the leftovers are gone, people will be looking to order delivery and avoid cooking for themselves.
That’s good news for DoorDash, which controls 50% of the U.S. food-delivery market.
As for the company’s IPO, it was a resounding success as DASH stock was initially priced at $102, but began trading on the New York Stock Exchange at $182 a share, an increase of 78% on the day of the company’s market debut. When the dust cleared on the IPO, DoorDash had a market valuation of $60 billion. The company reported $1.9 billion in revenue for the nine months ended Sept. 30, up from $587 million during the same period of 2019. The company is looking to close out the fourth quarter with a strong holiday season.
Best Buy (BBY)
Personal technology and home electronics are always popular gifts during the holidays, and 2020 is no exception. In fact, tech gifts are expected to be especially popular this year as new video game consoles from PlayStation and Xbox hit store shelves, along with popular new cell phone releases from Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG). And Best Buy remains a leading retailer of all things related to technology.
Like many stocks on this list, a strong December would cap off what has proven to be a great year for Best Buy. The company’s top-line revenue grew 6.6% through the first nine months of 2020 to $30.32 billion.
However, the real bright spot for Best Buy has been its online sales, which increased 174% during this year’s first three quarters. And that online strength should help carry Best Buy to new heights during the holiday season. BBY stock is up nearly 15% year-to-date and now trades at $101.70 a share.
Dollar General (DG)
Dollar stores have a role to play during the holidays. From stocking stuffers to cooking utensils and wine glasses, a lot of people turn to their local Dollar General to get the things they need to make the holidays merry and bright. And with many family budgets stretched this year due to the pandemic, more and more people may turn to Dollar General to get through this December. The company is doing its best to capitalize on Christmas this year, advertising decorations and other items available at its retail outlets.
DG stock is a little off its 52-week high at its current price of $206.57 a share, but still holding relatively strong, up 40% from its March low. While the pandemic has pushed more people to shop at the low-cost retailer, there are no indications that the popularity of Dollar General will dissipate once the pandemic is over. Many analysts and commentators remain bullish on Dollar General stock, seeing continued gains well into 2021.
On the date of publication, Joel Baglole held a long position in AAPL.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.