A holiday when those in love show their feelings for each other, Valentine’s Day is a beloved tradition and has been widely celebrated since ancient Rome. People buy flowers, chocolates and gifts, but they also buy things that they need, such as food and clothing. This holiday has become so popular, retailers have embraced it and use it to generate higher sales with less effort. Therefore, Valentine’s Day stocks are one of this year’s most popular market trends.
These stocks have been seen as a safe bet for investors looking for long-term growth opportunities. However, there are some risks involved with investing in Valentine’s Day stocks.
It’s typically not a good idea to invest in booming stocks around holidays. These picks tend to crash pretty quickly, or go up and down rapidly with the market as a whole. However, if you invest in a fundamentally strong company and manage it well, you’re unlikely to put a foot wrong.
According to Statista, spending on Valentine’s Day in America is expected to be about $24 billion this year. That’s an increase of nearly two billion from last year.
Therefore, if you’re looking for the companies that will thrive on Valentine’s Day, consider these three:
Valentine’s Day Stocks: PayPal (PYPL)
PayPal’s success is due to many factors, such as its innovative solutions, strong brand recognition and its ability to provide excellent customer service. A couple of years ago, it would have been unheard of for someone to do their in-person shopping using digital payments. But the switch has taken hold and is unlikely to wane even after the pandemic.
Contactless payment methods are becoming more and more popular, and consumers are always looking for ways to make purchases without seeing cash registers in person. PayPal is a huge part of this secular trend, and its growth story shows no signs of slowing down.
The company’s revenue for the fourth quarter came in at an impressive $6.9 billion. This was a significant increase from last year, when it had $6.1 billion. The payment-technology company reached an annual total of $25.4 billion by the end of 2021, up from $21.5 billion in 2020.
PayPal had more than 426 million active accounts in 2021, but it predicts large growth in its userbase by 2022. This would allow PayPal to sign up an additional 15 to 20 million users.
PayPal is predicting 6% quarterly growth for 2022. When you exclude any impact of its eBay (NASDAQ:EBAY) business, it would be 14%. The company expects to reach $1.5 trillion in earnings for the full year, and revenues will exceed $29 billion.
However, there are certain risks to consider as well. Consumers at all levels are feeling squeezed by rising inflationary pressures and weak consumer sentiment. “We have an incredible business, but we are not immune to the vagaries of the economy,” CFO John Rainey noted. But expect PayPal to maintain strong revenue growth as the year goes on, despite the occasional troubles.
Due to the pandemic, total luxury sector sales fell by 23%. This is the first known decline in sales since 2009.
After Covid-19 began to spread, luxury spending decreased, unemployment increased and people had less disposable income. This was because people were saving more and spending less on luxury items. However, now that things are getting back to normal, spending on the luxury sector will only increase.
Companies like Movado are already showing signs of strength. Movado has been around since 1881, making it one of the longest-running brands in the watch industry.
The company recently released second-quarter and six-month records. With robust growth in net sales and operating income, earnings per share were also higher than the same period of last year.
Net sales increased by 96.4% from fiscal 2021 and 10.2% from fiscal 2020. Operating income was $24.6 million, up from a loss of $8.9 million in fiscal 2021 and income of $8.8 million in fiscal 2020.
Fiscal 2022 brought a huge spike in net sales. In the first six months, net sales were increased by almost 95%. Operating income was $37.9 million compared to an operating loss of $191.1 million last year.
Movado expects to make $680 to $695 million in net sales and 55.5% to 56% gross profit in fiscal 2022. It also predicts 13% to 13.5% in operating profit and diluted earnings per share in a range of $2.75 to $2.90.
Valentine’s Day Stocks: Signet Jewelers (SIG)
This year, the jewelry industry has seen an uptick in sales — especially for younger shoppers who bought into the category for the first time. Many of them are planning proposals or preparing for the wave of weddings postponed due to Covid.
Signet reported $1.45 in earnings per share during the October quarter, up from 2 cents a year ago. Sales spiked to $1.54 billion this year from $1.3 billion last year. The company has seen a huge uptick in sales, topping analyst expectations of $1.43 billion.
Its fiscal 2022 revenue is expected to range between $7.41 billion and $7.49 billion compared to a prior estimate of $7.04 billion to $7.19 billion. The company also anticipates same-store sales at 41% to 43%, up from a previous range of 35% to 38%.
The CEO of Signet, Virginia Drosos, mentioned the company had a smooth holiday season uninterrupted by various supply chain issues, as it secured its inventory early on to avoid delays.
The company is conservative about its outlook. But President and CEO Joan Hilson said in its press release that it remains cautious about the outbreak of the omicron Covid-19 variant and potential shifts in consumer spending patterns.
On the publication date, Faizan Farooque did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. He does not directly own the securities mentioned above.