Wall Street Favorites: 3 Consumer Stocks With Strong Buy Ratings for May 2024


  • Wager on these three top consumer stocks to buy offering stellar growth despite economic headwinds.
  • Walmart (WMT): Recent blow-out earnings showcase Walmart’s diverse and resilient business model.
  • Vita Coco Company (COCO): Maintains over 50% market share in the coconut water segment, continuing to grow at a rapid clip.
  • E.l.f. Beauty (ELF): ELF stock is driven by impressive double-digit gains in revenue and EBITDA margins, reflecting strong brand appeal and demand.
Consumer Stocks to Buy - Wall Street Favorites: 3 Consumer Stocks With Strong Buy Ratings for May 2024

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The soft CPI print in April had plenty to do with weaker-than-expected growth in retail sales. Compared to March figures, retail sales in April remained unchanged, dropping 3% on a year-over-year (YOY) basis. Hence, investors may want to be circumspect over consumer stocks to buy.

However, consumer spending remains resilient despite the pressure on household income and job growth. Customers are now being more selective though, prioritizing their retail purchases. Therefore, investors would want to wager on high-quality consumer stocks to buy, offering a healthy upside ahead despite the headwinds. Keeping that in mind, here are three top consumer stocks to buy, which continue to prove their mettle despite operating in an unconducive environment.

Consumer Stocks to Buy: Walmart (WMT)

Here's Why Walmart Stock Can't Seem To Breakout Above $100
Source: Ford

Walmart (NYSE:WMT) has been on fire lately, reaching a new all-time high following a blow-out fiscal Q1 earnings report. Brushing off inflationary pressures, it posted sizable top-and-bottom-line beats marked by robust spending from wealthier customers and strong e-commerce growth. e-commerce growth, in particular, stood out, jumping 22%, underscoring its position as the most versatile discount retailer in the world. Also, the strength of its advertising machine cannot be denied either, which 24% in Q1.

Moreover, the company’s future looks remarkably bright, with recent figures showcasing the strong depth of its business. Its stock has gained more than 28% last year and over 23% in the past six months. Hence, WMT stock has been hot for a while, but Wall-Street believes it still has a stellar growth trajectory ahead. It currently attracts a consensus’ strong buy’ rating from Wall-Street analysts, offering healthy single-digit upside potential. Layering that up with its dependable dividend, which has been growing for the past 50 years, it’s tough to look past WMT stock at this point.

Vita Coco Company (COCO)

A line of Vita Coco (COCO) waters on a shelf.
Source: Nicole Glass Photography / Shutterstock.com

Vita Coco (NASDAQ:COCO) stands out among beverage stocks for its superior margin profile and robust top-line expansion over the years. It has carved a niche for its business by focusing on the coconut water segment, holding more than 50% market share. Hence, it’s effectively shielded itself from the fiercely competitive energy and sports drink market.

Its fundamentals are an absolute peach, with revenue and EBITDA growth averaging 16% and 173% over the past five years. What’s surprising is that despite the headwinds, its recent results are in line with its lofty historical averages. Another key metric that’s been growing at a rapid pace is its free-cash-flow margin (FCF). It stands at 18%, roughly 202% higher than the sector median and 364% higher than its 5-year average of 3.83%.

Moreover, the company is looking to diversify its revenue mix, having recently partnered with British alcohol giant Diageo (NYSE:DEO). The partnership allows the firm to tap into the booming ready-to-drink alcoholic beverage market, adding another layer to COCO’s growth story.

E.l.f. Beauty (ELF)

an elf branded beauty product on a stone counter
Source: Lisa Chinn / Shutterstock.com

Elf Beauty (NYSE:ELF) is one of the fastest-rising beauty brands that’s won over Gen Z consumers and millennials with its use of cruelty-free ingredients. It’s a trend that’s garnered plenty of steam of late, with ELF stock jumping more than 80% last year, beating the S&P 500 by 53%.

However, it’s far from just hype that’s driven ELF stock to such heights. Its top-and-bottom-line growth has been incredible, boasting double-digit gains across key metrics over the past several years. Despite operating in a less-than-ideal market, the company’s been growing at almost 80% on a YOY basis, a testament to the quality of its business. Similarly, its EBITDA margin growth is at an eye-catching 112%.

In explaining the ELF stock’s outperformance, my fellow InvestorPlace colleague Marc Guberti pointed out that beauty products often thrive during economic slowdowns. He writes, “People often tend to smaller luxuries during recessions to forget about their financial struggles for a little.” This phenomenon is termed the lipstick effect.

On the date of publication, Muslim Farooque did not have (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.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/wall-street-favorites-3-consumer-stocks-with-strong-buy-ratings-for-may-2024/.

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