Consumer confidence has remained range-bound over the past two years, with consumers continuing to worry over inflation and uncertainty about the future. Americans’ personal income increased by $237.6 billion in the second quarter. Thus, the American consumer now has slightly higher expectations for future income growth.
Meanwhile, American consumers plan to be more cautious about spending over the next six months. The mixed bag of results suggests that certain stocks should benefit from the surprise reading.
Let’s examine three firms whose stocks now appear to be in a better position due to the positive news in the reading.
Apple (AAPL)
Apple (NASDAQ:AAPL) is among the best-positioned stocks to rise as consumer confidence increases.
I understand why that may appear contradictory, given that I just mentioned the American consumer plans to be more cautious about spending over the next six months. Part of the justification for the assertion comes from more consumers reporting plans to buy smartphones and laptops as the back-to-school season approaches.
Apple, of course, sells popular iPhones and Macbooks that satisfy that demand. Investors should pay particular attention to iPhones in this regard. Apple plans to roll out its AI features, called Apple Intelligence, around September, which roughly coincides with the back-to-school season. Those upgraded features will not work on old iPhone iterations. Instead, Apple is rolling out Apple Intelligence for the upcoming iPhone 15 Pro and Pro Max models.
It’s reasonable to anticipate that Apple’s stock will rise dramatically this September due to the combination of the new iPhone releases, Apple Intelligence and potential rate cuts.
Costco (COST)
Valuations for Costco’s (NASDAQ:COST) stock continue to cause investors to wonder whether it can continue to fly high into the future. Its P/E ratio is close to all-time highs, but I still think the answer is ‘yes.’
While analysts can find all kinds of justification for selling Costco or trimming holdings that make financial sense, many investors aren’t that sophisticated. I don’t mean they cannot understand the nuance of an article like this; they only lack the time or interest. They’re more likely to be swayed by Costco’s late performance and the idea that it continues to make sense in a tight economy with increasing consumer confidence.
For those more interested in metrics, consider that Costco’s forward P/E ratio is 46.6, and 2025 earnings are expected to reach 18.03. That equates to a price of $840. Maybe COST shares aren’t as overpriced as many fear. As long as investors prop it up, such arguments are academic.
Walmart (WMT)
Walmart (NYSE:WMT) is an all-weather stock for which positive arguments can almost always be made. The shares are an excellent choice and currently trade slightly less than their consensus target price.
However, consumer confidence is rising, and those consumers expect to be more cautious about spending over the next six months. That could result in greater foot traffic at Walmart in the coming months, propping up revenues.
It’s relatively underpriced, and Walmart grew 6% in Q1. The company’s ad business and e-commerce segment are growing quickly. It’s continuing to compete against Amazon (NASDAQ:AMZN) to claw market share from its rival. Investors don’t hear as much about Amazon’s ability to disrupt Walmart in its grocery business or other areas of competition.
Anyway, this article is about Walmart and its appeal as consumer confidence rises, not about Amazon vs. Walmart. Walmart remains a solid choice for all of the reasons mentioned above.
On the date of publication, Alex Sirois 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
