Retail sales climbed a very impressive seasonally adjusted 0.8% in December when compared to November. And retail sales jumped 5.6% in December year-over-year (YOY), coming in significantly above inflation which is running below 4%. Additionally, the University of Michigan’s index of consumer sentiment rose 21% YOY this month to 78.8. Moreover, the index’s gain in the last two months was the greatest advance over such a period in more than 30 years. So consumers’ confidence is clearly rapidly increasing, causing their spending to surge. In such an environment, the top consumer discretionary companies should thrive. As a result, buying the best consumer discretionary stocks is a good move. Here are three names within the category to buy.
Dutch Bros (BROS)
A prominent investment bank recently issued a bullish note on coffee retailer Dutch Bros (NYSE:BROS). The upbeat assessment may suggest that Wall Street is getting very enthusiastic about BROS stock.
On Jan. 16, Stifel raised its rating on the shares to “buy” from “hold.” According to the bank, BROS is starting to develop transaction generating strategies such as a loyalty rewards program. Additionally, Stifel is upbeat about the company’s decision to ramp up its paid advertising and its promotion of its new products. Stifel placed a $35 price target on BROS stock.
Analysts, on average, expect the company’s top line to jump to $1.2 billion this year from $964 million last year, and the firm’s earnings per share are expected to come in at 37 cents, versus 27 cents in 2023.
The shares have a reasonable price-sales ratio of four.
lululemon (LULU)
Yoga apparel retailer lululemon (NASDAQ:LULU) recently issued a positive preannouncement, indicating that the demand for its products continues to be strong and is still increasing rapidky.
Specifically, the firm reported that its top line would come in at $3.17 billion to $3.19 billion, up from its prior guidance of $3.13 billion to $3.17 billion. Assuming the new guidance is accurate, the company’s revenue jumped 14% to 15% last quarter versus the same period a year earlier.
LULU reported that its Q4 earnings per share would come in at $4.96 to $5, versus its previous guidance of $4.85 to $4.93.
Also noteworthy is that LULU’s revenue from China soared 53% in the third quarter versus the same period a year earlier, indicating that LULU is making significant inroads into the world’s second-largest economy.
LULU’s rock-solid business and strong growth make it one of the best consumer discretionary stocks to buy.
Rivian (RIVN)
The outlook for EV startup Rivian (NASDAQ:RIVN) continues to be strong. Consumers’ improving situation, along with falling interest rates, will only bolster its business.
Also noteworthy is that investment bank Needham recently retained RIVN stock on its Conviction List, citing solid demand trends for the automakers truck and SUV. Additionally, Needham noted that the prices of the company’s used EVs are higher than those of its peers.
Further, RIVN stock would be bolstered by strong demand for its delivery vans from companies, including Amazon (NASDAQ:AMZN) and AT&T (NYSE:T). Finally, Ford’s (NYSE:F) decision to scale back the production of its F150 electric trucks should increase the demand for Rivian’s pickup truck.
On the date of publication, Larry Ramer held a long position in RIVN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.