The winter vacation season brings a different atmosphere where people are more reflective and value aspects such as family and friendship. However, it is also a good time to go in search of top Christmas stocks to invest in.
This period is known as the Santa Claus rally; when the markets experience a positive seasonal trend, possibly attributable to a general increase in optimism or year-end fiscal considerations. With the possibility that investors may be more inclined to back their equities during this period, it is suggested to consider stocks highlighted for the holiday season.
Although some investors did not receive their Christmas presents last year following disappointing performance, the current environment suggests a paradigm shift. Given the negative experiences of the past, investors may be eager to balance the scales this year, which cynically could become a bright catalyst for these three Christmas stocks.
PayPal Holdings, Inc.
Being a company with a solid presence in the digital payments market, PayPal stands out as an attractive option for investors during the holiday season. While it needed to be faster to address the buy now, pay later (BNPL) trend, its recent launch, Pay in 4, shows its ability to adapt.
However, amid underwhelming performance in 2023, the warning about buying PayPal stock is heightened as fierce competition, particularly from giants like Apple, Block, and Stripe, poses significant challenges for the payments processor. Amazon’s recent withdrawal from accepting Venmo, PayPal’s service, as a payment method adds additional pressure on the company.
Wall Street analysts, such as Bank of America’s Jason Kupferberg and BMO Capital Markets’ Rufus Hone, express caution, suggesting that the change in leadership with a new CEO and CFO could make 2024 a challenging transition year. Kupferberg downgraded PayPal shares from “buy” to “neutral,” while Hone forecasts modest earnings growth and issued a “market perform” rating.
The situation is exacerbated by Amazon’s withdrawal of Venmo, a blow that raises concerns about PayPal’s ability to monetize on key platforms. Evercore ISI’s David Togut highlights concerns around this development. In this context, potential investors are advised to be cautious. PayPal’s current outlook and strategic decisions suggest that it may be wiser to explore alternatives in the financial technology sector rather than betting on this company for the remainder of 2023 and possibly the first quarter of 2024.
That being said, it is also worth looking at the other side of the coin. Despite losing ground in the BNPL arena, PayPal, with its global presence, has the potential to revitalize the field. With a current valuation of just 2.4 times last year’s sales and an average Wall Street price target of $74.32, the stock has an upside potential of 21.5%.
Mondelez International, Inc.
Mondelez has experienced share sales by insiders over the past year, with insiders being net sellers, i.e., they sold more shares than they acquired. The most notable transaction was by Maurizio Brusadelli, who sold $1.4 million worth of shares at a price below the current market price, which could suggest a perception of a lower price by the seller. Although insider sales are often considered a negative signal, this sale represented only 9.2% of Brusadelli’s total stake in the company.
In terms of insider ownership, Mondelez International insiders own about $129 million in stock, equivalent to 0.1% of the company. While this holding may be seen as indicative of alignment with shareholder interests, the absence of significant insider purchases in the past year could raise concerns. In addition, it highlights the importance of assessing the risks associated with the company, with one red flag having been identified. While insider ownership is encouraging, the lack of substantial purchases and the presence of risks should be considered in the investment decision-making process.
Mondelez, as the owner of popular brands such as Oreo, stands out as a solid investment option, especially during the holiday season. While it may not draw prominent interest from investors, the company benefits from the “trade-down” phenomenon, where consumers are looking for cheaper alternatives amid persistent inflation and economic challenges.
With a growing gross margin of 38.7% in the most recent quarter and a dividend yield of 2.2%, Mondelez demonstrates its ability to maintain attractive pricing and appeal to consumers in challenging times. The company’s stock has a strong Buy recommendation on Wall Street, supported by an average price target of $79.50, representing a 12.4% upside potential.
In this economic environment, Mondelez is positioned as an attractive option for those looking for solid investments during the holidays.
Lowe’s Companies, Inc.
Lowe’s, a well-known home improvement retailer, is not often directly associated with holiday cheer, but rather with the adversities of home maintenance, from downed fences to plumbing system mishaps. Despite these challenges, the chain offers a reliable platform for acquiring essential tools and materials, especially during unpredictable weather events such as the recent storms in the eastern United States. Lowe’s stands out as a vital resource in times of emergency, serving as a haven for those looking to address household issues effectively.
From a financial perspective, the consistency and predictability of Lowe’s underlying business provide confidence to investors. With a gross margin of 33.7% in its most recent quarter, the company has maintained performance in line with historical norms, even in the context of the pandemic. In addition, the dividend yield of 2.06% adds to investor appeal. With a moderate buy consensus valuation on Wall Street and an average price target of $225.25, Lowe’s shares are perceived to be trading at approximately fair value, suggesting potential interest for investors.
Final thoughts
In looking for the most promising options for holiday shopping, it is suggested to pay particular attention to those ideas that could take advantage of renewed holiday sentiment and increased Christmas cheer. Despite a possible stumble from last year’s Santa Claus rally, seasonal trends point to broader profit opportunities on these stocks. So the question arises: which option looks best to you?
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(Information in this post is for general informational purposes only. It cannot and should not be considered as suggestions or recommendations regarding investing or financial decisions.)
