3 Luxury Stocks Capitalizing on High-End Consumer Trends
Despite America’s elevated interest rates and high inflation since 2021, most wealthy Americans have managed to thrive in recent years. Stocks, white-collar salaries and home values have generally risen quicker than inflation and most homeowners are still locked into mortgages with very low interest rates. Meanwhile, lingering, unfounded concerns about a recession has left the valuation of most luxury stocks quite low, despite the stock market’s recent rally. As a result, now is a great time to buy equities in this sector. Here are three luxury stocks to buy to capitalize on this situation.
Tapestry (TPR)
Source: TY Lim / Shutterstock.com
A luxury handbag maker, Tapestry (NYSE:TPR) has an excellent outlook, according to many analysts. On average, most analysts expect the company’s earnings per share to climb to $4.45 in 2024.
On January 2, JPMorgan moved TPR onto its Analyst Focus List. Theoretically, the company will be able to add new customers and cut costs thanks to higher prices and digital sales.
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Additionally, Tapestry can benefit from other cost-cutting initiatives, which placed a $46 price target on the shares.
Also upbeat recently on TPR stock was investment bank Jefferies, which identified the shares as a growth at a reasonable stock (GARP) name that investors should buy.
TPR does indeed qualify as a GARP name, as its forward price-earnings ratio is just nine.
Porsche (POAHY)
Source: r.classen / Shutterstock.com
Luxury automaker Porsche (OTCMKTS:POAHY) has only been publicly traded since September 2022, and its shares are listed on an over-the-counter exchange, so most investors probably aren’t too familiar with its stock offerings.
The European automaker delivered great financial results in the first nine months of 2023, especially considering its bargain basement valuation. Specifically, its revenue jumped 12.6% versus the same period a year earlier. Meanwhile, its operating profit surged 9% year-over-year to 5.5 billion euros. In October, Deputy Chairman Lutz Meschke attributed some of the company’s success to high demand, a mix of products and price effects.
Also noteworthy is that HSBC last month raised its rating on Porsche to a “buy” from a “hold,” contending that it was “a deep value pick” with a better outlook than that of Ferrari (NYSE:RACE), Seeking Alpha reported. The bank believes that any risk from the Chinese economy to Porsche is “more than” baked into its stock price. The company’s margins are expected to climb going forward.
The shares have a very low and enormously attractive forward price-earnings ratio of three, making it an ideal option in luxury stocks.
Darden Restaurants (DRI)
Source: DavideAngelini / Shutterstock
Not all of Darden’s (NYSE:DRI) restaurants are high-end eateries. But many of them, including its Capital Grille, LongHorn Steakhouse, Ruth’s Chris and Eddie V’s Prime Seafood chains, can be put in the category. Certainly, the firm has enough exposure to wealthy consumers to get a big lift from their spending increases.
Indeed, DRI is benefiting significantly from the strong performance of its upper-end restaurants. Specifically, in Q2, LongHorn’s profit jumped to $111.8 million from $85.6 million during the same period a year earlier. The bottom line of DRI’s fine-dining restaurants climbed to $56.6 million from $38.9 million in Q3 of 2022.
Meanwhile, Darden’s top line jumped 9.7% YoY to $2.7 billion.
DRI stock has an attractive forward price-earnings ratio of 18.3.
On the date of publication, Larry Ramer 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.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.
The post 3 Luxury Stocks Capitalizing on High-End Consumer Trends appeared first on InvestorPlace.
