4 Stocks to Watch as Back-to-School Shopping Promises Growth
Parents and students are busy with last-minute shopping as schools across the United States are set to resume after the break. This could be positive news for struggling retailers, as rising costs have caused consumers to be more cautious with their spending.
Back-to-school sales are projected to grow and are expected to drive retail sales this year. The good sign is that inflation is finally cooling, while personal income has been steadily increasing over the month, which might prompt people to spend at ease. This makes for a good opportunity to invest in stocks like Apple, Inc. AAPL,HP Inc. HPQ, PC Connection, Inc. CNXN and Casey's General Stores, Inc. CASY.
Back-to-School Sales to Grow
According to a survey by the National Retail Federation (NRF), Americans are expected to spend a record $41.5 billion during the all-important back-to-school season this year. Although commodity prices have increased considerably over the past year, NRF forecasts consumers to spend 12.5% more than they did in 2022 during this back-to-school shopping window.
Last year, the back-to-school season saw $36.9 billion in sales.
The survey further shows that families with children in kindergarten through Grade 12 intend to spend an average of $890.07 this year on back-to-school expenses, which is $25 more per than the previous years.
In order to cover these costs, many families are cutting back on other discretionary spending.
Spending on college-related expenses is projected to reach $94 billion in 2023 compared with $74 billion in the prior year. On average, people are expected to spend around $1,367 per person, up from last year's average of $1,199.
Consumers are expected to spend more on laptops and tablets, with the demand for electronics projected to hit a record high.
The retail sector has been suffering over the past year. The Fed has increased interest rates by 500 basis points since March 2022, which has been making things difficult for the retail sector as people have been cutting down on spending.
However, the good thing is that the Fed paused its interest rate hike in June for the first time after 10 straight hikes. Moreover, the June inflation data indicated that inflation is slowing, which has raised optimism that the Fed might finally end its monetary tightening cycle. This definitely bodes well for retailers ahead of the all-important back-to-school season.
Stocks to Watch
Given this situation, it would be ideal to focus on these four stocks.
Apple, Inc. primarily runs its business around its flagship iPhone. However, the Services portfolio, which includes revenues from cloud services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services have now become the cash cow. Moreover, AAPL’s non-iPhone devices like Apple Watch and AirPod have gained significant traction. In fact, Apple dominates the Wearables and Hearables markets due to the growing adoption of Watch and AirPods.
Apple’s expected earnings growth rate for next year is 10.3%. Shares of AAPL have gained 4.4% in the past 30 days. Apple carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
HP Inc. is the surviving entity following the November 2015 split of Hewlett-Packard Company into publicly traded entities — Hewlett Packard Enterprise Company and HP Inc. HPQ is a leading global provider of personal computing and other access devices. HP’s other products include imaging and printing products, and related technologies, solutions and services to individual consumers, SMBs and large enterprises, including customers in the government, health and education sectors.
HP’s expected earnings growth rate for next year is 6.3%. Shares of HPQ have gained 5.1 % over the past 30 days. HP presently has a Zacks Rank #3.
PC Connection, Inc. is a direct marketer of brand-name personal computers. CNXN also markets related peripherals, software, and networking products to business, education, government, and consumer end users located primarily in the United States.
PC Connection’s expected earnings growth rate for next year is 16.4%. Shares of CNXN have gained 1% in the past three months. PC Connection presently carries a Zacks Rank #3.
Casey's General Stores, Inc. operates convenience stores under the Casey's and Casey's General Store names in 16 Midwestern states, mainly Iowa, Missouri and Illinois. CASY also operates two stores under the name "Tobacco City," selling primarily tobacco and nicotine products, one liquor store and one grocery store.
Casey's General Stores’ expected earnings growth rate for next year is 8.9%. Shares of CASY have gained 6.3% in the past 30 days. CASY currently carries a Zacks Rank #2.
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