Looking for undervalued stocks? Here are the top undervalued stocks in December 2024. (search description)
With one interest rate cut in September and more likely on the way, 2025 could be a standout year for consumer spending. World Data Lab has projected next year’s global consumer spending will reach $3.2 trillion. That translates to growth of almost 6%, fueled by 131 million new consumers.
If the growth materializes, consumer discretionary stocks—and their shareholders—will benefit. That means it may be time to increase your exposure to the consumer discretionary sector. Even better, you can make the move with one of the potentially undervalued stocks introduced below.
How These Undervalued Stocks Were Chosen
I picked the six top undervalued stocks for December by screening on these criteria:
- Operating in the consumer discretionary sector with a market capitalization of $5 billion or more
- Recent growth record, with revenue growth of at least 5% and EPS growth of at least 10%
- Reasonable debt load, with a debt-to-equity ratio below 1
- Solid outlook, with expected five-year EPS growth above 10%
- Reasonable valuation with forward P/E ratio under 40 and PEG ratio below 2.25
- Loved by analysts, with buy ratings on average and projected upside of 10% or more
Note that these best stock picks are concentrated in one sector, so they are not intended to represent a diversified portfolio. They are presented as options for investors who want to capitalize on falling interest rates in 2025 and the positive effect that trend may have on consumer confidence.
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6 Top Undervalued Stocks To Buy In December 2024
The table below includes six consumer discretionary stocks that analysts love. After the table, I discuss each of these potentially undervalued stocks in more detail.
Table data source: Stockanalysis.com.
As you can see, these are mid-cap and large-cap stocks only. For smaller companies, see our small-cap value stock picks. You may also want to reference our list of value stocks for 2024.
1. Amazon (AMZN)
- Stock price: $196.20
- Forward P/E ratio: 33.7
- PEG ratio: 1.6
- Five-year EPS growth outlook: 29.5%
- Price target: $233.63
- Price target upside: 18.7%
- Debt/equity: 0.61
Business Overview
Amazon generates revenue from several sources. They include online and store-based retail sales in the U.S. and globally, online advertising, Amazon Prime memberships, logistics and support services for retailers and cloud computing.
Why AMZN Is A Top Choice
Since Amazon’s third-quarter earnings release, at least 15 analysts have raised their AMZN price targets. The headlining takeaway from the release was 19% quarter-over-quarter growth in the AWS cloud computing business, attributed to strong AI infrastructure demand.
AWS is faster-growing and higher-margin than retail sales for Amazon. However, e-commerce, including Prime memberships, still provides most of the company’s revenue. Amazon is also the market share leader in U.S. e-commerce sales. Globally, the company accounts for 12% of gross merchandise volume sold online. With that positioning, Amazon should benefit from any measurable uptick in consumer spending.
2. Alibaba Group Holding (BABA)
- Stock price: $99.39
- Forward P/E ratio: 10.9
- PEG ratio: 0.96
- Five-year EPS growth outlook: 16.1%
- Price target average: $111.93
- Price target upside: 12.6%
- Debt/equity: 0.23
Business Overview
Like Amazon, Alibaba operates a diversified business model that includes e-commerce sales, display advertising, logistics and delivery services and cloud computing. The company is based in China and generates more than half of its revenue from retail e-commerce in its home country.
Why BABA Is A Top Choice
At least five analysts have raised their price targets on Alibaba since the company’s last earnings release. Others reiterated their targets and two lowered them.
Alibaba also grew its cloud computing revenues, but growth in the company’s international digital commerce group was much stronger. Revenues there were up 32% quarter over quarter. The division includes retailers AliExpress and Trendyol plus wholesale site Alibaba.com.
One risk to note for Alibaba is the uncertain state of the Chinese economy. Recent stimulus efforts by the Chinese government have helped China’s financial markets but consumer confidence remains low.
3. Lululemon Athletica (LULU)
- Stock price: $319.56
- Forward P/E ratio: 22.2
- PEG ratio: 2.1
- Five-year EPS growth outlook: 14.6%
- Price target: $369.40
- Price target upside: 15.5%
- Debt/equity: 0.36
Business Overview
Lululemon produces athletic apparel, footwear and accessories, with an emphasis on technical fabrics and functional designs. The company has deep roots in the yoga community. Products are sold through third-party retailers and directly to consumers via lululemon.com and company-owned stores.
Why LULU Is A Top Choice
Analysts’ reactions to Lululemon’s last earnings report were mixed, with more target price reductions than increases. While the company beat earnings expectations, it missed on revenue.
In 2024, LULU is down 37%. Investors have been worried about rising competition in the luxury athleisure space and the departure of the company’s Chief Product Officer Sun Choe. Despite those issues, analysts largely still see upside for the apparel maker, particularly at the lower trading price. If the company can keep its line-up relevant and compelling, it should benefit from increasing consumer confidence next year.
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4. Deckers Outdoor (DECK)
- Stock price: $163.15
- Forward P/E ratio: 27.7
- PEG ratio: 2.1
- Five-year EPS growth outlook: 64.1%
- Price target: $191.06
- Price target upside: 17.1%
- Debt/equity: 0.12
Business Overview
Deckers Outdoor makes and sells lifestyle and performance footwear, apparel and accessories. The brand portfolio includes UGG, Hoka, Teva, Koolaburra and ANHU. The products are sold to customers around the world, online and through company-owned retail stores and third-party retailers.
Why DECK Is A Top Choice
Deckers Outdoor has been handily beating analysts’ revenue and earnings expectations for several quarters running. The latest earnings release outpaced EPS expectations by more than 28%, prompting several analysts to raise their price targets.
DECK stock is up nearly 50% for the year on double-digit revenue gains plus a rising gross margin. Given the five-year EPS growth outlook of 64%, many believe DECK’s impressive results will continue in the intermediate term.
5. SharkNinja (SN)
- Stock price: $93.88
- Forward P/E ratio: 27.7
- PEG ratio: 1.3
- Five-year EPS growth outlook: 38.1%
- Price target: $116.39
- Price target upside: 24.0%
- Debt/equity: 0.63
Business Overview
SharkNinja makes a range of lifestyle products under the Shark and Ninja brand names. Shark products include vacuums and hair styling tools. The Ninja line-up features cookware and small kitchen appliances, such as air fryers and beverage makers. Products are sold online and through third-party retailers.
Why SN Is A Top Choice
Like Deckers Outdoor, SharkNinja has made a habit of beating expectations recently. Highlights of the company’s last earnings release included 33% net sales growth versus the prior-year quarter and a 160-basis-point increase in adjusted gross margin.
SharkNinja’s success is related in part to its ability to innovate solutions and launch products faster than competitors, according to JPMorgan analysts. The company routinely announces new products and line expansions as it works to optimize the supply chain. Investors like the balance of topline growth with expense control. SN stock is up nearly 80% on the year.
6. Skechers USA (SKX)
- Stock price: $62.82
- Forward P/E ratio: 13.2
- PEG ratio: 0.6
- Five-year EPS growth outlook: 16.1%
- Price target: $77.73
- Price target upside: 23.7%
- Debt/equity: 0.43
Business Overview
Skechers designs, makes and sells footwear, apparel and accessories for men, women and children. The company sells to retailers, marketplaces and directly to consumers (DTC). The DTC channels are skechers.com and a chain of retail stores.
Why SKX Is A Top Choice
In its latest earnings release, Skechers reported 15.9% sales growth and 35.5% diluted EPS growth. The company also raised its full-year revenue and EPS outlook. One negative in the quarter was an 80-basis-point gross margin decline due to lower average selling prices.
Despite the raised guidance and several analyst price target increases, SKX stock has not moved much since the late-October release. Given the upside and the generally bullish outlook on the company’s five-year earnings outlook, now may be the time to buy.
Bottom Line
A 2025 uptick in consumer spending could deliver a nice lift to consumer discretionary stocks that already have business momentum. If you are ready to claim your piece of the potential profits, retailers like Amazon and Alibaba plus brand portfolios such as Decker Outdoors and SharkNinja, bought at the right price, could be perfect choices.
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