Amid all the challenges for consumers, Goldman Sachs still has some stocks it sees as wise choices. Analyst Kate McShane said continued wage growth should help boost disposable income. The key question is how much of that translates into increased discretionary spending and savings, especially among lower-income Americans. That’s important to watch amid signs of consumer weakness, she said, citing rising credit card delinquencies, lower savings levels and weaker consumer confidence as reasons for caution. The latest indicator of how shoppers are doing was the Consumer Price Index for May, released Wednesday morning. The inflation measure rose 3.3% on an annualized basis, still well above the Federal Reserve’s 2% target. In this environment, it’s important to be “curative” with consumer-focused single-stock ideas, McShane said. She listed six stocks that she believes will be protected by attributes such as low-price leadership, unusual growth drivers and healthy revenue streams. Here are some of the names that made her list: Walmart made the list. The retailer’s shares have had a strong year so far this year, with the stock expected to rise more than 27% in 2024. Wall Street sees room for further upside, with analysts surveyed by LSEG on average giving the stock a buy recommendation and a price target that suggests the stock could rise 8.1% over the next year. JPMorgan’s Christopher Horbert joined the bulls on Monday, raising his rating to overweight from neutral. “Amid a very high degree of uncertainty in the second half of 2024 and a soft (to softening) consumer environment, we believe the stock offers a strong defensive-offensive balance on both the top and bottom lines,” Horbert told clients. Royal Caribbean is another consumer discretionary stock on the list. Cruise ship stocks have had a similarly strong year, with shares up more than 20%. Like other cruise lines, Royal Caribbean has seen demand surge amid a shift towards experiences post-COVID-19 pandemic. The majority of analysts surveyed by LSEG also have buy recommendations and price targets, suggesting the stock could rise another 6%. Consumer goods maker Colgate-Palmolive was also on her list. The stock is up nearly 17% through 2024, but most of that gain has come in the first three months of the year. A typical analyst also has a buy recommendation on Colgate-Palmolive, according to LSEG. Their price target reflects a potential upside of almost 5%. Goldman isn’t the only one who sees the stock as a smart idea given the current climate. Jefferies on Wednesday listed Colgate-Palmolive as a consumer stock that would be least affected by shoppers downgrading or switching to private labels.
Goldman likes these stocks as U.S. consumers start to face headwinds
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