As per the data release by National Retail Federation (NRF), the US holiday sales in 2023 should increase at the slowest pace over past 5 years. This is because Americans continue to grapple with higher inflation. Therefore, people in America are expected to think twice before they spend in this shopping season. Experts believe that holiday sales, which includes e-commerce and non-store sales, should increase in the range of 3%-4% to touch $957.3 billion and $966.6 billion in the months of November and December. In the last year, there was an increase of ~5.4% rise and, in 2021, there was a rise of ~12.7%. Therefore, investors continue to look for one growth stock for US holiday season.
Despite significant uncertainty, economy and increased global challenges which households continue to face, the company has seen strength and resilience throughout the overall consumer sector. According to NRF President and CEO Matthew Shay, there has been an evolution in the way Americans continue to allocate dollars on the monthly basis on their spending patterns. Despite these uncertainties, there is one growth stock for US holiday season.
Shoppers continue to take disciplined steps before they indulge in spending at the time of holiday season. This is because increased fuel and food prices and student loan repayments are impacting the household budgets. As the result, the consumers are being forced to even curb some of the grocery purchases.
Modest expectations of NRF are in line with the similar forecast from Deloitte which expects holiday sales in the US to increase at the lowest pace over 5 years. This is because the consumers prioritise purchases on the day-to-day basis. Consumers have cut down on their bulk purchases. NRF expects that online and other non-store sales should see a rise in the range of 7% – 9% to total of between $273.7 billion and $278.8 billion.
Gloomy forecasts from the industry players come as giant retailers such as Walmart and Macy’s saw lower visits at their respective stores. This momentum was seen despite they decided to kick off holiday promotions early in the year. Retail analytics company, Sensormatic Solutions, expected that footfalls in this holiday season might see a decline of ~3.5% year-on-year.
However, with Americans bracing for the upcoming holiday season, this one stock has fallen significantly over past couple of months. Buying this stock at the current levels will definitely be the value purchase.
With this in mind, let us now have a look at one growth stock for US holiday season.
GoPro, Inc.
It is the United States-based company which is mainly engaged in designing and providing cameras, mounts, drones and appliances. It focuses on outsourcing a part of manufacturing to 3rd parties which are located in China.
The company released financial results for 3Q ended September 30, 2023. Its strong 3Q third quarter results demonstrated advantages of the growth strategy it initiated in May. Successful launch of HERO12 Black and strong entry-level product sales together with growing retail presence supported the company in exceeding its 3Q revenue and unit sales expectations. Collectively, all these measures helped the company in finishing 3Q with ~2.5 million subscribers.
Revenue of the company in 3Q came in at $294 million, exhibiting a rise of 5% to the mid-point of guidance and a fall of 4% year-over-year. Revenue from the company’s retail channel came at $231 million, making up ~78% of the total revenue and exhibiting a rise of 12% year-over-year. GoPro.com revenue, which includes subscription and service revenue, came at $63 million, or 22% of the total revenue and was down 36% year-over-year. Subscription and service revenue saw an increase of 16% year-over-year to $25 million. Cash and marketable securities of the company came at $259 million at 3Q end.
In 3Q23, the company bought back ~$10 million in stock, and has plans to continue executing on its stock repurchase plan in 2023 and 2024. In September, the company launched its new $399 flagship HERO12 Black. Revenue and unit sales for 2023 should be ahead of what was expected in its 2Q23 earnings results. The company returned to year-over-year unit growth in its 3Q at ~16%. It anticipates unit growth to be up ~15% year-over-year in 4Q.
Through October, the company was tracking to its estimated ~1 million units of camera sell-through in 4Q. GoPro, Inc. returned to non-GAAP profitability in its 3Q and it anticipates to be profitable on non-GAAP basis 4Q. Therefore, the company is quite optimistic about its plans to return GoPro to growth and profitability.
Investments are being done in innovation, primarily in system-on-chip, hardware, accessories and software. Apart from this, the company continues to expand marketing and sales capabilities to support growth. It continues to support efficiencies in several other areas of its business. The company has tightened its operating expenses for 2023, and it expects these expenses to be at ~$365 million, a fall from $370 million expected as per previous expectations. Focus is on tightly managing its balance sheet metrics, mainly inventory and DSO. The company projects to reduce inventory while exiting 4Q to below $100 million, or ~40 days. And, it plans to exit 2023 with the cash balance of $300 million, which includes a minimum of $10 million of stock buy-backs in 4Q or $40 million in share repurchases for 2023.
Talking about 2024, the company expects to increase units to the range of 3.3 million – 3.5 million, or over ~10% in comparison to 2023. As a result of these figures, the company expects revenue of between $1.1 billion – $1.2 billion. It plans to end 2024 with ~25,000 doors, or rise of ~14%, year-over-year.
Conclusion
While GoPro, Inc. is the one growth stock for US holiday season, this time the season is expected to be quite volatile and uncertain. Retailers should take a look at the consumers’ spending patterns before reaching a concrete decision. Consumer credit touched the breaking point. As per NY Federal Reserve, credit card debt touched an all-time high of $1 trillion earlier in 2023. And ~60% of the consumers are not sure about whether or not they will get more credit.
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