5 Christmas Stocks To Invest In This Holiday Season

SAN FRANCISCO, CA - NOVEMBER 30: Macy's store illuminated with lights and Christmas tree at Union Square, San Francisco on November 30, 2014 in San Francisco, California.
Bipin Goyal / Shutterstock.com

For many consumers, it seems as if the pandemic will never end. Much of 2020 was lost to business shutdowns and stay-at-home orders, and 2021 brought the highly contagious delta and omicron variants, further prolonging the pandemic. Yet the 2021 holiday season will nonetheless be quite different from that of 2020. For starters, most stores will still remain open, and for those who are still reluctant to shop in person, the online capabilities at most retailers have improved dramatically. Add in the fact that many Americans received significant stimulus payments in 2021, and the shopping season looks to be in good shape.

If you’re looking to buy some stocks to take advantage of what many businesses hope will be a high-spending season, take a look at these five names. Although heavily weighted toward retailers, every name on the list has its own niche, from online businesses to mall-based stores and even payment processors. As always, consult with your financial advisor to see if your investment objectives and risk tolerance match any of these names.

Target

Target fights for market share in a competitive field that includes powerhouses Walmart and Amazon. However, Target took advantage of the coronavirus pandemic to add and remodel stores, decrease delivery times and greatly boost its online presence, factors that should continue to help the stock through the holiday season. But the truth is that Target has been becoming a stronger competitor for years now, and shareholders have been rewarded greatly. After gains of 87.81% in 2019 and 41.50% in 2020, Target has posted a 2021 year-to-date gain of 26.52% as of Dec. 17.

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Helping to fuel Target’s gains has been a favorable view of the company by consumers. According to a survey by DealAid, Target ranks tops when it comes to where in-store shoppers plan to head in 2021, even ahead of the largest retailer in the world, Walmart. Specifically, a full 33.9% of consumers who plan to shop in-store planned on spending most of their 2021 holiday shopping budgets at Target, vs. 30.4% at Walmart. As the stock has recently tumbled about 20% from its November high of $268.98, there may now be an attractive entry point on Target stock as we move through the holiday season.

Amazon

If you’re looking for a company to generate high holiday sales, Amazon should be at or near the top of your list. Although Cyber Monday sales for retailers across the board fell 1.4% in 2021 vs. 2020, Amazon posted record revenue for the post-Thanksgiving sales period. Perhaps this shouldn’t be a surprise, as Amazon also noted that according to research firm Profitero, Amazon offered the lowest prices by 14% compared with rival retailers.

The combination of good prices, fast delivery and a seemingly limitless range of available products consistently keeps Amazon at the top of shoppers’ minds. According to survey data from DealAid, an incredible 79.4% of online shoppers plan to spend most of their 2021 holiday shopping budgets at Amazon, with competitor Walmart.com a distant second at just 6.2%. With the stock having a sluggish 2021, up just 4% as of Dec. 17, Amazon might be an attractive purchase before the holidays.

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Macy’s

Macy’s is a turnaround story for the ages, and its stock has reflected its resurgence. As of Dec. 17, the company’s shares have posted gains in excess of 118%, even after a sharp sell-off from its November high of $37.95. With the sales momentum the company has been generating, however, that rapid 35% drop could prove to be a good buying point heading into the holidays. 

In 2020, Macy’s was all but left for dead during the so-called “retail apocalypse” triggered by the coronavirus pandemic. With businesses shuttered and consumers forced to stay home, Macy’s suffered greatly, particularly as its online business wasn’t well developed. However, like other successful companies, Macy’s took the time during the pandemic to close underperforming locations, refresh many of its stores and dedicate itself to building up its online presence. In fact, some activist investors feel that Macy’s e-commerce division is so strong that the company could generate significant extra value by spinning that business off into its own company. If this were to come to fruition, it would likely be an extra kicker for the stock.

Regardless of whether or not Macy’s reorganizes itself, it seems well positioned for a booming holiday season from customers still flush with pandemic-related stimulus cash. Investors can also benefit from its recently reinstated dividend, which currently provides a yield of 2.47%.

Good To Know

Buying stocks for the holidays is often a good strategy, as December and January are generally strong months for the stock market as a whole. In fact, the seasonably favorable period for the stock market runs for a full six months, from November through April, so picking up shares before the holidays often pays off. Just be sure to check with your financial advisor to ensure the stocks you buy are appropriate for your portfolio.

Etsy

Etsy is another retailer that could be poised for a good holiday season, but it’s a bit different from stores like Target or even Amazon. Etsy is primarily dedicated to online artists and those making handmade or unique items that they sell directly to consumers. The site exploded in popularity during the depth of the pandemic, as online shopping in general boomed and more workers had to turn to marketing their goods virtually. In response, the stock jumped an astronomical 296.24% in 2020, and as of Dec. 17, 2021, it’s climbed another 24.56% YTD. However, as with some other high-flying stocks, Etsy got hammered in late November and early December, falling from a high of $307.75. That amounts to a 28% drop in a matter of weeks.

Although the stock might have gotten a bit ahead of itself, analysts are still bullish on Etsy’s prospects, with a median 12-month price target of $270. The company is extremely profitable, with a net margin of over 20%, and management expects a full-year revenue jump of 32.5%, on the back of 2020’s stellar 111% revenue growth. In its most recent quarter, the company reported both revenue and earnings above analyst expectations. The rapidly growing company continues to expand internationally, and will likely garner its fair share of sales through the holiday season.

PayPal

PayPal is another Wall Street darling that has seen its shares fall on hard times, down about 20% YTD in 2021. The payment processing company, which also owns the popular payment app Venmo, has faced bearish investor sentiment in 2021 due to increasing competition and slowing growth. However, this “slowdown” is coming off record numbers posted by the company due to the explosion of pandemic-fueled online payments in 2020, and organic growth is still strong.

For example, in its most recent quarter, PayPal reported revenue growth of 13% year-over-year, even coming off its strong 2020. The company expects full-year revenue growth closer to 18%, with 430 million active accounts anticipated by year-end. Perhaps most intriguingly, the company also announced a partnership with Amazon that will allow customers to pay for their online purchases with Venmo in 2022. The company also noted that use of its “buy now, pay later” option soared 400% on Black Friday. The bottom line is that as transactions increase, PayPal and Venmo should both see rising revenues and account numbers. If predictions by some analysts of record holiday spending by consumers hold true, this can only benefit PayPal.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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