U.S. consumers have been more optimistic in October regarding the next six to nine months than they were last month. Two recently released studies — the University of Michigan's Consumer Sentiment Index and the Conference Board's Consumer Confidence Index — climbed in October. 

At this stage, investment in consumer discretionary stocks should be fruitful from the mid to long-term perspective. Our three recommended stocks are - Carnival Corporation & plc CCL, Norwegian Cruise Line Holdings Ltd. NCLH and Roku Inc. ROKU.

Consumers Are More Comfortable in October

On Oct 29, the Conference Board reported that Consumer Confidence in October jumped to 108.7, beating the consensus estimate of 99.5. The metric for September was revised upward to 99.2 from 98.7 reported earlier.

The Present Situation sub-index increased to 138 in October from 123.8 in the previous month. The sub-index for Expectations for the next six months rose to 89.1 from 82.8 in the prior month. 

On Oct 25, the University of Michigan reported that the final Consumer Sentiment Index in October rose to 70.5 from a reading of 70.1 in September. The consensus estimate was 69. Notably, the initial reading of October was 68.9. 

The sub-index of the Current Economic Situation increased to 64.9 in October from 63.3 in September. The sub-index of Economic Outlook for the next 12 months marginally dropped to 74.1 in October from 74.4 in September. 

Arguments for Selecting Consumer Discretionary Stocks

The consumer discretionary sector comprises businesses that sell goods and services that are considered non-essential by consumers. These are products that consumers can avoid without any major consequences to their well-being. 

In fact, these goods are desirable only if the available income of an individual is sufficient to purchase them. Therefore, a jump in consumer optimism should generate demand for consumer discretionary companies.

3 Consumer Discretionary Stocks to Buy

We have narrowed our search to three consumer discretionary stocks that have strong upside potential for 2025. All these stocks have witnessed positive earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

Carnival Corp. & plc

Carnival reported third-quarter fiscal 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis. The upside was backed by sustained demand strength, increased booking volumes at significantly higher prices and the baseloading strategy. 

CCL reported a solid booked position for the remainder of the year, with pricing and occupancy considerably higher than the 2023 levels. Also, CCL’s focus on marketing campaign efforts bodes well. CCL emphasized strategic investments in fleet modernization to drive growth.

Solid Earnings Estimate Revisions for CCL Stock

Carnival has an expected revenue and earnings growth rate of 12.9% and 22.2%, respectively, for next year (ending November 2025). The stock has seen positive earnings estimate revisions for the next quarter, current year and next year in the last 30 days.

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Norwegian Cruise Line Holdings Ltd.

Norwegian Cruise Line Holdings is benefiting from strong demand, high pricing and increased booking volumes, leading to record advance ticket sales. NCLH’s focus on fleet expansion efforts and digital initiatives bodes well. 

These factors showcase that NCLH’s strategy is well-aligned with its growth goals and 2026 financial and sustainability targets. Given the substantial progress made so far and current demand expectations, NCLH raised its 2024 full-year guidance.

Robust Earnings Estimate Revisions for NCLH Shares

Norwegian Cruise Line Holdings has an expected revenue and earnings growth rate of 9.9% and more than 100%, respectively, for the current year. The current Zacks Consensus Estimate for 2025 revenues and EPS for NCLH reflects an upside of 6.8% and 21%, respectively. The stock has seen positive earnings estimate revisions for the current quarter, next quarter, current year and next year in the last 30 days.

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Roku Inc.

Roku benefits from increased user engagement on The Roku Channel and the popularity of the Roku TV program. The Roku Channel has become the No. 1 TV streaming platform by hours streamed in the United States, Canada and Mexico. 

The Roku Channel’s active accounts are nearing half of all broadband households in the United States. The launch of third-party streaming channels, including Peacock, Disney+ and HBO Max, is aiding ROKU’s user growth.

Strong Earnings Estimate Revisions for ROKU Shares

Roku has an expected revenue and earnings growth rate of 14.1% and 71.7%, respectively, for the current year. The current Zacks Consensus Estimate for 2025 revenues and EPS for ROKU reflects an upside of 12.9% and 22.2%, respectively. The stock has seen positive earnings estimate revisions for the next quarter, current year and next year in the last 30 days.

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