Retail investors banking on Starbucks and Lululemon recovery – but what do the experts think?

Retail investors took the opportunity to buy the dip on faltering consumer brands Starbucks and Lululemon in Q2, according to data from eToro, the trading and investing platform

eToro delved into its platform data to offer a glimpse of the household name consumer brands its global user base have been buying and selling most in recent months.

Amongst the most-bought consumer stocks were Starbucks and Lululemon, two companies which have seen their share prices tank in 2024. The findings indicate that eToro users are backing these firms to mount a recovery in the months ahead, but are they right to buy the dip? Let’s see what eToro’s experts think.

1. Lululemon Athletica

 
42% increase in eToro users holding the stock in Q2

Sector overview: Sportswear brands have experienced mixed fortunes of late, with Adidas’ share price outperforming Nike and Puma and the emergence of new competitor brands including On Running and Hoka.
 
eToro analyst Jean-Paul van Oudheusden on Lululemon: “The stock hit an all-time high in December 2023, but has gone down more than 50% in 2024, making it one of the worst performers in the S&P 500 Index. With consumer budgets under pressure and competition fierce, Lululemon’s sales growth has slowed significantly to single digits.That’s not a good match with the company’s relatively high cost base, as a result of primarily selling via company-operated stores rather than third party venues. The stock looks cheap in a historical comparison, however either sales growth needs to pick up again or costs need to come down.”

2. Starbucks 

21% increase in eToro users holding the stock in Q2

Sector overview: Quick service restaurants such as Starbucks, Yum Brands and McDonald’s struggled in Q2 attributing weaker-than-expected results to inflation, falling consumer confidence and geopolitical tensions. However two QSR stocks, Domino’s and RBI (parent company of Burger King, Popeyes, and Tim Hortons) outperformed analysts’ expectations.

eToro Analyst Sam North on Starbucks: “We’re talking about one of the most iconic brands in the world being down over 40% from its all-time highs and trading at levels we also say back in 2019. Rates coming down in the near term could help a little, and Starbucks do have plans in place to improve performance, but ultimately understanding their consumer better would go a long way. It is also worth saying for those who have the patience and belief in this stock, their dividend yield of just over 3% is near the highest it’s ever been. Are the days over for fancy expensive coffee? Not just yet.”

Crocs and Hasbro lose holders despite share price gains – but could they still have momentum?

While eToro users grabbed the opportunity to buy the dip in some consumer brands, other big names saw a significant drop in holders over the three-month period, for a combination of reasons. Alternative shoewear brand Crocs and toy manufacturer Hasbro both experienced double-digit declines in eToro users holding the stock, indicating that some felt it was time to cash in on profits.

With other names – such as Puma – poor share price performance in 2024 suggests it was more of a case of investors cutting their losses. So what do the experts think?

1. Puma 

16% decrease in eToro users holding the stock in Q2

Sector overview: Puma is struggling in the global footwear market, valued at nearly $400 billion and marked by intense competition. While Deckers Brand and Skechers hit new record highs in Q2, Puma lagged behind. However, unlike Nike, it has not reached new lows. The US remains a crucial market, not only because consumer spending contributes 70% to GDP, but also due to wages rising faster than inflation, boosting purchasing power.

eToro analyst Jean-Paul van Oudheusden on Puma: “In a crowded sports apparel market it seems very difficult for Puma to make a difference. The recovery attempt since February has so far failed to spark a new long-term uptrend, causing retail investors to lose patience. The number of eToro users holding shares in Puma fell by 16% in Q2. The stock has been in a structural downtrend for the last one-and-a-half years, due to continuous pressure on operating margins. Without a clear short-term catalyst, a growing number of investors is losing patience with management.”

2. Crocs 

15% decrease in eToro users holding the stock in Q2

Sector overview: The hype around Crocs has recently waned. Nevertheless, the brand, known for its clogs-inspired footwear, remains among the ten most valuable shoe companies in the world. The combination of falling inflation and anticipated interest rate cuts could potentially boost consumer sentiment once again.

Stock analysis: The number of eToro users holding Crocs fell by 15% in Q2 with scepticism appearing to grow towards the potential for Crocs to continue its upwards trajectory.

eToro Analyst Sam North on Crocs: “Whilst I would argue Crocs is fairly valued, they recently beat on the top and bottom end of their second quarter results and raised 2024 earnings guidance. HEYDUDE, which Crocs acquired a few years ago has been struggling, so investors will be hoping to see improvement. As long as the share price stays above $109 I’d imagine investors feeling relatively content.”

3. Hasbro 

14% decrease in eToro users holding the stock in Q2 

Sector overview: US toy manufacturer Hasbro competes with Mattel, Spin Master, VTech, Playmates Toys, and Zapf Creation. The toy market is rapidly evolving, driven by higher consumer expectations and increasing demand for educational and interactive toys. Integrating new technologies requires substantial investment but presents significant growth opportunities.

Stock analysis: Hasbro lags behind the broader market, with its market value halving since its peak in 2019. The number of eToro investors holding Hasbro stock fell by 14% in Q2.

eToro analyst Jean-Paul van Oudheusden on Hasbro: “Hasbro is the kind of company that saw its business results deteriorate when central banks raised interest rates, but surprised investors positively in 2024. The stock has gained almost 50% from its low in November, based on solid cost management and restructuring. Hasbro has chosen to focus on digital gaming to let the positive trend continue.”
 

Where are the prospects for consumer stocks in general?

eToro analyst Jean-Paul van Oudheusden: “The current economic environment makes it difficult for consumer stocks to shine. High energy prices, interest rates, and commodity prices have taken a bite out of consumer budgets. In a competitive environment, most consumer companies lack pricing power. Revenues and margins have been under pressure recently, causing the consumer discretionary sector to be the worst performer year-to-date among the 11 sectors in the S&P 500 Index. A series of interest rate cuts by the Fed, now widely expected by the market, should help to create a more favourable economic environment.”