With the market settling down as trade tensions ease, now can be a great time to add some consumer goods stocks that are trading well off their highs. While there is still a risk that tariffs could roil the economy, these three stocks look poised to be long-term winners.
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1. Apple
Trading down more than 20% from its earlier highs, Apple (AAPL 0.41%) has faced worries over tariffs, its lagging efforts in artificial intelligence (AI), and the potential loss of a lucrative search revenue-sharing agreement with Alphabet.
However, the company's walled ecosystem is one of the most attractive and sticky business models in the world. While iPhone sales growth has slowed, there is still a natural replacement cycle, as users replace older phones due to battery life issues or to upgrade to the latest technology.
The real strength of Apple's business, though, is its service segment. This business has a variety of revenue streams, including its App Store, cloud storage, subscriptions like Apple TV, Apple Pay, and Google search ads. This segment is the fastest-growing part of Apple's business, and it also carries much higher gross margins than its devices. Last quarter, its service revenue climbed 12% and had a 75.7% gross margin compared to the product segment's 3% growth and 35.9% gross margin. This leads to earnings growing more quickly than overall revenue.
Though trailing with AI, Apple is rarely a company at the forefront of technology. It has a history of sitting back and refining tech for the best user experience, so I wouldn't count it out just yet. Meanwhile, while Google's deal to be Safari's and iPhone's default search engine is at risk due to regulatory issues, Apple should still be able to strike attractive revenue-sharing deals with search and AI companies. Its iOS operating system holds a nearly 30% market share, and Apple users as a whole are more affluent than Android users, giving it a strong position.
2. LVMH Moët Hennessy -- Louis Vuitton
While its products rarely ever go on sale, LVMH Moët Hennessy -- Louis Vuitton (LVMUY 0.70%) (LVMHF 0.81%) shares trade more than 30% off their highs. The European fashion house is home to some of the most prestigious luxury brands in the world, including Louis Vuitton, Christian Dior, Marc Jacobs, and Fendi, among others. It also owns luxury jewelers such as Bulgari and Tiffany & Co., high-end wine and spirit makers such as Moët & Chandon, and even beauty retailer Sephora. In all, it owns around 75 luxury brands.
The company has faced some struggles recently, as luxury spending in China remains weak and global macroeconomic uncertainty remains due to global trade tensions and tariffs. Meanwhile, it has seen some normalization of demand in its wine and spirits segment, while cognac sales in the U.S. and China have been weak.
That said, LVMH is a company that has some serious brand power. Its flagship brands are some of the most desirable in the world, giving it a strong moat and solid pricing power. And while the Chinese consumer is currently experiencing some struggles, the luxury goods market is still in the midst of a longer-term secular growth story as more people rise to the upper class, especially in countries like China.
Trading at a forward price-to-earnings (P/E) ratio of below 21 times based on the analyst consensus for 2025, this is a cheap price for one of the world's leading luxury brand operators.
3. Crocs
At the other end of the spectrum, Crocs (CROX -0.57%) shares have also been tossed into the clearance bin, with the stock trading off around 35% from its 52-week high. Although the company turned in solid Q1 results that topped estimates, it withdrew its full-year guidance due to the uncertainty over tariffs.
However, this cheap stock has strong upside if it can help turn around its HeyDude brand. Currently, the stock trades at a forward P/E of just 8.6 times. Even before tariff worries, it has been dragged down by the poor performance of HeyDude, which it acquired in February 2022 for $2.5 billion. What was supposed to be a second growth brand instead became one that was plagued by over-expansion, inventory issues, and operational challenges.
Crocs has been working diligently to help turn around the brand. It's been trying to stop gray market selling, which is the selling of genuine products by unauthorized dealers typically at lower prices, while reducing inventory and pulling back on price matching. It's also working to improve its marketing message, including hiring actress Sydney Sweeney, football player Travis Hunter, and singer Jelly Roll to be global ambassadors and setting up a TikTok shop to help attract younger consumers. It's still a work in progress, but transforming the brand is a significant opportunity.
Meanwhile, its namesake brand continues to see solid growth, helped by international expansion. Last quarter, its international revenue was up 12.3% in constant currency, including a 30% jump in China, while its overall brand revenue rose 2.4%, or 4.2% on a constant currency basis.
