With consumers opening their wallets wide, the holiday season has always been an especially crucial set of months for consumer and technology companies, and this year will be no different. And as true market diehards, we Fools are always on the lookout for companies poised to benefit from or struggle in any situation, and the holiday quarter presents a great situation to examine.
We recently polled a number of our consumer goods and technology specialists to get their views on which consumer and technology stocks deserve investors' special attention in the months ahead. With a bevy of new hardware and software on the market, the coming months will serve as the first real test for Microsoft's (NASDAQ:MSFT) long-overdue mobile revamp. Similarly, the holiday quarter will also serve as a litmus test for action sports camera upstart GoPro (NASDAQ:GPRO), which investors clearly fear might fall victim to mounting competition. And looking at retail names, Wal-Mart (NYSE:WMT), the world's biggest retailer, clearly has plenty riding on whether it can overcome mounting pressure from competitors of both the online and bricks-and-mortar variety. To get a better sense of each unique opportunity, read on the see why exactly these names deserve your attention as we head into the holidays.
Tim Brugger (Microsoft): Among the many new gadgets Microsoft unveiled at its product launch event on Oct. 6 were a few Lumia smartphones, an updated HoloLens augmented reality device, a fitness band and another hybrid tablet, the Surface Pro 4. But the show-stealer was Microsoft's first laptop, the Surface Book. With its Surface line-up already gaining steam, and the new Book ready to hit the shelves, this holiday season could be a whopper for Microsoft's computing hardware unit.
What made last quarter's Surface growth to nearly $900 million in revenue impressive wasn't just its 117% improvement year-over-year, it was that it accomplished the feat with a paltry 150 resellers. As per COO Kevin Turner, the number of sales folks hitting the streets to move Microsoft Surface products will jump to over 4,500 in "the coming months." In other words, like Microsoft's new Surface Book, just in time for the holidays.
If early sales of the Surface Book are any indication, it appears Microsoft is off-and-running with its new laptop. Within days, Microsoft's online store sold out of Surface Books. Of course, without knowing how many Books had been produced to handle early demand, no one outside Microsoft knows how many were actually sold. But at a starting price of $1,499, it won't take many to make an impact on Microsoft hardware revenue.
Strong reviews and early sales of its Surface line-up, the new Book garnering widespread praise, and expanding its independent sales force by more than 4,000 could very well set Microsoft up for one joyous calendar Q4.
Andrew Tonner (GoPro): With its stock price down precipitously over the past year, the coming holiday quarter will certainly prove pivotal in framing investors' perception, for better or worse, for action camera producer GoPro.
To be clear, although I truly respect its products and the amazing content they create, I see few options and long odds on GoPro's path to realizing the sizable valuation currently bestowed upon it. To me, the key question in assessing GoPro's long-term viability is this – How does GoPro create a business model that cannot be replicated by its myriad competitors within one to two product cycles?
I see two avenues to achieving this, neither of which is particularly easy.
First, GoPro just out-innovates the competition. As the original visionary that spawned a global industry, GoPro certainly deserves some credit for seeing an opening in the market overlooked by others. If it can continue cranking out novel devices that open new opportunities for consumers and various business verticals, the company will always find customers. That's a tough task, though, and a proposition that makes its business model, and rational valuation by extension, fraught with risk. Second, GoPro can find some way to monetize its massive stockpile of content, which is exactly what the GoPro Network aims to do. However, aside from simply serving ads against that content, which the company is not doing at present, I don't see an immense amount of value there either.
Many young companies face a make-or-break period. And with its current share price struggles and mounting competition, I believe the coming all-important holiday quarter could prove one such moment for GoPro.
Daniel B. Kline (Wal-Mart): The world's biggest physical retailer has suffered recently from increasing concerns over its ability to compete with Amazon.The online retailer may be the only company that can compete with Wal-Mart on price and some think its technology gives it an edge despite its rival having a huge network of physical stores.
That might be true at this exact moment, but Wal-Mart is taking steps to compete and it's doing so by becoming a technology company.
"We have also been building an e-commerce business; we have been hiring top technology talent in Silicon Valley and around the world," CEO Doug McMillon said in his speech at its 22nd Annual Meeting for the Investment Community on Oct. 14.. "Refreshing the customer experience and becoming a true Internet technology company. We are now one of the top three online retailers by traffic and our Wal-Mart U.S. app is among the top three apps in retail with tens of millions of customers downloading it and using it regularly."
Wal-Mart is not just saying it intends to compete as a tech company, it's also investing $2 billion over the next two fiscal years to make that happen. Of course, much of that money won't benefit the company this holiday season, but some initiatives have already been launched. For example, the retailer is using a unique text-messaging customer service system in some of it stores.
To use the system, shoppers text "hi" to 415-214-8445, and are then greeted by a Walmart associate via text message directing them to the item of their choice in precise detail. For more complicated queries, the system directs users to a live customer service agent.
Wal-Mart is behind in technology, but it's spending big to catch up and some of that will be felt this holiday season. The expectation may be that Amazon wins the holiday season, but Wal-Mart could put up a better-than-expected showing.