3 Top Stocks to Buy This Holiday Season

As another year comes to an end, investors may feel overwhelmed by the rising market indexes that reached new peaks in 2024. Despite some stocks being priced at a premium, there are still several reasonably priced stocks that hold potential for growth in 2025 and beyond.

To help find some appealing investment options, three contributors have identified three stocks that could make a great addition to your portfolio this holiday season: Amazon, Williams-Sonoma, and Ulta Beauty.

Amazon is using AI to enhance retail

John Ballard (Amazon): Over the past two decades, Amazon has significantly transformed the retail landscape. With the rise of artificial intelligence (AI), Amazon is well-positioned to leverage this technology to its advantage.

The company has made substantial investments in AI, particularly for its cloud computing division, which has seen impressive growth this past year. Amazon Web Services (AWS) is the driving force behind the company's profitability. Additionally, AI has improved the shopping experience on its platform by providing personalized product recommendations.

Recently, Amazon introduced the Rufus AI-powered shopping assistant, just in time for the peak shopping season. The result? A record-breaking Black Friday week. Innovations like Rufus, along with tools such as AI Shopping Guides and Amazon Lens, demonstrate Amazon's commitment to staying at the forefront of the $4 trillion global e-commerce market.

Amazingly, the company's revenue has doubled in the last five years, reaching $620 billion, with an 11% growth in Q3 compared to the previous year. This growth comes amid broader economic challenges affecting consumer spending, showing Amazon's resilience. With its AI advancements and quick delivery options, Amazon is set for long-term growth, especially in advertising and cloud services that are growing around 20% annually. Investors can expect positive returns from this stock moving forward.

A solid choice amid housing market challenges

Jeremy Bowman (Williams-Sonoma): For those looking to enhance their portfolios, Williams-Sonoma is an excellent option. This well-known home furnishings company, which also showcases brands like West Elm and Pottery Barn, offers stylish home decor and kitchenware.

Despite facing a slowdown in the housing market, Williams-Sonoma is flourishing. Their stock has surged by 87% this year, thanks to improved profit margins, focused operational strategies, and increased market share.

In its latest earnings report, comparable brand revenues fell by 2.9% due to industry-wide challenges, yet the company's profitability improved as gross margins rose to 46.7%—a gain attributed to efficient supply chain management and higher merchandise margins. This resulted in an operating margin increase, leading adjusted earnings per share to rise from $1.83 to $1.96, displaying exceptional resilience.

The company's effective inventory management and fresh product introductions have supported their full-price sales strategy, maintaining customer trust. The expansion of their B2B and trade business further creates growth avenues. Recently, the company announced a $1 billion share buyback program, reaffirming its commitment to returning value to shareholders and positioning them well for future growth.

Ulta Beauty capitalizing on industry trends

Jennifer Saibil (Ulta): Despite recent moves by major investors like Warren Buffett selling shares, Ulta Beauty remains a powerhouse in the cosmetics and skincare scene with over 1,400 retail locations and partnerships within Target.

Ulta continues to open new stores and offers an impressive range of 600 brands from budget-friendly to luxury. The company targets beauty enthusiasts with a diverse shopping experience that invites customers to spend more.

While the beauty industry anticipates modest growth in the coming years, Ulta is well-positioned to excel in faster-growing segments, such as wellness products, which together with cosmetics could lead to a $400 billion market opportunity.

Ulta has also developed a successful loyalty program with over 44 million members, who account for 95% of sales. This customer base is continuing to expand, tapping into the growing population of beauty enthusiasts.

Although Ulta faces some short-term challenges as consumer spending on non-essential items contracts, it stands ready to seize market share and drive organic growth once spending rebounds. This makes Ulta a strong candidate for those looking to invest this holiday season.

Investing in stocks requires careful consideration, and these three companies present unique opportunities for growth as we approach 2025.

Investing, Stocks, Growth