Most consumer discretionary businesses succeed or fail based on the broader economy. This sensitive demand profile can cause the industry to underperform when macro uncertainty enters the fray, and over the past six months, its 4.8% return has fallen short of the S&P 500’s 8.9% gain.
Investors should tread carefully as many companies in this space are also unpredictable because they lack recurring revenue business models. With that said, here are three consumer stocks we would avoid.
Lucky Strike (LUCK)
Market Cap: $920.8 million
Born from the transformation of traditional bowling alleys into modern entertainment destinations, Lucky Strike (NYSE: LUCK) operates bowling alleys and other entertainment venues with upscale amenities, arcade games, and food and beverage services across North America.
Why Is LUCK Risky?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 8× could force the company to raise capital on unfavorable terms if market conditions deteriorate
Lucky Strike is trading at $6.74 per share, or 67x forward P/E. If you’re considering LUCK for your portfolio, see our FREE research report to learn more.
Live Nation (LYV)
Market Cap: $42.33 billion
Owner of Ticketmaster and operator of music festival EDC, Live Nation (NYSE: LYV) is a company specializing in live event promotion, venue management, and ticketing services for concerts and shows.
Why Do We Steer Clear of LYV?
- The company has faced growth challenges as its 5.1% annual revenue increases over the last two years fell short of other consumer discretionary companies
- Operating margin of 3.6% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 1.8 percentage points over the next year
Live Nation’s stock price of $181.65 implies a valuation ratio of 121.5x forward P/E. Check out our free in-depth research report to learn more about why LYV doesn’t pass our bar.
Delta (DAL)
Market Cap: $59.91 billion
One of the ‘Big Four’ airlines in the US, Delta Air Lines (NYSE: DAL) is a major global air carrier that serves both business and leisure travelers through its domestic and international flights.
Why Do We Avoid DAL?
- Number of revenue passenger miles has disappointed over the past two years, indicating weak demand for its offerings
- Free cash flow margin is projected to show no improvement next year
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $91.71 per share, Delta trades at 10.4x forward P/E. Read our free research report to see why you should think twice about including DAL in your portfolio.
Stocks We Like More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
