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3 Consumer Stocks Skating on Thin Ice

By: StockStory

February 25, 2025 at 12:55 PM EST

ⓘ This article is third-party content and does not represent the views of this site. We make no guarantees regarding its accuracy or completeness.

PTON Cover Image

The performance of consumer discretionary businesses is closely linked to economic cycles. This sensitive demand profile can lead to some stock price volatility, but over the past six months, the industry has stayed on track as its 6.3% return was close to the S&P 500’s.

Although these companies have produced results lately, investors must be mindful because many are fads and only a few will stand the test of time. Keeping that in mind, here are three consumer stocks we’re steering clear of.

Peloton (PTON)

Market Cap: $3.42 billion

Started as a Kickstarter campaign, Peloton (NASDAQ: PTON) is a fitness technology company known for its at-home exercise equipment and interactive online workout classes.

Why Do We Think PTON Will Underperform?

Sluggish trends in its connected fitness subscribers suggest customers aren’t adopting its solutions as quickly as the company hoped
Poor expense management has led to operating losses
Negative free cash flow raises questions about the return timeline for its investments

Peloton is trading at $8.31 per share, or 12.7x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than PTON.

Verizon (VZ)

Market Cap: $182.4 billion

Formed in 1984 as Bell Atlantic after the breakup of Bell System into seven companies, Verizon (NYSE: VZ) is a telecom giant providing a range of communications and internet services.

Why Should You Sell VZ?

Underwhelming customer growth over the past two years shows the company faced challenges in winning new contracts
Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.7%
Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $43.55 per share, Verizon trades at 9.1x forward price-to-earnings. To fully understand why you should be careful with VZ, check out our full research report (it’s free).

Tapestry (TPR)

Market Cap: $17.47 billion

Originally founded as Coach, Tapestry (NYSE: TPR) is an American fashion conglomerate with a portfolio of luxury brands offering high-quality accessories and fashion products.

Why Are We Cautious About TPR?

Lackluster 1.4% annual revenue growth over the last two years indicates the company is losing ground to competitors
Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
Projected sales growth of 2.9% for the next 12 months suggests sluggish demand

Tapestry’s stock price of $83.66 implies a valuation ratio of 17x forward price-to-earnings. Check out our free in-depth research report to learn more about why TPR doesn’t pass our bar.

Stocks We Like More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.

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Symbol	Price	Change (%)
AMZN	246.02	+7.47 (3.13%)
AAPL	296.42	+5.29 (1.82%)
AMD	547.26	+35.69 (6.98%)
BAC	55.87	-0.15 (-0.27%)
GOOG	367.11	+8.95 (2.50%)
META	593.48	+26.50 (4.67%)
MSFT	399.76	+9.02 (2.31%)
NVDA	212.45	+7.26 (3.54%)
ORCL	192.64	+8.51 (4.62%)
TSLA	411.15	+4.72 (1.16%)