Consumer discretionary businesses are levered to the highs and lows of economic cycles. Unfortunately, the industry’s recent performance suggests demand may be fading as discretionary stocks have pulled back by 11% over the past six months. This drop was worse than the S&P 500’s 5.5% loss.

Investors should tread carefully as many companies in this space are also unpredictable because they lack recurring revenue business models. Taking that into account, here are three consumer stocks we’re passing on.

PlayStudios (MYPS)

Market Cap: $194.5 million

Founded by a team of former gaming industry executives, PlayStudios (NASDAQ: MYPS) offers free-to-play digital casino games.

Why Do We Think Twice About MYPS?

1. Products and services aren't resonating with the market as its revenue declined by 4.4% annually over the last two years
2. Persistent operating losses suggest the business manages its expenses poorly
3. Push for growth has led to negative returns on capital, signaling value destruction

PlayStudios’s stock price of $1.55 implies a valuation ratio of 3.9x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why MYPS doesn’t pass our bar.

Monarch (MCRI)

Market Cap: $1.48 billion

Established in 1993, Monarch (NASDAQ: MCRI) operates luxury casinos and resorts, offering high-end gaming, dining, and hospitality experiences.

Why Is MCRI Not Exciting?

1. 4% annual revenue growth over the last two years was slower than its consumer discretionary peers
2. Estimated sales growth of 2% for the next 12 months implies demand will slow from its two-year trend
3. Low returns on capital reflect management’s struggle to allocate funds effectively

Monarch is trading at $76.03 per share, or 8.2x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than MCRI.

Purple (PRPL)

Market Cap: $85.45 million

Founded by two brothers, Purple (NASDAQ: PRPL) creates sleep and home comfort products such as mattresses, pillows, and bedding accessories.

Why Should You Sell PRPL?

1. Annual revenue declines of 6.3% over the last two years indicate problems with its market positioning
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

At $0.80 per share, Purple trades at 26.3x forward EV-to-EBITDA. To fully understand why you should be careful with PRPL, check out our full research report (it’s free).

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.