4 stocks to watch: consumer cyclical – the firms defining the future of discretionary spending

The consumer cyclical sector makes up around 10% of the S&P 500 by weighting, thrives when economic fundamentals are good, boasts impressive growth potential, and can be a goldmine of underpriced companies with serious growth potential.

Discover:

• How close are we to letting AI book our holidays?
• Which iconic brand is trading 62% below its all-time high and why summer 2026 could be key to its turnaround?
• Which firm has appointed a Chief Luxury Officer and why does that matter?
• How can you take a leveraged position on underpriced companies without owning a single share?

Booking Holdings - finally reaping the benefits of AI investment?

What it does
If you’ve booked any form of travel online recently, there’s a good chance you’ve used a Booking Holdings product. It’s the owner of well-known travel tech brands including Booking.com, Agoda, Kayak, Priceline.com, Cheapflights, Rentalcars.com, and OpenTable.

Why it matters
Booking Holdings lies at the intersection of travel and tech. And while not unique in its adoption of AI as a force multiplier for efficiency, it’s notable for its public declaration of AI’s impact on its recent fortunes.

In October 2025, CEO Glenn Fogel confirmed^[1] that the firm’s heavy investment in AI had started to bear fruit, leading to faster search times, higher conversion rates, and improved customer satisfaction.

Growth since the global travel shutdown of 2020 has been robust. In the five years to October 2025, Booking Holding’s stock has increased 175.7%^[2] .

What to watch
Analysts think Booking Holdings could be an underpriced value pick. Having recovered well from the Covid-19 pandemic, recent performance has tailed off. In the year to October 2025, shares have fallen just under 2%^[2].

Despite its size, Booking Holdings faces stiff competition from similar companies offering online travel booking services. There’s a relatively low barrier to entry in the sector. If OpenAI decided to start selling holidays, it wouldn’t take much for them to launch a competing platform. And with Google, Expedia, and Trip.com all offering stiff competition in a high-margin environment where loyalty is low, price tends to be the key differentiating factor.

However, Booking Holdings is large and diverse, offering hotel rooms, dining, car rental, experiences, and flights. It’s not overly exposed to any particular facet of the travel sector and has options to pivot its technology to other areas of discretionary spending.

The recent drop could represent value for long-term investors looking to capture growth from the firm’s investment into AI.

DoorDash, Inc. - a controversial but appealing growth pick?

What it does
It’s a food ordering and delivery service with a relatively storied recent history, including class action lawsuits, data breaches, antitrust litigation, and strikes. In some ways, it’s the quintessential consumer cyclical stock; consumers don’t need it, but they do love it.

Before delivery services, consumers called up their local takeaway and placed an order. Companies like DoorDash have found a way to squeeze their technology between the customer and the person cooking the food. This has caused food delivery prices to skyrocket, and consumers have never seemed happier with the deal.

Why it matters
Just under two in every three food deliveries^[3] in the United States are fulfilled by DoorDash. It’s the most popular platform of its kind in the United States. In October 2025, DoorDash expanded its non-U.S. presence by acquiring UK-based Deliveroo for approximately £2.9bn, giving the combined entity a presence in more than 40 countries, serving about 50 million customers per month^[4].

Despite strong year-to-date growth of 39%^[5] as of November 2025, DoorDash stock took a tumble at the start of November 2025 as the firm fell short of key forecasts^[6], dropping just shy of 27% in the five days to November 6th.

What to watch
Analysts point to DoorDash’s commitment to continued investment in its platform and growth as a source of optimism.

DoorDash’s fortunes rely as much on its own investment as they do in the performance of key rivals, including Uber Eats. Demand for home food deliveries will peak and dip in line with economic headwinds and consumer confidence. So investors aren’t betting on whether people will still treat themselves to a restaurant-prepared burger in their own home. They’re betting on which app will take the order.

Nike - ready to ambush Adidas again?

What it does
Nike is a sportswear giant with an iconic brand, immense loyalty, and an interesting marketing strategy. It’s the world’s largest supplier of running shoes and one of the biggest sportswear brands in the world.

Why it matters
Recent struggles and a particularly volatile 2025 have made analysts nervous about Nike. It remains a dominant force, but so were Kodak, Blockbuster, and Nokia. As of late October 2025, Nike is trading 62% below^[7] its all-time high and stock has fallen 11% in 2025.

Any turnaround will take time. The brand’s controversial decision to pull away from established distribution channels to focus more on its own digital real estate didn’t work out particularly well. There’s much to do, and investors don’t appear to be in a rush to back the brand.

What to watch
Retail events like Black Friday and Christmas tend to be factored into a company’s stock price. And clothing and sport brands do well when there are discounts on offer. But certain global events can still present opportunities, and Nike will be looking to the next FIFA World Cup in 2026 for theirs.

Hosted across America, Mexico, and Canada. Nike will see this as a ‘home advantage’ as they take on official sponsor Adidas once again in the battle for visibility. While the German sportswear brand is the official tournament sponsor, Nike has an impressive record of hijacking major football events, including the World Cup and European Championships, to achieve impressive reach without investing directly in tournament sponsorship.

Nike’s medium-term fortunes will depend on much more than how its marketing fares at the upcoming World Cup, but we can expect the world’s most watched football event to form a key part of its turnaround trajectory.

Norwegian Cruise Line Holdings - stock has sunk, but will the ships stay afloat?

What it does
Norwegian Cruise Line Holdings is among the largest cruise line operators in the world by passenger numbers. It owns brands including Norwegian Cruises, Oceana, and Regent. Its Q3 2025 earnings call made much of its laser focus on the luxury sector. They’ve even appointed a Chief Luxury Officer to steer the ship.

Why it matters
The focus on luxury is telling. Consumer cyclical spending is heavily influenced by consumer confidence. But there are certain segments within the sector that are less exposed to economic fundamentals. The elite tier of luxury categories like cruises, supercars, and designer watches, tend not to be as reactive. Regular consumers may scale back their use of DoorDash when times are tight. Someone who can afford a cruise can probably afford a cruise regardless of the economy.

What to watch
While Norwegian Cruise Holdings boasted of a record-breaking quarter in their November earnings call, the markets weren’t convinced and shares sank 12.5%^[8] as they failed to live up to other key forecasts.

The company still has a lot of COVID-19 era debt, which could be distorting how investors view its market cap of $8.34bn^[9]. Could this be a blip, potentially positioning Norwegian as a longer-term value pick? Or is this a sinking luxury ship?

The bottom line

Smart investors will be examining where new demand is coming from and which companies are best positioned to meet it. Regardless of economic fundamentals, recent uncertainty has driven a surge in value-seeking habits that won’t just go away. Consumers will still splurge, they’ll just do it differently. Tech adoption, adaptability to new purchasing norms, and exposure to emerging consumer markets will be key to growth for firms within the discretionary sector.