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After splurging on computers and consumer electronics during a Covid pandemic lockdown, people may not have the appetite to buy more gadgets this holiday season, analysts say. High inflation and macroeconomic concerns could also keep customers from shopping this holiday season.
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“The big question is: Will people be in a buying mood?” said Ben Arnold, an analyst with retail tracker NPD Group. “Comparisons to last year will be difficult. That’s because 2020 and 2021 were very strong sales years for consumer electronics.”
The NPD Group predicts that US holiday season spending on tech products will drop 6% from last year. However, sales will still be 11% above the pre-pandemic level of the 2019 holiday season, Arnold told Investor’s Business Daily.
Work-from-home and shelter-in-place trends from the pandemic have boosted sales of computer hardware, tablets, video games and home entertainment products and services. Now, most people probably have what they need in those categories, Arnold said.
Holiday Sales Forecast: ‘Watch Below’
Morgan Stanley analyst Erik Woodring echoed the negative sentiment about holiday sales in a recent report titled “Consumer Electronics Holiday Spending … Watch Below.”
“Consumer sentiment remains largely negative but was more mixed in our latest survey,” Woodring said in his note. “However, (survey) results point to a very difficult holiday season for consumer hardware.”
The latest results of Morgan Stanley’s survey support his underweight, or sell, ratings on shares of Cricut (CRCT), HP (HPQ) and Logitech (LIKE), he says.
“What’s most striking about this latest survey is that about three times as many respondents expect to spend less (than expect to spend more) on consumer electronics and computers this holiday season versus last year, with 70% more expecting discounts,” Woodring said.
Record Discounts Forecast On Consumer Electronics
The good news for consumers is that retailers could offer bargains on key gift categories like TVs and laptops to get shoppers into stores and clear inventory.
Adobe Analytics predicts that online discounts will reach record highs for computers, consumer electronics and toys this holiday season. It predicts that discounts for computers will be up to 32%, against 10% in 2021.
It sees consumer electronics discounts of up to 27%, up from 8% last year. TVs are likely to be discounted as much as 19% this season, versus 11% in 2021, Adobe said.
A survey by the Consumer Electronics Association found that streaming video services and gaming products are among the top tech gifts people plan to give this season. Other sought-after gifts include portable audio products, smartphones and health and wellness technology.
Apple Plays In Top Growth Categories
an apple ( AAPL ) is a potential beneficiary because it plays in most of the growth categories. Its holiday product lineup includes new iPhones, iPads, Apple Watch smartwatches and AirPods wireless headphones.
However, some sought-after devices will be missing this year due to production issues. They include Apple’s iPhone 14 Pro smartphones and Sony (SONY) PlayStation 5 video game consoles.
Logitech CEO Bracken Darrell said his company expects to have a good holiday season thanks to its presence in some hot categories. They include gaming equipment and equipment for content creators who deliver video and podcasts.
“We’re going into a holiday season where I don’t think we’ve ever had a better set of products to buy,” Darrell told IBD.
Consumer Electronics: Digital Gifting On the Rise
Meanwhile, digital gifts are growing in popularity. That includes the plethora of subscription streaming video services such as Netflix (NFLX), Walt DisneyDisney+ and Hulu from (DIS), Warner Bros. Discoveryfrom (WBD) HBO Max, Most important Global‘s (PARA) Paramount+, Apple TV+ and more.
A recent survey by Recurly pointed to a big holiday season for digital subscriptions, especially among millennials and Gen Z consumers. About 63% of respondents are considering giving subscriptions as a gift while 70% are interested in receiving subscriptions as gifts.
The top three subscription categories most likely to be given as consumer electronics gifts are: streaming video at 54%, gaming at 39%, and streaming audio at 36%, Recurly said. Most consumers, or 61%, said they would be interested in giving at least a six-month subscription.
Another digital gift is video game software. The shift from packaged media to digital downloads did not affect the gift of game software, Take-Two Interactive Software (TTWO) CEO Strauss Zelnick told IBD.
“People can still give a gift even though it’s digital,” he said. “You basically can give code. About 75% of our business on the console side is digital and obviously 100% on the mobile side.”
He said Take-Two is well positioned for the holiday season with titles like “NBA 2K23,” “PGA Tour 2K23” and “Marvel’s Midnight Suns.”
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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