After splurging on PCs and consumer electronics during Covid pandemic lockdowns, people may not have an appetite to buy more devices this holiday season, analysts say. High inflation and macroeconomic concerns also could keep customers from buying during this holiday season.
"The big question is: Are people going to be in a buying mood?" said Ben Arnold, an analyst with retail tracker NPD Group. "Comparisons to last year are going to be tough. That's because 2020 and 2021 were very strong sales years for consumer electronics."
The NPD Group predicts that U.S. holiday season spending on tech products will decline 6% from last year. However, sales will still be 11% above the pre-pandemic level of holiday season 2019, Arnold told Investor's Business Daily.
Work-from-home and shelter-in-place trends from the pandemic boosted sales of PC gear, tablets, video games and home entertainment products and services. Now, most people likely have what they need in those categories, Arnold said.
Holiday Sales Forecast: 'Look Out Below'
Morgan Stanley analyst Erik Woodring echoed the negative sentiment on holiday sales in a recent report titled "Consumer Electronics Holiday Spending … Look Out 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 Morgan Stanley survey results support his underweight, or sell, ratings on shares of Cricut, HP and Logitech, he says.
"What's most eye-catching about this latest survey is that about three times more respondents expect to spend less (than expect to spend more) on consumer electronics and PCs this holiday season vs. last year, with 70%-plus waiting for discounts," Woodring said.
Record Discounts Forecast On Consumer Electronics
The good news for consumers is that retailers might offer bargains on major gift categories like televisions and notebook computers to get shoppers into stores and clear inventory.
Adobe Analytics predicts that online discounts will hit record highs for computers, consumer electronics and toys this holiday season. It forecasts discounts for computers will be as high as 32%, vs. 10% in 2021.
It sees consumer electronics discounts of up to 27%, vs. 8% last year. Televisions likely will be discounted up to 19% this season, vs. 11% in 2021, Adobe said.
A survey by the Consumer Technology Association showed that streaming video services and video game 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 tech.
Apple Plays In Top Growth Categories
Apple is a potential beneficiary because it plays in most of the growth categories. Its holiday products lineup includes new iPhones, iPads, Apple Watch smartwatches and AirPods wireless earbuds.
However, some sought-after devices will be in short supply this year because of production issues. They include Apple's iPhone 14 Pro smartphones and Sony PlayStation 5 video game consoles.
Logitech Chief Executive Bracken Darrell said his company expects to have a good holiday season thanks to its presence in some hot categories. They include video game gear, and equipment for content creators who do livestreaming video and podcasts.
"We're going into a holiday period 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, Walt Disney's Disney+ and Hulu, Warner Bros. Discovery's HBO Max, Paramount Global's Paramount+, Apple's 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. Some 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'd 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 hasn't impacted the gifting of game software, Take-Two Interactive Software Chief Executive Strauss Zelnick told IBD.
"People can still give a gift even though it's digital," he said. "You basically can give a code. Some 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.
