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During the holiday season, the stock market activity tends to ramp up with higher trading volumes. Ahead of festivities, consumers spend more, which leads to atypical pre-holiday stock gains.

The opposite of the September Effect, the December effect, also known as the Santa Claus Rally, historically shows 1.3% greater S&P 500 gains on average seven days following Christmas. Aware of the trend, fund managers tip it up to excite investors and make the case for the fund’s management fees.

This year, the proximity to November’s presidential elections is another market dynamic to consider. Taking this into account, here are three holiday season stocks investors should put on their watchlist.

Tesla (Nasdaq: TSLA)

For the last three months, TSLA stock is down 15.54%. This is good news for investors for multiple reasons at this point in time. Elon Musk has recently made historic news with Mechazilla launch arms catching the massive Starship rocket booster on re-entry. While SpaceX is not a publicly traded company, the investor confidence in Musk’s leadership is likely to carry over to Tesla.

After the reveal of Tesla’s long-awaited Cybercab, having received lukewarm reception, TSLA stock took a 9% dip over the last week. As expected, the demonstration of the robotaxi in a controlled environment led to speculation of the vehicle’s ability to navigate more complex and dynamic environments, especially against Alphabet’s Waymo and GM’s Cruise competitors.

Nonetheless, Tesla’s Q3 delivery figures showed 6.4% year-over-year growth to 462,890 EVs. Promotions in China contributed, on top of Jiangsu provincial government approving Model Y for official use in July. Long-term, Tesla has built a formidable supply chain infrastructure for both transformational robotaxis and its energy storage division.

In short, there is yet a comparable EV company in the US/EU market that can tackle Tesla’s integration of software, self-driving potential, charging infrastructure and drive-train tech. If former President Trump wins his 2nd term, this will additionally serve as an intermediary valuation accelerator of TSLA stock.

Presently priced at $218.47, TSLA stock is above the 52-week average of $208.18 and significantly under the 52-week high of $271 per share. Due to the aforementioned political variable, TSLA price target is difficult to gauge. WSJ’s average TSLA price target is $225 while the ceiling is nearly double the current price level at $400 per share. 

Best Buy Co., Inc. (NYSE: BBY)

Aptly named brick-and-mortar retail chain, Best Buy has become synonymous with holiday deals and hot sales. Over the last three months, BBY stock is up nearly 12%, having beaten four consecutive earnings per share estimates. The last one in Q3 2024 had the largest positive upside at $1.15 expected vs $1.34 EPS reported. After better than expected $9.29 billion revenue and $291 million net income, for the full fiscal 2024, Best Buy raised EPS to $6.10 – $6.35 range.

Prior to the Q3 earnings report, in June, UBS Global Research raised BBY price target from $85 to $106 per share. Best Buy stock is currently priced at $96.80 vs the 52-week average of $80.13. Ahead of the holiday season, there is still room for BBY’s valuation growth.

Being focused on consumer electronics, this holiday season should also see a ramped up Best Buy demand to replace aging laptops and tablets. The average BBY price target is $105.64 per share, while the ceiling is $123, per Nasdaq’s forecasting data based on 22 analysts.

Wayfair Inc. (NYSE: W)

Utilizing a dropshipping business model, Wayfair’s ecommerce platform connects thousands of suppliers to bring Wayfair’s extensive catalog of home improvement products to people’s doorsteps. This also includes a marketplace to connect third-party sellers, with Wayfair earning a commission on sales, but without the inventory management costs.

Year-to-date, W stock has largely exhibited sideways action, down 7.71% to the current price of 54.27 per share. In the last Q2 earnings report ending June 30th, Wayfair reported a 0.9% YoY increase of active customers to 22 million. However, the orders delivered dropped to 2.9% for the same period. 

This led to $42 million net loss for the quarter, which is $4 million better than the $46 million net loss in the year-ago quarter. Nonetheless, with Trump’s announced tariffs on Chinese imports, on top of existing ones implemented by the Biden admin, Wayfair could benefit. This would undermine direct competitors like Temu, under the umbrella of PDD Holdings.

Wayfair’s next earnings report is scheduled for November 1st. Against the 52-week average of $54.05, which is aligned with the current price of $54.27, the average W price target is $63.52 while the ceiling is $100 per share. 

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