Buy these 2 global stocks as inflation fades, HSBC says — giving one 85% upside

Published Mon, Mar 25 20247:13 PM EDT

As high inflation appears to be waning, a long-neglected set of stocks stands to benefit as consumers settle into a "new normal" of spending, according to HSBC. The investment bank's latest consumer survey suggests positive signs amid the economic uncertainty of the past two years. It noted that consumers are less worried about the cost of living, although it remains the biggest concern, and are more confident that the value of their homes will rise. The bank's survey also showed that consumers are set to prioritize spending on holidays, but save money when it comes to eating out. Inspired by the survey results, HSBC named two companies it sees benefiting from these emerging consumer trends: French video game giant Ubisoft and Swiss travel retailer Avolta . Ubisoft HSBC said its research pointed to resilient consumer spending on video games, which will benefit video game developer Ubisoft . "Our survey highlights that video game spending is more embedded and resilient than we would have expected," HSBC analysts led by Paul Rossington and Pankaj Agarwala said in a note to clients on Mar. 20. The bank has a buy rating on the stock with a price target of 35 euros ($37.90), representing more than 85% upside from the current share price of around 18.84 euros. The stock is also traded in the U.S. and U.K. Ubisoft, founded in 1986, is behind major gaming franchises like Assassin's Creed, Far Cry, and Rainbow Six. Last month, the company raised its sales outlook for the fiscal year ending March 2024, forecasting a record level of over 792 million euros for the final quarter. Earlier this month, it said it was using generative artificial intelligence to power storylines in its games. This is expected to enable characters in games to talk more naturally, and not be limited to scripts. HSBC cited Ubisoft's strong intellectual property and track record attracting gamers' interest. "We think Ubisoft as an AAA video game developer is in a good position to benefit from these underlying trends and has strong IPs with a proven record to attract consumer interest," the analysts said. UBI-FR 1Y line Avolta For the travel and retail sector, HSBC is bullish on Avolta, recommending investors buy shares with a 57 Swiss Francs ($63.52) price target, around 70% above the current 33 Swiss Francs price. The stock is also traded in the U.S. The investment bank believes the company, which operates over 2,300 stores globally in airports and tourist destinations, is attractively valued after underperforming despite positive earnings revisions. The bank thinks investors have ignored the stock. "On stock underperformance in the past year (-18% vs +3% for the Swiss index) despite earnings upgrades, our view is that there has been a lack of interest in second-derivative travel operators (such as concessions)," the bank's analysts said. "We believe that as traffic outlook data continues to improve and if the current momentum persists, Avolta should rerate." AVOL-CH 1Y line — CNBC's Michael Bloom contributed reporting.