If an ASX investor were searching for top stock picks in the consumer discretionary sector, there are a few prominent names that would probably come to mind. Two of those would be Nick Scali Ltd (ASX: NCK) stock and Harvey Norman Holdings Ltd (ASX: HVN) shares.
These two shares are fairly ubiquitous in Australia. Chances are, readers have visited at least one in the past 12 months.
Both have also been decent performers in recent times.
Over the past 12 months, Harvey Norman shares have climbed by a healthy 26.65%. Nick Scali stock has risen by an even more impressive 36.6%.
Zooming out a little, though, and we have one clear winner. Over the past five years, Harvey Norman shares have jumped about 54%. But Nick Scali stock has galloped almost 180% higher.
Past giants are always a useful lens to look through. But what about the future? Will Nick Scali continue to beat out Harvey Norman?
Luckily for investors, brokers at Macquarie are fairly optimistic about both companies. But they still have a favourite.
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What is this ASX broker saying about Nick Scali stock and Harvey Norman shares?
In a recent note to clients, Macquarie reaffirmed an 'outperform' rating for both ASX consumer discretionary shares, meaning it is recommending clients buy them.
This optimism is built on Macquarie's 'high frequency consumer data' survey, which analyses spending habits across Sydney and Melbourne. Macquarie's latest numbers reportedly show that "the rate of decline in furniture has also started to moderate, and we see upside to this (and other housing-related categories) as housing conditions improve alongside a lower cash rate".
Both Harvey Norman and Nick Scali have significant operations in furniture retailing, so it's understandable that this is supporting Macquarie's bullish outlook. The broker also sees ongoing population growth as a net positive for both stocks.
In terms of 12-month share price targets, Macquarie has given Harvey Norman shares a target of $5.50. If realised, that would see investors gain around 1.3% from the $5.43 the company is currently trading at (that's at the time of writing). The upside is more pronounced for Nick Scali, though, with the broker giving this consumer discretionary stock a target of $19.90 a share. That's a good 9.46% from the $18.18 price tag the shares are sporting right now.
So Macquarie is clearly seeing more upside with Nick Scali shares at the present time. Let's see if the broker is on the money with the benefit of hindsight.
