As the reporting season for corporate earnings winds down, it’s becoming clear that numerous companies have managed to post commendable results despite the ongoing pressures related to consumer spending. For investors on the lookout for stocks that can not only weather these short-term challenges but also secure long-term growth, paying attention to the insights provided by leading Wall Street analysts is vital. Their recommendations, often backed by substantial research, can guide investors toward promising opportunities in this volatile market landscape. This article examines three stocks currently favored by prominent pros in the financial sector.
Take-Two Interactive Software (TTWO), a notable player in the gaming industry, made headlines in August when it exceeded expectations with its adjusted earnings for the first quarter of fiscal 2025. Analyst Colin Sebastian from Baird has issued a ‘buy’ rating on TTWO, setting a price target of $172, reflecting his confidence in the company’s forthcoming game releases. Sebastian anticipates a substantial increase, approximately 40%, in the company’s bookings for the next fiscal year, which he attributes to the launch of several key titles, including Civilization VII, Borderlands 4, and the highly awaited Grand Theft Auto VI (GTA VI).
Sebastian’s optimistic forecasts outline projections for TTWO’s mobile gaming sector, estimating around $3.1 billion in contributions and $2.5 billion from live services and catalog sales. Even the anticipated release of GTA VI is supposed to generate upwards of $3 billion in bookings during its first year, theoretically enhancing the company’s financial stability with over $2 billion in free cash flow. “Following the initial release period, Take-Two should capitalize on the ongoing revenue streams from live services and an expanding pipeline of sequels and franchises,” said Sebastian, highlighting the studio’s long-term potential in a fundamentally changing entertainment environment.
Next, we turn our attention to Costco Wholesale (COST), a membership-only warehouse club that continues to exhibit robustness in its sales performance. Peter Benedict, also from Baird, expressed buoyancy regarding Costco in light of its recent report showcasing a 7.1% increase in net sales during the retail month of August. Even when certain adjustments concerning gasoline prices and foreign exchanges are excluded, Costco’s comparable sales growth remains at a steady 7.1%, a slight dip from the previous month’s 7.2% growth.
Benedict’s revised EPS estimate for Costco in Q4 fiscal 2024 now stands at $5.10, edging past the consensus estimate. The analyst underscored that Costco’s ability to maintain substantial growth, particularly within the core non-foods sector, highlights its effectiveness amid broader economic concerns. As discretionary spending appears to be under pressure for many retailers, Costco’s consistent performance and planned expansion indicate that the company is maintaining its status as a retail ‘growth staple.’ Given the continually positive traction with consumers and effective membership operations, Benedict reaffirmed his buy rating on COST with a price target of $975.
Lastly, we examine Netflix (NFLX), which continues to navigate turbulent waters in the streaming industry despite the overarching economic pressures and fierce competition. Addressing the dynamics of this competitive environment, JPMorgan analyst Doug Anmuth sees opportunities for Netflix to solidify its footing with its ad-supported tier and the crackdown on password sharing. Although advertising has not traditionally been a core aspect of Netflix’s business model, Anmuth emphasizes the service’s potential to become a significant player in the advertising sector as its scale and monetization strategies evolve.
Anmuth forecasts that by 2027, ad revenues could surpass 10% of Netflix’s total income. He anticipates that strategic adjustments, such as restructuring pricing plans and facilitating exclusive live content, will bolster Netflix’s ad-driven revenue. Despite early dilution of average revenue per member stemming from the ad tier, Netflix has impressed with a reported 150% growth in upfront ad commitments. This momentum suggests an encouraging outlook for margin improvements and cash flow growth in the years ahead. Anmuth maintains a buy rating on NFLX with a price target of $750, believing in the company’s capacity for sustained growth.
As investors sift through the challenging economic landscape, identifying resilient stocks becomes imperative. Companies like Take-Two Interactive, Costco Wholesale, and Netflix demonstrate the potential for growth even amidst adversity. By analyzing the insights provided by top analysts in the field, investors can strategically position themselves to navigate the uncertainties of the market while capitalizing on growth opportunities. The recommendations noted here reflect not just individual company performance but also broader trends that can shape future investment strategies.