As the earnings season reaches its final stretches, some companies have managed to showcase impressive results, managing to navigate the stormy seas of fluctuating consumer spending. Investors searching for resilient stocks that can both weather short-term market conditions and yield satisfactory returns over longer periods should consider recommendations from highly-rated Wall Street analysts. Based on data from TipRanks, a platform that evaluates analyst effectiveness, three stocks have emerged as favorites among the leading experts.
First on the radar is Take-Two Interactive Software (TTWO), a well-known figure in the gaming industry. In August, Take-Two outperformed expectations by delivering strong adjusted earnings for its first quarter of fiscal 2025. Analyst Colin Sebastian, from Baird, has reiterated a ‘buy’ rating on the stock with an ambitious price target of $172. This optimism is primarily fueled by anticipation surrounding the company’s forthcoming game releases, which include major franchises like Civilization VII, Borderlands 4, and the highly awaited Grand Theft Auto VI (GTA VI).
Sebastian’s projections suggest that these new titles, particularly GTA VI, are poised to significantly boost Take-Two’s bookings, expecting an uptick of at least 40% over the following fiscal year. The analyst estimates that GTA VI alone could drive approximately $3 billion in bookings within its first year, thereby enhancing the company’s financial agility with over $2 billion projected in free cash flow. Furthermore, Sebastian exudes confidence that even potential delays in releasing upcoming titles will not notably derail the earnings trajectory of Take-Two, indicating the company’s robust game development pipeline that includes anticipated sequels to popular titles like Red Dead and BioShock.
Another strong contender is Costco Wholesale (COST), which has shown remarkable resilience amidst broader economic challenges affecting consumer behavior. Following a 7.1% increase in net sales for August, Costco demonstrated sustained strength despite fluctuations in average traffic volume. Analyst Peter Benedict maintains a positive outlook on Costco, raising his Q4 fiscal 2024 EPS (Earnings Per Share) estimate to $5.10, surpassing the consensus estimate of $5.07.
Benedict emphasizes Costco’s continual performance amidst a challenging economic backdrop, highlighting their consistent sales growth particularly in the non-food sectors, even as discretionary spending remains subdued in many retail domains. The company’s appeal as a “growth staple” stands firm due to factors such as ongoing store expansion and the promise of increased membership fees. The analyst upheld a ‘buy’ rating on COST stock with a price target set at $975, confident that Costco’s well-established model equips it to withstand potential economic hurdles effectively.
Lastly, Netflix (NFLX) emerges as a crucial pick, especially given the tumultuous competitive landscape of the streaming industry. Notably, Netflix has fortified its market position through measures aimed at curbing password sharing and successfully launching an ad-supported subscription tier. Despite initial reluctance toward advertising being central to its revenue model, analyst Doug Anmuth from JPMorgan projects that Netflix’s advertising revenues could account for over 10% of overall revenue by 2027.
Anmuth recognizes that while Netflix’s current scale in the ad market trails behind competitors like Amazon, the potential for growth is significant. With strategic adjustments in pricing and content offers, as well as the introduction of live features, Netflix appears poised to enhance its advertising revenues effectively. Despite concerns over average revenue dilution from the new ad tier, Anmuth remains focused on the company’s growth trajectory, reaffirming a ‘buy’ rating with a price target of $750, driven by expectations of mid-teen growth rates for 2025.
As the marketplace continuously evolves amid varying economic conditions, investors are urged to explore stocks that not only demonstrate strong financial performance but are also backed by the insights of seasoned analysts. Companies like Take-Two, Costco, and Netflix illustrate the potential for durable growth, even amidst current market headwinds. By keeping a close watch on these stocks and their respective strategies, investors can position themselves to capitalize on future opportunities while effectively managing risks.