As earnings reporting season draws to a close, many companies have managed to deliver solid results despite pressure on consumer spending.
Investors looking for stocks that can withstand short-term pressure and deliver long-term should track the recommendations of top Wall Street analysts.
Keeping in mind, there are three stocks favored by the Street’s top professionals, according to TipRanks, a platform that ranks analysts based on past performance.
Take-Two Interactive Software
This week’s first pick is a game developer Take-Two Interactive Software (TTWO). In August, the company reported better-than-expected earnings for the first quarter of fiscal 2025.
Recently, Baird analyst Colin Sebastian reiterated a buy rating on Take-Two Interactive shares with a price target of $172. Analysts are optimistic about the company’s upcoming releases and expect orders to increase by at least 40% in the next fiscal year after mid-single-digit growth this year.
Sebastian’s strong order growth forecast is supported by the release of major titles – Civilization VII, Borderlands 4 and the highly anticipated Grand Theft Auto VI (GTA VI). Additionally, they expect the company’s new console/PC releases to deliver an additional $2.25 billion in orders. He expects the mobile business to contribute around $3.1 billion, and catalog/live services to generate $2.5 billion in the full year.
While management has expressed high confidence in its ability to release GTA VI next year, analysts think the potential delay between two fiscal years will have limited impact on TTWO’s two-year earnings path. He expects this important release to generate about $3 billion in orders in the first year, while increasing the company’s financial flexibility with free cash flow of more than $2 billion.
“Over the next 12-24 months, Take Two should benefit from direct service/catalog sales and deeper pipeline with sequels to Red Dead, BioShock and Max Payne, and possibly a new 2K sports franchise,” he said. Sebastian.
Sebastian ranks No. 286 among more than 9,000 Analysts tracked by TipRanks. His ratings have been favorable 56% of the time, yielding an average of 12.8%. (See TTWO’s Ownership Structure on TipRanks)
Costco Wholesale
Baird analyst Peter Benedict is bullish on the prospects of the members-only warehouse chain Costco Wholesale (Cost). Earlier this month, Costco reported a 7.1% increase in net sales for the retail month of August (four weeks ended September 1).
Excluding the impact of changes in gasoline prices and foreign exchange, Costco’s August comparable sales also rose 7.1%. Benedict noted that comparable sales growth in August was consistent compared to a 7.2% increase in July, as stronger traffic was offset by some moderation in average traffic growth.
Benedict increased its fiscal 2024 Q4 EPS estimate to $5.10 compared to the Street consensus estimate of $5.07 per share to reflect better-than-expected sales in the fiscal quarter. “COST’s appeal with consumers continues to emerge against an increasingly challenging spending backdrop,” the analyst said.
Benedict stressed that the company delivered comparable sales growth and showed continued strength in the non-food area, although there was still softness in the discretionary category across most of the retail sector.
Analysts think Costco’s “core growth” appeal remains intact, thanks to consistent performance, store network expansion, supporting member key performance indicators and recently announced fee increases. He reiterated a buy rating on COST stock with a $975 price target.
Benedict is ranked 30th among more than 9,000 analysts tracked by TipRanks. His ratings have been successful 71% of the time, yielding an average of 16.1%. (See COST Options Trading on TipRanks)
Netflix
The streaming giant Netflix (NFLX) is the third pick for this week. Despite macro pressures and intense competition in the streaming space, the company managed to impress investors by cracking down on password sharing and rolling out ad-supported tiers.
JPMorgan analyst Doug Anmuth asserted that while “advertising is not in NFLX’s DNA” and the company is building advertising levels from scratch, it has the ability to emerge as a major advertising player as scale and monetization grow in 2025 and beyond. He estimates that advertising revenue, excluding the subscription component, will account for more than 10% of the company’s revenue by 2027.
The analyst admitted that the scale of Netflix’s advertising level is still lagging behind its peers Amazonwhich automatically includes Prime membership at the ad-supported level. That said, he believes that Netflix can expand its scale by making changes to plans and prices, combining offers and providing live content that has broad appeal.
Anmuth further explained that Netflix’s dilutive ad rate for average revenue per member, impressive 150% growth in company-wide ad sales commitments, greater scale and better focus on ad formats and ad technology should drive monetization the higher.
Overall, Anmuth is optimistic about Netflix’s ability to grow its top line in the mid-teens this year and into 2025, improve margins, and generate multi-year free cash flow. He reaffirmed a buy rating on NFLX stock with a $750 price target.
Anmuth is ranked 99 among more than 9,000 analysts tracked by TipRanks. His ratings have been successful 61% of the time, yielding an average of 17.7%. (See NFLX Financials on TipRanks)