As the earnings reporting season concluded, many companies reported solid results despite pressure on consumer spending.
Investors looking for stocks that can withstand short-term pressure and deliver long-term results should follow the recommendations of leading Wall Street analysts.
With that in mind, here are three stocks favored by Wall Street's top pros, according to TipRanks, a platform that ranks analysts based on their past performance.
Interactive software from Take-Two
This week’s first choice is Game Developer Interactive software from Take-Two (TTWO). In August, the company reported better-than-expected adjusted earnings for the first quarter of fiscal 2025.
Recently, Baird analyst Colin Sebastian reiterated his buy rating on Take-Two Interactive stock with a price target of $172. The analyst is optimistic about the company's upcoming releases and expects orders to increase by at least 40% in the next fiscal year after the company reported mid-single-digit growth this year.
Sebastian's robust estimate of order growth is supported by the expected release of major titles – Civilization VII, Borderlands 4 and the highly anticipated Grand Theft Auto VI (GTA VI). In addition, he expects the company's new console/PC releases to bring in approximately $2.25 billion in additional orders. He expects the mobile business to contribute approximately $3.1 billion and catalog/live services to generate $2.5 billion for the full year.
Although management has expressed high confidence in the release of GTA VI next year, the analyst believes that any potential delay between two fiscal years would have limited impact on TTWO's two-year earnings trajectory. He expects this major release to generate about $3 billion in bookings in the first year while increasing the company's financial flexibility with free cash flow of over $2 billion.
“Beyond the next 12 to 24 months, Take Two should benefit from the long line of live services/catalog sales and further planned sequels to Red Dead, BioShock and Max Payne, as well as perhaps new 2K sports franchises,” said Sebastian.
Sebastian is ranked 286th among more than 9,000 analysts tracked by TipRanks. His ratings have been profitable 56% of the time, generating an average return of 12.8%. (See TTWO ownership structure on TipRanks)
Costco Wholesale
Baird analyst Peter Benedict is optimistic about the prospects of a member-only warehouse chain Costco Wholesale (COST). Earlier this month, Costco reported a 7.1% increase in its net sales for the retail month of August (the four weeks ending September 1).
Excluding the impact of changes in gasoline prices and foreign exchange rates, Costco's comparable sales also rose 7.1% in August. Benedict noted that comparable sales growth in August remained stable compared to July's 7.2% increase as heavier traffic was offset by some moderation in average traffic growth.
Benedict raised his fourth-quarter fiscal 2024 earnings forecast to $5.10 versus Wall Street's consensus estimate of $5.07 per share to reflect better-than-expected fiscal quarter revenue. “COST's appeal with consumers continues to be notable against a backdrop of increasingly difficult spending,” the analyst said.
Benedict stressed that the company continued to deliver solid comparable core sales growth and demonstrated continued strength in non-food, even as weakness in consumer goods categories continues across most retail sectors.
The analyst believes Costco's appeal as a “growth staple” remains intact thanks to its consistent performance, store network expansion, encouraging membership performance indicators and recently announced fee increase. He reiterated his Buy rating on COST stock with a $975 price target.
Benedict ranks 30th among more than 9,000 analysts tracked by TipRanks. His ratings have been successful 71% of the time and have produced an average return of 16.1%. (See COST Options Trading on TipRanks)
Netflix
Streaming giant Netflix (NFLX) is this week's third pick. Despite macro pressures and intense competition in the streaming space, the company has managed to impress investors with its crackdown on password sharing and the launch of an ad-supported tier.
JPMorgan analyst Doug Anmuth claims that while “advertising is not in NFLX's DNA” and the company is building the ad layer from scratch, it has the potential to establish itself as a major advertising player as scale and monetization increase in 2025 and beyond. He estimates that advertising revenue, excluding the subscription component, will account for more than 10% of the company's revenue in 2027.
The analyst admits that the size of Netflix’s advertising layer is currently behind that of competitors such as Amazonwhich benefited from automatically enrolling its Prime members in its ad-supported offering. Still, he is confident that Netflix can grow its scale by making changes to plans and pricing, bundling deals and providing live content that has broad appeal.
Anmuth further explained that while Netflix's ad quota has a dilutive effect on total average revenue per member, the company's impressive 150 percent growth in upfront advertising sales, increased reach and improved focus on ad formats and advertising technology should lead to higher monetization.
Overall, Anmuth is optimistic that Netflix can grow its revenue by 15% this year and in 2025, continue to improve its margins and deliver multi-year free cash flow growth. He reiterated a buy rating on NFLX stock with a $750 price target.
Anmuth ranks 99th among more than 9,000 analysts tracked by TipRanks. His ratings have been successful 61% of the time and have produced an average return of 17.7%. (See NFLX Financials on TipRanks)