As the current earnings reporting season begins to wind down, a clearer picture emerges regarding how various companies are navigating the landscape of consumer spending pressures. Despite these challenges, some firms have managed to present strong financial outcomes, attracting the attention of discerning investors. With a focus on resilience and long-term viability, this article highlights three stocks that analysts from Wall Street recommend for lasting profitability, emphasizing their growth potential and strategic positioning in their respective markets.
Leading the spotlight is Take-Two Interactive Software (TTWO), a powerhouse in the gaming industry. Recently, the company delivered adjusted earnings that outstripped expectations for the first quarter of fiscal 2025. The excitement surrounding Take-Two is palpable, especially as Baird analyst Colin Sebastian has reiterated a ‘buy’ rating on the stock with an ambitious target price of $172. The analyst’s enthusiasm hinges on the upcoming releases of high-profile games, including titles like Civilization VII, Borderlands 4, and the long-awaited Grand Theft Auto VI (GTA VI).
Sebastian projects that Take-Two’s total bookings will experience significant growth, estimating a 40% increase for the next fiscal year after a modest rise this year. This optimism is substantiated by anticipated new console and PC releases, which are expected to generate additional bookings of approximately $2.25 billion. Furthermore, Sebastian believes that Take-Two’s mobile gaming sector will contribute around $3.1 billion, while catalog and live service offerings could add $2.5 billion over the full fiscal year.
Despite management’s strong confidence in launching GTA VI next year, there is acknowledgment that a potential delay could minimally affect the two-year earnings trajectory of the company. In fact, the expected release of GTA VI is anticipated to yield around $3 billion in first-year bookings, with a forecast for over $2 billion in free cash flow, adding to the company’s financial flexibility. With a robust pipeline featuring sequels to franchises like Red Dead and Max Payne, as well as potential new sports franchises, Take-Two positions itself as a formidable player in the industry.
Another stock capturing investor interest is Costco Wholesale (COST), a membership-only warehouse club that continues to demonstrate solid performance in a challenging retail environment. Recently reporting a remarkable 7.1% increase in net sales for August, Costco’s resilience shines through, bolstered by strong comparable sales that remained steady despite inflationary pressures affecting consumer behavior.
Baird analyst Peter Benedict echoes a positive outlook for Costco, as he raised his earnings per share estimate for the fourth quarter of fiscal 2024 to $5.10—slightly above the consensus estimate of $5.07. The consistency of Costco’s sales growth, especially in non-food categories, highlights its appeal as a “growth staple” in today’s consumer marketplace. Despite the broader struggles facing many retailers, Costco’s strategic expansion and membership fee increase signal continuing strength in customer engagement and retail performance.
Benedict’s buy rating on COST, with a price target set at $975, reflects confidence in the warehouse giant’s ability to withstand economic pressures and maintain its growth trajectory. His standing as the 30th ranked analyst among 9,000 tracked by TipRanks, with a successful rating percentage of 71%, reinforces the reliability of his insights.
Finally, streaming giant Netflix (NFLX) finds itself at a critical juncture as it faces macroeconomic challenges and stiff competition. However, the company remains resilient, actively evolving its strategy through measures like cracking down on password sharing and launching an ad-supported subscription tier. JPMorgan analyst Doug Anmuth is optimistic about these changes, noting that while Netflix is venturing into the advertising space—an area outside its traditional core—there is substantial potential for growth.
Anmuth forecasts that Netflix’s ad revenue could constitute more than 10% of its overall revenue by 2027, buoyed by efforts to enhance scaling and monetization. Notably, even though the current ad tier is still developing compared to more established peers, Netflix’s initiatives in adjusting plans, pricing, and content offerings position it favorably for future expansion.
Despite some short-term dilution in revenue per member due to the ad-supported tier, Anmuth highlights significant growth in upfront ad sales and believes that Netflix can achieve mid-teens revenue growth going forward. He reaffirmed a buy recommendation with a price target of $750, underscoring the platform’s capacity for ongoing cash flow growth and improved margins.
With the earnings season closing, investors are faced with the challenge of discerning long-lasting opportunities amidst economic volatility. By focusing on stocks like Take-Two Interactive, Costco Wholesale, and Netflix, investors can align their portfolios with companies exemplifying strength, innovation, and the potential for sustained growth in uncertain times.