Top Stocks Recommended by Wall Street Analysts for Long-Term Growth
As the earnings reporting season comes to a close, it’s evident that many companies have managed to deliver solid results despite pressures on consumer spending. For investors looking for stocks that can withstand short-term pressures and deliver long-term growth, keeping an eye on the recommendations of top Wall Street analysts is crucial. According to TipRanks, a platform that ranks analysts based on their past performance, here are three stocks favored by the Street’s top pros.
Take-Two Interactive Software
One of the top picks this week is game developer Take-Two Interactive Software (TTWO). In August, the company reported better-than-expected adjusted earnings for the first quarter of fiscal 2025. Baird analyst Colin Sebastian reiterated a buy rating on Take-Two Interactive stock with a price target of $172. Sebastian is optimistic about the company’s upcoming releases and expects its bookings to increase by at least 40% in the next fiscal year following mid-single-digit growth this year.
Sebastian’s bullish outlook is supported by the expected release of key titles such as Civilization VII, Borderlands 4, and the highly anticipated Grand Theft Auto VI (GTA VI). He anticipates that the new console/PC releases will generate around $2.25 billion in incremental bookings, while the mobile business is expected to contribute approximately $3.1 billion. Additionally, catalog/live services are projected to generate $2.5 billion in the full year.
While there is confidence from management about the release of GTA VI next year, Sebastian believes that any potential delay between fiscal years would have a minimal impact on TTWO’s earnings trajectory. He foresees GTA VI generating about $3 billion in bookings in the first year, along with enhancing the company’s financial flexibility with over $2 billion in free cash flow.
Looking beyond the next 12-24 months, Sebastian sees Take-Two benefiting from the long-tail of live services/catalog sales and further depth in the pipeline with sequels to Red Dead, BioShock, and Max Payne, as well as potential new 2K sports franchises.
Costco Wholesale
Another stock recommended by Wall Street analysts for long-term growth is membership-only warehouse chain Costco Wholesale (COST). Baird analyst Peter Benedict is bullish on Costco’s prospects, especially after the company reported a 7.1% increase in net sales for the retail month of August. Excluding the impact of changes in gasoline prices and foreign exchange, Costco’s August comparable sales also grew by 7.1%.
Benedict raised his Q4 fiscal 2024 EPS estimate to $5.10, higher than the Street’s consensus estimate of $5.07 per share, to reflect better-than-expected sales in the fiscal quarter. He emphasized Costco’s strong traction with consumers, even amidst a challenging spending environment, as evidenced by solid core comparable sales growth and continued strength in the non-foods area.
The analyst believes that Costco’s “growth staple” appeal remains intact due to its consistent performance, store network expansion, positive membership key performance indicators, and the recently announced fee hike. Benedict reiterated a buy rating on COST stock with a price target of $975.
Netflix
Streaming giant Netflix (NFLX) is the third top pick recommended by Wall Street analysts for long-term growth. Despite macro pressures and intense competition in the streaming space, Netflix has impressed investors with its crackdown on password sharing and the rollout of an ad-supported tier.
JPMorgan analyst Doug Anmuth believes that while advertising is not traditionally part of Netflix’s business model, the company’s move to create an ad tier from scratch could position it as a major player in the advertising space as scale and monetization grow in 2025 and beyond. He estimates that ad revenue, excluding subscriptions, will contribute more than 10% of Netflix’s revenue in 2027.
Anmuth acknowledges that Netflix’s ad tier currently lags behind competitors like Amazon, which automatically includes its Prime members in its ad-supported tier. However, he is confident that Netflix can increase its scale through changes in plans, pricing, bundling offers, and providing live content with broad appeal.
The analyst anticipates that Netflix’s ad tier may dilute its overall average revenue per member, but the company’s 150% growth in upfront ad sales commitments, increased scale, and enhanced focus on ad formats and ad tech should drive higher monetization. Overall, Anmuth is positive about Netflix’s potential to grow its top line in the mid-teens this year and in 2025, improve its margins, and deliver multi-year free cash flow growth. He reaffirmed a buy rating on NFLX stock with a price target of $750.
In conclusion, investors looking for stocks with long-term growth potential may want to consider the recommendations of top Wall Street analysts. Stocks like Take-Two Interactive Software, Costco Wholesale, and Netflix are favored by analysts for their ability to withstand short-term pressures and deliver strong performance over the long term. It’s essential for investors to conduct thorough research and consider their own investment goals before making any decisions.
