Goldman Sachs Identifies Top Stocks Poised for Upside Ahead of Earnings Reports
Goldman Sachs has pinpointed a select group of stocks with significant upside potential ahead of their upcoming earnings reports. The firm, known for its deep market expertise, has identified companies with compelling growth narratives and undervalued assets, making them prime targets for investors seeking attractive returns. CNBC Pro has delved into Goldman Sachs’ research to bring you the most promising names leading into earnings season. These include Affirm, Li Auto, Madison Square Garden Entertainment, Waystar, and CAE.
Key Takeaways:
- Goldman Sachs is bullish on a group of stocks despite ongoing market uncertainty, seeing them as undervalued and primed for growth.
- These companies possess unique qualities, including strong market positioning, innovative products, and strategic partnerships, setting them apart from their peers.
- Investors with a long-term horizon may find these stocks especially attractive, given their potential to generate significant returns over time.
Madison Square Garden Entertainment: A Leading Entertainment Powerhouse
Madison Square Garden Entertainment (MSGE) has caught the eye of Goldman Sachs analysts, who have upgraded their rating on the stock to "buy" from "neutral." The firm cites a confluence of positive factors, including a thriving live entertainment market and strong corporate demand in New York. The company’s iconic venues, including Madison Square Garden and Radio City Music Hall, are seen as key drivers of growth.
Analyst Stephen Laszczyk highlights the company’s strong event booking pipeline, fueled by a surge in concert tours and a resurgence of fan demand for live entertainment.
He further notes that corporate demand in New York remains robust, with no signs of a slowdown.
"These market characteristics, we believe, should lead to increased venue utilization, pricing power, and continued demand for sponsorship and premium hospitality, especially for the market’s most iconic venues," Laszczyk emphasized.
MSG Entertainment is set to report earnings in mid-August. The stock has experienced a positive 15% year-to-date surge, indicating investor confidence in the company’s growth prospects.
Affirm: A "Long Term Secular Winner" with Apple Pay Integration
Affirm (AFRM), the buy-now, pay-later company, has taken a hit this year, with shares down nearly 48%. However, Goldman Sachs analyst Will Nance believes the negative sentiment is overblown, calling Affirm a "long-term secular winner."
Nance is particularly bullish on Affirm’s new partnership with Apple Pay, announced in June.
"We think volumes trend better than expected, with focus on earnings around the Apple Pay integration and what it can add to 2025," Nance said.
He views the partnership as a significant growth catalyst, expanding Affirm’s reach and driving increased adoption.
Nance highlights the stock’s compelling valuation at current levels, emphasizing Affirm’s ability to leverage the Apple Pay partnership to expand its distribution capabilities across the e-commerce landscape.
Affirm’s earnings are slated for late August. While the stock has faced headwinds this year, Goldman Sachs’ bullish stance on the company’s long-term prospects suggests potential for a rebound.
Waystar: A Unique Player in the Healthcare Payments Landscape
Waystar (WAY) is another company attracting Goldman Sachs’ attention, with the firm initiating coverage with a "buy" rating. Waystar, a healthcare payments service provider, went public in early June.
Analyst Adam Hotchkiss highlights Waystar’s unique position within a market dominated by point-solution technology vendors.
"We believe that WAY’s comprehensive technology platform, addressing multiple points across the healthcare revenue cycle, is unique within a market dominated by point-solution technology vendors, manual processes & healthcare IT services businesses," Hotchkiss said.
He believes Waystar’s platform is undervalued and has the potential to drive significant growth.
"We think that the combination of a $15bn TAM [total addressable market], Waystar’s nascent market share (~5%), and underlying end-market stability provides a compelling formula for compounding growth," Hotchkiss added.
Waystar’s earnings are expected on August 7. The stock has shown a 5.4% gain in the past month, signaling investor confidence in the company’s growth trajectory.
Li Auto: Leading the Charge in China’s New Energy Vehicle Market
Li Auto (LI), a prominent player in China’s burgeoning new energy vehicle (NEV) market, has received a "buy" rating from Goldman Sachs. The firm recognizes Li Auto’s 5% market share in China as of the first quarter of 2024 and acknowledges its strong product pipeline and expansion plans.
Goldman Sachs analysts point to Li Auto’s robust product pipeline, with plans to launch five new models in 2024. The company is also aggressively expanding its sales network with the addition of 400 stores this year.
"With continued scale economics and operating leverage, we expect Li Auto to deliver the fastest earnings growth with top-tier free cash flow generation among our China auto OEM coverage," the firm noted.
Li Auto’s focus on innovation and expansion positions it for continued growth in China’s rapidly evolving EV market.
CAE: A Dominant Force in Aviation Simulation and Training
CAE (CAE), a global leader in aviation simulation and training, also holds a prominent spot in Goldman Sachs’ portfolio. The firm sees CAE as a value play, with its stock significantly undervalued based on their analysis.
Analyst Jonathan Novak highlights CAE’s dominant position in a highly regulated, recurring, and high-margin business.
"CAE is the market leader in commercial aviation simulation & training, which is a highly regulated, recurring, and high margin business," Novak said.
He further notes that CAE’s size is a substantial competitive advantage, enabling the company to offer superior data quality and pricing advantages to its customers.
Goldman Sachs’ assessment indicates significant upside potential for CAE. The firm’s valuation analysis suggests the stock is currently trading at a discount to its intrinsic value.
These compelling names represent a diverse range of sectors, offering investors attractive opportunities for growth and portfolio diversification. Goldman Sachs’ research serves as a valuable guide for navigating the complex earnings season, providing insights into companies poised to deliver strong returns. Whether you’re seeking exposure to the dynamic live entertainment market, the burgeoning e-commerce landscape, the expanding healthcare payments sector, or the booming Chinese EV market, these stocks offer promising potential. As earnings season unfolds, investors will be eager to see how these companies perform and whether they live up to Goldman Sachs’ optimistic projections.
