Morgan Stanley’s top picks into earnings include AMD and Costco

Morgan Stanley Highlights AMD and Costco as Key Stocks to Watch Ahead of Earnings

Imagine picking players for a sports team—you want to choose the ones who are playing their best and have the most potential to win. That’s how big banks like Morgan Stanley pick stocks they believe will score big for investors during earnings season. Let’s break down why this matters and what it could mean for your investments.

Why Investors Care About Earnings Season

Every quarter, companies report how much money they made and spent. These reports can move stock prices up or down—sometimes a lot! If a company does better than expected, its stock might jump. If it disappoints, it could fall. This is why investors pay close attention.

Morgan Stanley’s Top Picks: Who’s in the Spotlight?

  • Advanced Micro Devices (AMD): This tech company makes computer chips. Morgan Stanley thinks AMD will benefit from strong demand for server chips and could get even stronger because its main rival, Intel, is having trouble making enough chips. Last year, AMD’s stock went up 111%—that’s more than doubling your money!
  • Costco Wholesale: This big retailer is known for its warehouse stores. Morgan Stanley expects Costco’s sales and profits to pick up speed this year, with a possible 15% gain for the stock. Even though Costco’s stock has only grown 5% in the past year, analysts think it’s set for a comeback as sales trends improve.
  • Southwest Airlines: Southwest’s stock jumped 30% over the last year. Investors are watching its new assigned seating plan, which could make flying more comfortable for passengers and boost profits. Morgan Stanley thinks the stock could rise another 19% if the company delivers good news.

Bulls: Why These Stocks Could Go Higher

  • AMD: Experts see AMD as a winner because more companies need powerful chips for servers, and Intel can’t keep up. That could mean more sales—and bigger profits—for AMD.
  • Costco: When people keep shopping at Costco, even during tough times, it’s a good sign. If sales speed up as expected, the stock could see a nice jump.
  • Southwest Airlines: If new ideas like assigned seating work out, Southwest could stand out from other airlines and attract more travelers.
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Bears: What Could Go Wrong?

  • AMD: If demand slows down or competitors catch up, AMD’s growth could stall. Also, stocks that rise a lot in one year sometimes take a break or drop.
  • Costco: If shoppers cut back, or if costs rise, Costco might not hit those higher targets. It’s also possible that recent slow sales could continue.
  • Southwest Airlines: Big changes like assigned seating don’t always go smoothly. If customers don’t like it, or if there are travel disruptions, the stock could fall.

What the Numbers Say

According to FactSet, as of late January, 75% of S&P 500 companies that reported earnings surprised investors with better-than-expected profits, and 69% beat sales forecasts. That’s above the long-term average, which shows companies are mostly doing well right now.

Looking back, during strong earnings seasons like this, the S&P 500 index has often climbed higher. For example, after a similar beat rate in 2021, the S&P 500 rose about 10% over the next quarter (S&P Global).

Investor Takeaway

  • Watch earnings reports for companies like AMD, Costco, and Southwest—big surprises can move their stocks quickly.
  • If you already own these stocks, consider how much risk you want. Stocks that have gone up a lot can also come down fast.
  • Diversify your portfolio—don’t put all your money in just one sector or company, even if it’s a top pick.
  • Use strong earnings seasons to look for new opportunities, but remember that trends can change quickly.
  • Stay updated with credible sources and keep an eye on both the good and the bad news before making decisions.

For the full original report, see CNBC

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