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3 Stocks That Goldman Sachs Expects to Beat the Market in 2025
Goldman Sachs strategists recently noted that U.S. stocks are unlikely to maintain their above-average performance from the past decade, as investors are expected to shift towards other assets, such as bonds, seeking better returns.
According to an analysis from strategists led by David Kostin, the S&P 500 Index ($SPX) is projected to deliver a nominal total annualized return of merely 3% over the coming decade. This represents a sharp decrease from the 13% return observed over the previous decade, as well as the long-term average of 11%.
“Investors should be prepared for equity returns during the next decade that are toward the lower end of their typical performance distribution,” the team wrote in a note dated Oct. 18.
However, some of the names that could buck this trend to outperform over the near term are The Walt Disney Company (DIS), Micron Technology (MU), and Chewy (CHWY). Each of these companies holds a “Buy” rating from Goldman analysts, who have set 12-month price targets suggesting at least 30% upside potential from current levels.
This article takes a closer look at each company, their strategic outlook, and how they’re positioned to deliver the robust growth that Goldman’s team anticipates will set them apart in 2025 and beyond.
1. The Walt Disney Company
Based in California, The Walt Disney Company (DIS) is a global leader in entertainment, providing a wide array of media, entertainment, and consumer products. With a market capitalization of $173.2 billion, DIS is a dominant force in the industry, famed for its iconic films, television networks, theme parks, and streaming services.
Shares of the entertainment giant have risen 5.7% year-to-date, lagging the broader market.
On Oct. 21, The Walt Disney Company announced that its Board of Directors appointed Morgan Stanley (MS) vet James P. Gorman as Chairman, effective Jan. 2, 2025. He will replace Mark G. Parker, who will leave the Disney Board on Jan. 2 following nine years of service.
“James Gorman is an esteemed leader who has become an invaluable voice on the Disney Board since joining earlier this year, and I am extremely pleased that he has agreed to assume the role of Chairman upon my departure. Drawing on his vast experience, James is expertly guiding the extensive search process for a new CEO, which remains a top priority for the Board,” said Parker.
On Oct. 9, Walt Disney implemented a 6% increase in ticket prices for its two Southern California theme parks on its most popular days. Also, Disneyland Resort increased prices for its Magic Key annual pass program; the Imagine Key, the least expensive option, now costs $599, reflecting a $100 hike.
Disney reported its third-quarter earnings results in early August. Its total revenue grew 3.7% year-over-year to $23.16 billion, beating Wall Street’s expectations by $70 million. Year-over-year revenue growth was 4% in entertainment, 5% in sports, and 2% in experiences. The company posted a total segment operating income of $4.25 billion, compared to the consensus of $3.84 billion and $3.56 billion reported in the previous year.
The key factor in this report was that the Entertainment segment’s operating income nearly tripled year-over-year, driven by Disney Plus’s profitability. Notably, total Disney+ subscribers were reported at 154.5 million, slightly below the consensus of 154.6 million, while total Hulu subscribers increased by 2% to 51.2 million, surpassing the consensus of 50.4 million. Disney expects its streaming business to eventually reach double-digit margins, similar to Netflix (NFLX). In pursuit of this goal, the company has introduced an ad-supported tier and implemented restrictions on password sharing, emulating its competitor’s strategies. Disney’s adjusted earnings per share (EPS) for the quarter stood at $1.39, surpassing the consensus estimate of $1.19 and the previous year's figure of $1.03.
Still, comments from management regarding the Experiences segment, which includes theme parks and cruise liners, triggered a post-earnings sell-off in DIS stock. The company observed a slowdown in demand within that segment in Q3, and anticipates that the “moderation” in its domestic business will continue over the “next few quarters.” Disney attributed the slowdown to factors such as the Olympics and China's sluggish economy. The company also noted that while high-income customers have recently chosen international travel, those in the lower-income bracket are under financial strain due to high inflation.
It’s important to note that DIS has encountered several challenges in recent years across its streaming, linear TV, and theme park segments, leading its stock to decline from an all-time high of around $200 reached in early March 2021. Bob Iger’s return as CEO introduced a turnaround plan that began to materialize in early 2024. In recent developments, Disney eliminated hundreds of executive positions in late September as part of its ongoing $7.5 billion cost-cutting initiative.
The company has recently achieved strong results in content delivery, with Inside Out 2, Kingdom of the Planet of the Apes, and Deadpool and Wolverine collectively grossing $2.8 billion at the box office. Next year will see the release of Avatar 3 and Captain America films, while 2026 will feature a new Star Wars film and Toy Story 5. This lineup of films is expected to sustain the company’s revival over the next two years.
According to Wall Street projections, DIS is expected to post a moderate 2.67% year-over-year revenue growth to $91.27 billion in fiscal 2024, while EPS is estimated to grow 31.12% year-over-year to $4.93.
DIS is a dividend-paying stock. On July 25, the company paid its shareholders a semi-annual dividend of $0.45 per share, a 50% increase from the previous dividend of $0.30 paid in January. Based on current share prices, Disney offers a dividend yield of 0.95%.
Disney looks appealing from a valuation standpoint. Priced at 19.24 times forward earnings, the stock is trading at a considerable discount compared to its five-year average of 42.27x. The recent turmoil at the company has steadied with Iger’s return, providing investors an opportunity to capitalize on the current discount before his successor takes over.
On Oct. 24, Goldman Sachs analyst Mike Ng raised the firm’s price target on Disney to $125 from $120, which is roughly 32% above Friday’s closing price. Also, the analyst kept a “Buy” rating on the shares. Goldman revised its FY25 Parks and Experiences estimates to incorporate the launch of the Lightning Lane Premiere Pass and the maiden voyage of Disney Adventure on Dec. 15, 2025, raising the net FY25 EPS forecast by 1 cent to $5.15. Additionally, the FY26 EPS projection was boosted to $6.28 from $5.96.
Notably, most analysts believe that Disney’s stock is a “Strong Buy.” Out of the 29 analysts covering the stock, 19 recommend a “Strong Buy,” three suggest a “Moderate Buy,” and seven assign a “Hold” rating.
2. Micron Technology
Micron Technology (MU) ranks among Wall Street's foremost semiconductor companies, focusing on memory and storage solutions, including dynamic random-access memory (DRAM) and NAND flash memory. The company is well-positioned to benefit from the artificial intelligence (AI) megatrend. Its cutting-edge technologies facilitate the development of faster, more intelligent global infrastructures essential for AI model training, machine learning, and generative AI solutions. MU’s market cap currently stands at $119.6 billion.
Micron stock has gained 26.2% on a year-to-date basis.
On Oct. 23, Micron announced the inclusion of its 9550 PCIe Gen5 E1.S data center SSDs on the Nvidia (NVDA) recommended vendor list for the NVIDIA GB200 NVL72 system and its derivatives. The GB200 NVL72 utilizes the GB200 Grace Blackwell Superchip to provide rack-scale, energy-efficient AI infrastructure. The integration of PCIe Gen5 storage in the system positions the Micron 9550 SSD as an optimal solution for optimizing performance and power efficiency in AI workloads, including large-scale AI model training, real-time trillion-parameter language model inference, and high-performance computing tasks.
On Oct. 15, Micron introduced a new category of clock driver memory, launching its Crucial DDR5 clocked unbuffered dual inline memory modules and clocked small outline dual memory modules. The JEDEC-standard solutions operate at speeds up to 6,400 MT/s (mega transfers per second), which is more than double the speed of DDR4 and 15% faster than traditional non-clock-driver-based DDR5.
Micron Technology stock soared over +14% on Sept. 26 after the memory maker posted stronger-than-expected Q4 results and issued above-consensus Q1 guidance. MU reported a 93.3% year-over-year increase in revenue to $7.75 billion, driven by strong demand for AI, which boosted sales of the company’s data center DRAM products and industry-leading high bandwidth memory. Micron also achieved a NAND revenue record, with data center SSD sales surpassing $1 billion in quarterly revenue for the first time. As a result, the top line beat the consensus estimate by $100 million. Adjusted gross margin stood at 36.5%, topping expectations of 34.7%, and demonstrating sequential improvement from 28.1% in Q3. Q4 adjusted EPS reached $1.18, beating analysts’ estimates by $0.07.
The rapid advancement of AI hardware, spearheaded by industry leader Nvidia’s groundbreaking innovations such as the forthcoming GB200 from the Blackwell architecture, is transforming the computing landscape and is expected to fuel demand for MU’s products, as the company maintains a strong history of strategic partnerships with Nvidia. Micron’s capital expenditures due to AI investments were $3.1 billion in Q4 and totaled $8.12 billion for FY24, which resulted in adjusted free cash flows of $323 million in Q4 and $386 million for the full year. It’s also important to highlight that MU has benefited from its longstanding partnership with Taiwan Semiconductor Manufacturing Company (TSM), which ensures compatibility between its products and the packaging used for NVDA’s top offerings.
Notably, the global adoption of AI is expected to expand further. Statista forecasts the worldwide AI market to grow at a compound annual growth rate (CAGR) of 29.4% through 2030, reaching approximately $827 billion. Consequently, Micron should continue to benefit from this tailwind.
“We are entering fiscal 2025 with the best competitive positioning in Micron’s history,” said Micron Technology President and CEO Sanjay Mehrotra. “We forecast record revenue in fiscal Q1 and a substantial revenue record with significantly improved profitability in fiscal 2025.”
Micron forecasts its revenue for the first quarter to range from $8.5 billion to $8.9 billion. Also, the company anticipates adjusted EPS to be between $1.66 and $1.82. In addition, the company projects the adjusted gross margin to range between 38.5% and 40.5%.
For fiscal 2025, analysts tracking the company predict a dramatic 1,332.76% year-over-year surge in EPS to $8.31, while MU’s revenue is expected to grow 51.98% year-over-year to $38.16 billion.
The semiconductor company also pays dividends. On Oct. 23, Micron paid its shareholders a quarterly dividend of $0.115 per share, which was in line with the previous. Shares of MU currently yield a dividend of 0.43%.
In terms of valuation, MU stock is trading at 12.13 times forward adjusted earnings, well below the sector median of 24.15x and its own five-year average of 84.63x, which suggests the stock is undervalued at current levels.
On Sept. 26, Goldman Sachs analyst Toshiya Hari reaffirmed the firm’s “Buy” rating on Micron. The analyst adjusted the stock's price target to $145 from $158, which still represents a 34% upside potential from the stock’s Friday close.
Overall, analysts have deemed Micron stock a “Strong Buy.” Out of the 27 analysts offering recommendations, 23 recommend a “Strong Buy,” two advise a “Moderate Buy,” one suggests a “Hold,” and one has a “Strong Sell” rating.
3. Chewy
Valued at a market cap of $11.3 billion, Chewy, Inc. (CHWY) operates as an online retailer specializing in pet food and a variety of pet-related products. The company utilizes mobile applications and a retail website to distribute an array of items, including pet food, treats, supplies, and healthcare products for dogs, cats, fish, birds, horses, and reptiles. In addition, Chewy offers a selection of pet clothing and medications.
Shares of the pet retailer have climbed 14.8% on a year-to-date basis.
On Aug. 28, Chewy stock surged about +11% after the company reported solid Q2 results. CHWY’s revenue grew 2.6% year-over-year to $2.86 billion, in line with expectations, driven by continued user acquisition and deepening customer engagement. This is evident from their 20 million active customers, which increased sequentially during the quarter, while Net Sales per Active Customer (NSPAC) rose over 6% year-over-year to $565. Its Autoship subscription program expanded at twice the rate of overall company revenue, growing 5.8% to $2.24 billion and contributing 78.4% to total revenue, up from 76.1% the previous year.
Chewy also experienced enhanced customer engagement on its mobile app, marked by a 13% year-over-year increase in unique customers placing orders and 15% year-over-year growth in overall mobile app orders. This uptick followed the company’s investment in redesigning its mobile app to improve user experience. Notably, this also contributes to the growth of NSPAC.
“Our Q2 performance reflects another quarter of strong execution, delivering net sales at the high end of our guidance range,” said CEO Sumit Singh, adding, “Chewy’s compelling value proposition is driving broader and deeper customer engagement, as reflected by our 20 million active customers, which grew sequentially in the quarter, and net sales per active customer of $565, which reached a new record for the company.”
CHWY reported a profit of $0.24 per share, an increase from $0.15 per share in the same quarter last year and exceeding the expected $0.21. Its adjusted EBITDA improved 64% year-over-year to $144.8 million, leading to an adjusted EBITDA margin of 5.1%, compared to 3.2% in the same period last year. Part of the growth in adjusted EBITDA stemmed from a 120 basis point increase in GAAP gross margin, attributable to the favorable mix of its businesses and its position as a strategic channel for vendor partners. Management also believes there is potential to expand gross margins further over time.
It’s also important to note that the company continued to return value to shareholders through share repurchases during the quarter. In June, it bought back about 17.6 million shares of Class A common stock from BC Partners for a total of $500 million, executed separately from its existing 500 million share repurchase program. Additionally, during the quarter, Chewy repurchased around 1.3 million shares of Class A common stock, spending about $32.7 million under its share repurchase program.
Looking forward, Chewy projects Q3 sales to range from $2.84 billion to $2.86 billion. For FY24, management maintained their revenue guidance, projecting about 5% year-over-year growth at the midpoint to $11.7 billion. At the same time, full-year adjusted EBITDA margin guidance was raised to a range of 4.5% to 4.7%, up from the previous forecast of 4.1% to 4.3%. This increase highlights the company’s continued execution towards a richer product mix and the increasing leverage in its business model.
Analysts tracking the company forecast an 88.97% year-over-year surge in its EPS to $1.30 for fiscal 2025. Moreover, Wall Street anticipates CHWY’s revenue to grow 5.42% year-over-year to $11.75 billion.
In terms of valuation, the stock is currently trading at 20.67 times the consensus earnings estimate for FY25, which is higher than the sector median of 16.97x. This suggests the stock is trading at a moderate premium compared to its peers.
On Sept. 9, Goldman Sachs analyst Alexandra Steiger reiterated a “Buy” rating on shares of Chewy with a price target of $35.00, which is about 30% above Friday’s closing price. The firm’s analysis pointed out that the recent increase in Chewy’s active customer trends, as seen in the Q2 results, is primarily due to the company’s initiatives, including reactivation strategies and its application.
On Oct. 9, TD Cowen initiated coverage of the stock with a “Buy” rating and a $38 price target. Chewy is the top pure-play e-commerce provider in the $14 billion U.S. pet industry, the analyst told investors in a research note. The firm noted that CHWY boasts a robust retail business and an expanding pet health offering, which includes the largest online pet pharmacy. It anticipates a 9% annual revenue growth through FY29, with an expansion in EBITDA margin and strong free cash flow conversion.
Analysts have a consensus rating of “Moderate Buy” on Chewy stock. Out of the 26 analysts covering the stock, 12 rate it as a “Strong Buy,” one has a “Moderate Buy,” 12 classify it as a “Hold,” and one assigns a “Moderate Sell.”
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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
