After a brief dip, the S&P 500(SNPINDEX: ^GSPC) bull market is still alive, with the index hitting new highs in September. If you're interested in putting some money to work in the stock market, you might consider Apple(NASDAQ: AAPL) and leading video game maker Take-Two Interactive(NASDAQ: TTWO). Two Wall Street analysts recently issued buy ratings on these stocks based on upcoming catalysts. Here's why these stocks could hit new highs in 2025 and beyond.
1. Apple
Apple Intelligence is making its long-awaited launch in beta this month. Investors have started to price in a strong upgrade cycle for the iPhone, with the stock up more than 16% this year. However, Bank of America analyst Wamsi Mohan rates the stock a buy based on Apple's opportunity to drive growth in services with artificial intelligence (AI)-powered features.
Mohan believes Apple Intelligence could fuel sales of AI-powered apps in Apple's App Store. The analyst also sees potential for Apple to monetize the feature with a subscription-based platform as the company further develops its AI capabilities over time.
Apple hasn't given any specific plans on how it will generate revenue from AI. But Apple Intelligence serves as a powerful new weapon to fortify its walled garden strategy, where it controls the user experience by designing software and hardware to work seamlessly together. Apple built a premium brand with this strategy that users are willing to pay up for, which allows Apple to generate almost all of the smartphone industry's operating profit.
Growing revenue from services is a key part of Apple's strategy to deliver returns to shareholders. Services makes up more than a quarter of Apple's business and grew 14% year over year last quarter. Apple has more than 1 billion paid subscriptions across all services offered on its platform. Mohan believes deep integration of the Siri voice assistant with apps could generate $50 billion of additional revenue over the next decade.
Analysts expect Apple to grow earnings per share by 11% on an annualized basis over the next five years, which may prove conservative if Mohan is right about the monetization opportunity with Apple Intelligence. Services generate much higher margins than hardware, so AI monetization provides a catalyst for Apple stock over the next decade.
2. Take-Two Interactive
Take-Two is one of the leading makers of video games, with $5.4 billion in revenue. It's about to release several games over the next few years to capture more of that opportunity, and Redburn Atlantic analyst Hamilton Faber sees a big one launching next year that could provide a huge boost to Take-Two's financials.
Take-Two makes several best-selling franchises, but it is best known as the producer of Grand Theft Auto -- a long-running series that has sold more than 430 million copies over the last few decades. The next installment is scheduled to release in calendar 2025.
Faber expects Take-Two's operating profit to triple over the next few years. This is consistent with management's expectations that its upcoming release slate will drive "tremendous growth."
Take-Two has been executing against a long-term strategy to release more games from some of its best-selling properties. This is a low-risk strategy considering the established fan bases of annual sports releases like NBA 2K, PGA 2K, and popular titles like Grand Theft Auto.
The last release of Grand Theft Auto drove a revenue increase surpassing $1 billion in fiscal 2014. But the game has a much larger fan base than 10 years ago and could lead to significant pent-up demand for the new release. This is why analysts expect Take-Two to grow revenue 45% in fiscal 2026 (which ends in March).
Looking out to fiscal 2027, the consensus estimate has Take-Two's adjusted earnings per share reaching $9.05. The stock is trading at just 16 times that estimate, which could lead to more upside over the next few years.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, and Take-Two Interactive Software. The Motley Fool has a disclosure policy.
