Goldman Sachs Pounds the Table on 2 Quality Stocks Amid Heightened Volatility

Yahoo

22-03-2025

If there's anything predictable about President Trump, it's that he'll bring unpredictability with him wherever he goes. That's clear in his trade and tariff policy, with his threats and on-again, off-again tariffs directed at Canada and Mexico and his imposition of higher tariffs against Chinese imports. The moves have economists and political wonks talking about trade wars, while John Q. Public is more worried about the effect of tariffs on inflation.
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Add to these increased concerns on the geopolitical front, as the war in Ukraine grinds on and the war in the Middle East explodes again with the collapse of a fragile cease-fire, and it's no surprise that the University of Michigan's consumer sentiment index collapsed this month. The measure of consumer confidence fell from 64.7 in February to 57.9 in March; a Reuters survey of economists had put expectations at 63.1.
Against this backdrop, Goldman Sachs' consumer cyclicals analyst Brooke Roach is looking for quality stocks that will bring returns during a period of heightened volatility. Assessing the situation, she writes, 'We recognize the macro has dominated the micro in recent trading sessions, and the level of uncertainty remains elevated regarding the health of the consumer and ongoing geopolitical uncertainty. Nevertheless, recent market volatility provides an opportunity to lean into high-quality stocks with long-term earnings power and FCF at an attractive valuation… We continue to leverage our framework of: (1) Seek exposure to idiosyncratic brand momentum; (2) Prefer companies with channel-shift driven upside to profit; and (3) Screen for margin durability with an eye towards structural support vs. cyclical tailwinds.'
Roach goes on to recommend 2 stocks in particular, consumer names that should pique investor interest. The data from the TipRanks platform shows that both are Buy-rated and show plenty of upside; here's a closer look at them, along with Roach's comments.
Ralph Lauren (RL)
First up is one of the fashion world's most recognizable brand names, Ralph Lauren. This company, founded in 1967 by Ralph Lauren himself, is well-known as a designer of stylish clothing aimed at upscale buyers. The company's brand lineup is led by its Polo Ralph Lauren line, but the company has full lines of clothes for men, women, kids, and babies. In addition, the company offers several varied lines of homewares, in a wide range of styles.
For the shopper, Ralph Lauren lives up to its reputation as a leader in the design, marketing, and distribution of desirable lifestyle products, mainly in five categories, including apparel, footwear & accessories, home, fragrances, and hospitality. The company aims to create a timeless style with a distinctive image – a key advantage in developing any brand. Ralph Lauren products are available worldwide through a wide range of retailers, and the company also sells directly through its own stores, with 488 locations in 45 countries.
When we turn to the company's most recent earnings release, which covered fiscal 3Q25 – the quarter reported on February 6 of this calendar year – we find that Ralph Lauren's quarterly revenue and earnings came in well above the estimates. The top line, at $2.1 billion, was $90 million better than expected and was up 11% year-over-year; the bottom line, reported as a non-GAAP EPS, was $4.82, or 29 cents per share better than had been anticipated.
Following the strong performance in fiscal 3Q, which covered the holiday shopping season, the company boosted its full-year revenue guidance for fiscal 2025, increasing it from the 3% to 4% range to a new range of 6% to 7%.
The prospect of accelerating growth forms the starting point of Brooke Roach's take on Ralph Lauren. She says of the company, 'We believe improving execution and building momentum within the company's brand elevation strategy is set to drive additional market share capture opportunities and margin expansion. In particular, RL's broad-based geographic and category growth opportunity (high potential categories / growth in core) and idiosyncratic drivers of margin expansion provide stronger visibility to earnings growth ahead. The company also has more limited exposure to key near-term macro risks vs. peers, including tariffs, department store slowdown, and the health of the lower-income consumer.'
Looking ahead, the Goldman Sachs analyst adds, 'In recent quarters, RL has offered several incremental proofpoints for the bull thesis, with accelerating comp growth, wholesale channel stabilization in North America, and continued evidence of AUR expansion driven by reduced discounting and mix shift. Net, while we recognize investor enthusiasm for the stock is already somewhat elevated, we believe improving execution against the company's key strategic initiatives will continue to drive earnings improvements from here.'
For Roach, this all adds up to a Buy rating on RL, and her $286 price target implies a 27% gain on the one-year horizon. (To watch Roach's track record, click here.)
Overall, Ralph Lauren shares have a Moderate Buy consensus rating, based on 16 reviews that include 12 Buys, 3 Holds, and 1 Sell. The shares are priced at $225.13, and their $296.73 average price target points toward a 32% share appreciation in the next 12 months. (See RL stock forecast.)
SharkNinja, Inc. (SN)
Next on our list, SharkNinja, is a home appliance company that is well-known for its line of Ninja kitchen appliances, a variety of innovative tools designed to accommodate creativity, turn cooks into chefs, and to make cooking fun. The company was founded in 1994, and its name comes from its two primary brands, Shark and Ninja. On the Shark side, the company is best known for its high-end vacuum cleaners.
SharkNinja works hard to keep its products at the cutting edge – both of what is possible and of what consumers want. The company employs a team of engineers and designers, more than 800 strong, whose goal is not just to solve consumer problems, but also to discover problems that are not yet seen. The latter is the key to creating a market, and leads to SharkNinja's strong global marketing presence. The company's products are available globally, through retailers and distributors, both online and offline.
The company's success in both creating and meeting consumer needs has translated into financial success, as well. The company's last reported quarter was 4Q24, and in that period SharkNinja's revenue came to $1.79 billion, for an impressive 30% year-over-year gain. At the same time, the quarterly revenue beat the forecast by $160 million. At the bottom line, the company's adjusted net income per share came to $1.40, 12 cents per share ahead of the forecast.
Goldman analyst Roach starts with SharkNinja's ability to develop new products as a key feature, and goes on to outline the company's growth potential. She writes, 'SN's innovation pipeline is robust, with management's investments in product, marketing, and consumer connection driving an increased success rate of new products over the last several years which are driving growth in 2025 and beyond as they scale. The company's broad-based growth is durable, in our view, driven by international expansion, market share gains in core existing product categories, and innovation-led category and product expansion. Further, we believe recent investments in supply chain and marketing are set to scale into 2H25 and beyond which should drive ample margin expansion longer-term despite more limited margin flow through expected in 1Q25.'
These comments back up Roach's Buy rating here, and her $133 price target implies a one-year potential stock gain of 49%.
The 7 recent analyst reviews here include 6 Buys and 1 Hold, for a Strong Buy consensus rating. Shares are currently trading for $89.40 and the average price target of $138 suggests a 12-month potential upside of 54%. (See SN stock forecast.)
To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a tool that unites all of TipRanks' equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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