Goldman says these stocks have 'earnings power' so buy them now

Goldman Sachs has identified several stocks poised for significant earnings growth, including Ollie's, Walmart, Porch Group, Charles Schwab, and T-Mobile. The firm highlights Ollie's for strong market share gains and customer acquisition, while Walmart is expected to drive solid earnings growth in 2025 through market share gains and improved profitability despite a recent gross margin miss. Porch Group is noted for its strategic positioning for profitable growth, particularly in the homeowner's insurance market, with Charles Schwab's EPS growth acceleration and T-Mobile's industry-leading performance also cited as key drivers.

Analysis

Goldman Sachs has identified a curated list of stocks positioned for significant earnings growth, leveraging distinct catalysts across retail, technology, and financial sectors. In retail, Ollie's Bargain Outlet (OLLI) is highlighted for its operational momentum, having beaten top and bottom-line estimates in its August report and captured market share from bankrupt competitors; its stock is up approximately 22% year-to-date. Concurrently, Walmart (WMT), despite a recent gross margin miss, is seen as a compelling investment due to expected market share gains and improving profitability into 2025, supported by e-commerce growth and a strong value proposition. In technology, Porch Group (PRCH) has been initiated with a buy rating, with its stock surging 273% this year on the back of a strategic repositioning for profitable growth and a significant opportunity in the homeowner's insurance market, overcoming broader headwinds in the housing sector. T-Mobile (TMUS) is presented as a case of premium valuation justified by superior performance, with Goldman forecasting an industry-leading 7% 5-year EBITDA CAGR and strong free cash flow conversion. Finally, The Charles Schwab Corporation (SCHW) is flagged for upside potential in EPS, driven by anticipated net interest income (NII) growth, reduced borrowings enabling balance sheet expansion by Q4 2025, and hedging actions that mitigate sensitivity to short-term rates.

Key Decisions for Investors

• Investors seeking value retail exposure should note Ollie's strong operational momentum and market share gains, contrasting with Walmart's more defensive profile, which hinges on future profitability improvements despite recent gross margin pressure.
• The significant 273% year-to-date rally in Porch Group presents a high-growth opportunity, particularly its foray into insurance, but investors should be mindful of the stock's recent volatility and the challenges in the existing home sales market.
• For T-Mobile, the key consideration is whether its projected industry-leading EBITDA growth and strong free cash flow conversion are sufficient to justify its premium market valuation relative to peers.
• Charles Schwab may be attractive to investors positioning for a stabilizing interest rate environment, as its earnings growth thesis is directly tied to an expected improvement in net interest income and balance sheet reinvestment by late 2025.