Morgan Stanley highlights stocks that could see big earnings surprises this quarter

Morgan Stanley has identified Roblox, Capital One Financial, and Reddit as top picks likely to exceed Q3 earnings expectations, amidst an anticipated 8% year-over-year earnings growth for the S&P 500 this quarter. Roblox, which has surged 138% in six months, is favored by Wells Fargo for its ad business expansion, with a $155 price target. Capital One Financial, up 20% year-to-date, is expected by Barclays to accelerate buybacks and capital returns, targeting $257. Reddit, having soared 121% in six months, is highlighted by Oppenheimer for its strong digital ad market position, with a $300 price target.

Analysis

Stocks that could win big this earnings season include Roblox and Capital One Financial , according to Morgan Stanley. The third-quarter earnings season ramps up next week, with the nation's largest banks on the docket to report results. Analysts forecast another stellar quarter of results, with the estimated year-over-year earnings growth rate for the S & P 500 coming in at 8% — the ninth consecutive quarter of earnings growth. Before the start of third-quarter earnings season, Morgan Stanley shared a list of its overweight-rated stocks that are reporting earnings in the next month and are most likely to show profits in excess of what the Street is expecting. Some of the companies in the basket are listed below: One stock that Morgan Stanley highlighted was Roblox, which reports earnings Oct. 30. Shares of the online game platform have more than doubled over the past six months, surging 138% through Tuesday. Last week, Wells Fargo raised its price target to $155 per share, up from $153. Analyst Ken Gawrelski's updated forecast is 24% above where Roblox closed Tuesday. "We believe the company's recent expansion into the ad business represents a large opportunity and see material upside potential to current Street estimates for both bookings and EBITDA, driven by meaningful contribution from ad bookings starting in 2025," Gawrelski wrote. Wells Fargo has an overweight rating on Roblox. Morgan Stanley also favors Capital One Financial, which reports on Oct. 20. The bank and credit card issuer has rallied 20% this year, outperforming the 14% gain in the S & P 500. Barclays analyst Terry Ma named Capital One a favorite idea in the U.S. consumer finance arena in a research report on Monday. "We expect an acceleration of buybacks in 3Q and the start of a more robust capital return plan," Ma wrote, adding that an expansion in Discover Financial Services' network acceptance globally may prove an additional tailwind for Capital One. Ma has an overweight rating on Capital One and his 12-month price target of $257, up from an earlier $253, corresponds to 20% upside from the bank's Tuesday close. Another stock Morgan Stanley expects will report strong earnings this quarter is Reddit , due to release results on Oct. 27. The social media stock has soared 121% over the past six months. Oppenheimer raised its price target on Reddit to $300 in September, up from a previous $215. Analyst Jason Helfstein's new objective forecast implies the stock could rise 46% from Tuesday's close. "We believe Reddit is well positioned to continue gaining share of the ~$250B digital ad market ex-GOOG and META. Early monetization efforts have been successful, with pricing holding steady as impressions increased significantly in 2024," Helfstein wrote. "We believe Reddit's > 2B posts and > 20B comments is one of the best-written and most authentic sources of human interaction on the internet." ( Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here . ) Morgan Stanley's pre-earnings analysis highlights Roblox, Capital One Financial, and Reddit as key stocks expected to surpass third-quarter earnings estimates, amid a projected 8% year-over-year earnings growth for the S&P 500, marking the ninth consecutive quarter of expansion. This optimistic outlook precedes a Q3 earnings season poised for strong aggregate results. The selection emphasizes companies with significant recent stock performance and specific catalysts. Roblox (RBLX) and Reddit (RDDT) exhibit significant growth momentum, with shares surging 138% and 121% respectively over the past six months. Wells Fargo projects material upside for Roblox's bookings and EBITDA from its expanding ad business starting 2025, setting a $155 price target. Similarly, Oppenheimer forecasts a 46% upside for Reddit, citing its strong positioning in the ~$250B digital ad market and successful early monetization efforts. Capital One Financial (COF) is favored, having outperformed the S&P 500 with a 20% year-to-date rally against the index's 14% gain. Barclays anticipates an acceleration of share buybacks in Q3 and a more robust capital return plan, alongside potential tailwinds from Discover Financial Services' network expansion. Barclays has an overweight rating and a $257 price target for COF, representing a 20% upside.

Key Decisions for Investors

• Investors should closely monitor the Q3 earnings reports of Roblox, Capital One Financial, and Reddit for confirmation of the highlighted growth drivers and capital return plans.
• Consider potential upside in RBLX and RDDT driven by digital advertising monetization and market share gains, aligning with analyst price targets of $155 and $300, respectively.
• Evaluate COF for its anticipated increase in capital returns and strong financial sector performance, noting the Barclays price target of $257 and potential tailwinds from network expansion.
• Assess the broader implications of a robust S&P 500 earnings season, as an 8% year-over-year growth signals continued corporate profitability and potential for broader market resilience.