Stock Analysis & Ideas

3 Superior “Strong Buy” Stocks That Can Capture Market Share

Story Highlights

Costco, Apple, and Uber are three top-notch companies that could continue taking market share as we head into an economic downturn. Wall Street is upbeat on each stock, even amid mounting macro pressures.

A recession may be unavoidable as the Federal Reserve continues to move forward with its rate-hiking cycle. While the recent relief rally has been fueled by a promising and better-than-expected CPI report, it may be too soon for the Fed to pull the brakes. Undoubtedly, it’s hard to tell what’s next. Nonetheless, investors should look to the companies that can turn a recession into an opportunity to gain a leg up over market rivals. Uber (NYSE:UBER), (NASDAQ:AAPL), and (NASDAQ:COST) are three stocks that could add to their market shares, regardless of how “hard” the economy’s rate-induced landing will be.

Uber (UBER)

Uber is the ride-hailing leader that many Americans have embraced with open arms. The company is now a fierce player in food delivery and generic transportation of goods. Indeed, Uber sees itself as the one and only transportation app that consumers need.

Undoubtedly, there’s a lot of competition in transportation services reliant on the gig economy, and profitability prospects are quite slim at the worst possible time (in a rising-rate world). Still, Uber has been able to flex its muscles at the expense of the competition.

Uber’s impressive (and growing) network of drivers and customers makes it a top dog. That said, it’s the company’s ability to offer value via food delivery and ride-hailing that could help it run away with market share in a recession year.

The Uber One subscription offers members considerable savings. In a recession, savings are what people want. The company notes that the average subscriber saves more per month than the price of admission through the modest 5% discount on eligible services. The savings really do add up over time!

Indeed, the service allows customers to save on food orders and rides. That’s a value proposition Uber’s rivals can’t quite offer yet. Certainly, Uber takes convenience to the next level with a service that I think allows it to leverage its network in a way to take more share away from its rivals.

As Uber wins more customers with such a potentially sticky service, the company may have what it takes to squeeze its rivals like never before. Ultimately, I think Uber’s rivals in food delivery and ride-hailing will either need to merge or be acquired.

As Uber claws share from rivals while inching closer to profitability, analysts expect big things from the firm.

What is the Price Target for UBER Stock?

Wall Street is pounding the table on the ride-hailer. The average UBER stock price target of $49.07 implies 76.8% upside. That’s a big expected gain for the year ahead!

Apple (AAPL)

Apple is a $2.25 trillion behemoth at writing. For a company that size, it seems unreal that there’s still market share to be had. Though the iPhone is a beast in the smartphone market, it’s still yet to squeeze its rivals. In recent quarters, Apple has gained significant ground over competitors.

The company recently reported its highest Q3 smartphone market share in 12 years. That’s impressive, and I think it could be a sign of things to come as Apple opens up its ecosystem and looks to target to lower-end of the smartphone market.

I think Apple can go after the non-luxury segment of the smartphone market without damaging its brand affinity. Indeed, Apple has a lot of room to run to dominate the smartphone scene.

Though Apple faces supply issues ahead of the holidays, I still think the long-term trend is encouraging. The company’s taking share, and as it gets into new services, the tech titan could become even more powerful with time.

What is the Price Target for AAPL Stock?

Wall Street still loves Apple, even with iPhone delays considered. The average AAPL stock price target of $180.48 implies 25.1% upside.

Costco (COST)

Costco is a retailer that could win over new loyal customers as inflation and economic headwinds push consumers to save money on their grocery bills at any cost.

The company is willing to offer a great deal if it means getting customers to subscribe to its membership. Undoubtedly, Costco’s renewal rates in Canada and the U.S. are high at nearly 90%. As Costco keeps prices relatively low, the firm can bring on more “sticky” customers and raise prices at some point down the road.

It’s not just Costco’s bulk deals that could allow it to gain ground over other retailers. A push into digital retail and grocery delivery could be a game-changer. As inflation lingers into 2023, so too will Costco’s competitive strengths.

At 40.4x trailing earnings, Costco stock remains richly valued. However, with such a wide moat and strength in a wildly-competitive retail industry, it’s hard to dismiss its lofty valuation. It’s a premier price tag that’s well-earned!

What is the Price Target for COST Stock?

Wall Street doesn’t mind the rich multiple, with a “Strong Buy” consensus rating based on 14 Buys and four Hold ratings. The average COST stock price target of $552.29 implies 4.4% upside potential.

Conclusion: Analysts Expect the Most Upside from UBER

All firms will face pressure from the same macro headwinds. That doesn’t mean 2023 — a recession year expected by many — will be a “lost year” for the most competent firms. Companies that claw away market share from rivals could make the most of a difficult situation. Of the three Strong Buys, analysts expect the most upside from UBER stock.

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