Investors looking for less volatile stocks associated with companies having a proven track record can consider investing in large-cap stocks. These stocks of well-established companies have a market capitalization between $10 billion to $200 billion. Using TipRanks’ Stock Comparison Tool, we placed Starbucks (NASDAQ:SBUX), Disney (NYSE:DIS), and Energy Transfer (NYSE:ET) against each other to find the large-cap stock that could generate the most attractive returns, according to Wall Street analysts.
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Starbucks Corp. (NASDAQ:SBUX)
Shares of Starbucks have declined more than 24% so far this year, reflecting the impact of macro challenges on the coffee chain’s operations in the U.S. and key international markets like China. The company’s Q2 FY24 results missed the Street’s expectations amid high inflation and growing competition from rapidly growing players like Dutch Bros. Investors were also disappointed with the company’s full-year guidance cut.
The company’s Q2 FY24 revenue fell 2% to $8.6 billion, with U.S. comparable store sales down 3% due to lower transactions. Moreover, SBUX’s China comparable store sales declined 11%, reflecting the impact of a slower-than-anticipated economic recovery and competition from domestic players. Following the weak Q2 performance, the company expects full-year revenue growth in the low single digits and EPS growth in the flat to low single-digit range.
Looking ahead, Starbucks is trying to revive its business by expanding its offerings, growing its footprint, and refining the supply chain. The company aims to deliver supply-chain cost savings of $4 billion over the next four years.
Is Starbucks a Buy, Sell, or Hold?
On July 10, JPMorgan analyst John Ivankoe lowered his price target for Starbucks stock to $90 from $92 and maintained a Buy rating. Following a European tour of the quick-service restaurant market, the analyst was puzzled to see that Starbucks’ U.S. operations significantly lagged its European offerings. That said, the analyst thinks that there is potential for improvement in the company’s U.S. offerings.
With nine Buys and 18 Holds, SBUX has a Moderate Buy consensus rating. At $88.63, the average SBUX stock price target implies more than 22% upside potential.
The Walt Disney Company (NYSE:DIS)
Following a strong run initially during the pandemic, Walt Disney was weighed down by increased costs, challenges in its traditional TV and box office businesses, and activist investor pressure. Under the leadership of CEO Bob Iger, the company is taking several initiatives to turn around its business.
The company reported better-than-expected earnings for Q2 FY24. However, shares fell as DIS slightly missed revenue estimates. The top line was hit by continued weakness in Disney’s TV business due to customer migration from cable TV to streaming and the lack of a blockbuster release during the quarter. Moreover, Disney issued a softer-than-estimated guidance for the Experiences business, which includes parks and cruise lines.
On the positive side, Disney’s entertainment streaming business (Disney+ and Hulu) turned profitable in the quarter. Including ESPN+, the overall streaming business reported a loss of $18 million in Q2 FY24, which reflected a much narrower loss than the $659 million reported in the prior-year quarter. The company is confident about achieving profitability for its combined streaming business in the fiscal fourth quarter.
What is the Target Price for DIS Stock?
Last week, analysts at Bank of America cited four reasons to support their long-term bullish view on Disney’s Experiences segment, despite a subdued outlook for the second half of this year due to pre-opening costs and normalized demand. These reasons were continued growth and steady profits, improving profit margins (especially international Park margins), $60 billion worth of growth investments over the next decade, and expansion of the cruise line business.
Bank of America analysts also see favorable signs in Disney’s content strategy under Iger’s leadership. Despite minor adjustments to its financial estimates, BofA reiterated a Buy rating on DIS stock with a price target of $145, given “best-in-class premiere assets” and potential catalysts like direct-to-consumer profitability and the NBA rights deal.
Overall, Disney stock scores a Strong Buy consensus rating based on 21 Buys versus five Holds. The average DIS stock price target of $128.04 implies 31.9% upside potential from current levels. Shares have risen more than 7% so far this year.
Energy Transfer (NYSE:ET)
Energy Transfer is a diversified midstream company that operates more than 125,000 miles of pipeline and related energy infrastructure in the U.S. The company has an extensive network in 44 states, with assets in all the major production basins.
ET Stock has risen 18% year-to-date, fueled by the company’s strong growth potential and strategic acquisitions. In May, Energy Transfer announced the acquisition of WTG Midstream Holdings LLC for $3.25 billion. The acquisition will bolster ET’s network in the Permian Basin. Last year, ET acquired Crestwood Equity Partners for $7.1 billion and Lotus Midstream for $1.45 billion.
Additionally, Energy Transfer is well positioned to benefit from the ongoing artificial intelligence (AI) wave, as natural gas is expected to supply a significant proportion of the increase in power demand to support data centers.
Is ET Stock a Buy Now?
Recently, Mizuho analyst Gabriel Moreen reiterated a Buy rating on Energy Transfer stock with a price target of $20. The analyst believes that there is no dearth of growth opportunities for the company. He thinks that ET’s improved leverage outlook could drive more robust capital returns beyond the existing 3% to 5% distribution growth rate.
Moreen contends that the market is underappreciating Energy Transfer’s data center or AI-related tailwind.
On TipRanks, Energy Transfer earns a Strong Buy consensus rating based on nine Buys and one Hold recommendation. The average ET stock price target of $19.22 implies 18% upside potential. It is worth noting that Energy Transfer offers a high dividend yield of 7.7%.
Conclusion
Wall Street is highly bullish on Disney and Energy Transfer stocks and cautiously optimistic about Starbucks. Analysts currently see higher upside potential in Disney stock than in the other two large-cap stocks, reflecting confidence in the company’s turnaround efforts and growth prospects.
