The 2024 election has concluded, and speculation abounds regarding the economic policies of a second Trump administration. Many anticipate a return to the familiar blend of pro-business deregulation and protectionist measures that characterized his first term. Amidst this uncertainty, investors are seeking clarity and guidance on navigating the market landscape.
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Citigroup’s head of US equity strategy, Scott Chronert, maintains a cautiously optimistic outlook for US equities in 2025, acknowledging both potential risks and tailwinds. His S&P 500 target of 6500 suggests mid-single-digit gains, driven by a potential soft landing and the ongoing influence of artificial intelligence. However, Chronert emphasizes the importance of market broadening beyond mega-cap growth stocks and acknowledges that current valuations present a challenge.
Echoing this sentiment, Citi analysts have identified two specific stocks they believe are positioned for growth in alignment with the broader market. Leveraging the insights from TipRanks, we delve deeper into these companies: Chewy, Inc. (CHWY) and AT&T (T).
Chewy, Inc. (CHWY): Capitalizing on the Pet Care Boom
Chewy, a dominant player in the online pet supply market, boasts a substantial market capitalization of $13.3 billion. The company caters to a large and resilient market, with approximately two-thirds of US households owning pets and spending an estimated $136.8 billion on pet care in 2022. Chewy’s comprehensive product offerings span food, toys, treats, prescription medications, and even pet insurance.
Beyond its online presence, Chewy is strategically expanding into physical veterinary clinics, focusing on wellness and urgent care for cats and dogs. While the company’s recent Q3 2024 earnings report presented mixed results, with revenue exceeding expectations but earnings falling slightly short, Citi analyst Steven Zaccone remains optimistic.
Zaccone highlights Chewy’s expanding market share and its capacity for driving profitability through initiatives like sponsored ads, automated fulfillment centers, and increased health and wellness sales. He assigns a Buy rating to CHWY with a $40 price target, implying a potential 23% upside. The consensus view on Chewy is a Moderate Buy, with an average price target of $37.58 suggesting a 15.5% potential upside.
AT&T (T): A Telecom Titan Embracing 5G and Fiber
AT&T, a telecommunications giant with a market capitalization of $168.5 billion, stands as a cornerstone of the US market. The company has consistently outperformed the market in 2024, boasting a 48.5% year-to-date gain. AT&T is also recognized for its reliable dividend payouts, making it a favorite among income-seeking investors.
AT&T’s recent success is largely attributed to its growth in 5G and fiber network services. In its Q3 2024 report, the company reported significant fiber net additions and strong postpaid phone customer growth. While revenue fell slightly short of expectations, earnings surpassed forecasts, and free cash flow remained robust. The company’s consistent dividend payments and a current yield of 4.72% further solidify its appeal to investors.
Citi’s 5-star analyst Michael Rollins views AT&T favorably, citing the company’s service revenue growth, expanding fiber network, and cost-cutting measures as key drivers for future value creation. Rollins maintains a Buy rating on T with a $28 price target, indicating a potential upside of 19%. The consensus rating for AT&T is a Moderate Buy, with an average price target of $24.15 suggesting a modest 3% upside.
Conclusion: Prudent Optimism in a Dynamic Market
As we look ahead to 2025, the US equity market presents both opportunities and challenges. While the economic policies of a new administration remain to be seen, analysts like Scott Chronert at Citigroup suggest a cautiously optimistic outlook. Within this context, companies like Chewy and AT&T, with their strong market positions and growth strategies, stand out as potential candidates for investors seeking to capitalize on emerging trends and navigate the evolving market landscape. Remember to conduct thorough research before making any investment decisions.
