Market Momentum Shifts, But These 3 Stocks Are Built to Last
Market momentum clearly shifted in late February as the S&P 500 (NYSEARCA: SPY) began to sell off. The shift is caused by increased uncertainty related to Trump’s tariffs and policy changes and a growing risk of a recession. The takeaway for investors is that fundamentals have not shifted for many blue chip companies; that is what investors should focus on: blue chip companies with quality fundamentals. Fundamentals for the companies on this list include organic business growth, demand for products and services, and wide margins sufficient to sustain balance sheet health and capital returns.
Oracle Speaks: AI Cloud Growth Will Be Sustained and Accelerate in 2025
Oracle’s (NYSE: ORCL) FQ3 results left something to be desired compared to the consensus forecasts reported by MarketBeat. That aside, the results showed continued growth in key segments and came with an outlook for acceleration in 2025 and again in 2026. Critical details include double-digit growth in the cloud infrastructure segment and rapidly increasing demand from hyperscalers like Google, Amazon, and Microsoft. Regarding the cloud, Oracle plans to double its capacity by year-end and will likely continue building its data center empire in the following fiscal period. At this pace, it is on track to gain market share in the cloud, and the odds are high that the guidance is cautious.
Other pertinent details from Oracle’s FQ3 release are its positive cash flow, growing cash balance, and a sharp increase in shareholder equity. Shareholder equity nearly doubled, aiding a significant reduction in leverage. The debt ratio remains elevated but is down to 5x equity from 8x, improving the company's financial outlook. That outlook includes dividend distribution, which was increased by 25% for F2026. The new payment is worth about 1.35% with shares near $150 and will likely rise again at the year's end. After the announcement, analysts reset their stock price expectations but remain steadfast in their bullish rating and forecast for at least 18% upside from the March 11th lows.
Costco Leads the Pack: Special Dividends Are in the Forecast
Despite solid fundamentals, Costco’s (NASDAQ: COST) share price is also struggling in mid-March. The company’s FQ2 earnings report was shy of the analysts’ forecasts, but the bar was set high, and the results are strong, so the weakness should be overlooked. The takeaways include Costco’s outperforming peers, growing by 9%, taking market share, and growing its cash balance, which is significant. Costco has a history of paying substantial special dividends when its cash balance approaches $18 billion, and it is on track to reach that figure by the end of next year.
The analyst response is noteworthy, including numerous price target increases that more than offset the single price target reduction issued by Loop Capital. Even so, Loop Capital’s reduced $1,135 price target aligns with the price target increases in that it is significantly above the consensus reported by MarketBeat. The consensus forecasts a 10% upside from the early March lows; a move to Loop’s $1135 target adds 10%.
AutoZone Is in the Zone
AutoZone (NYSE: AZO) is in the zone, growing its business in the retail and commercial segments. The results from FQ2 were shy of estimates, but, as with Costco, strength is in the eye of the beholder. Tepidness aside, the company grew revenue by 2.3% and sustained a solid margin. Earnings were sufficient to maintain the balance sheet health, the growth outlook, and the capital return, which is entirely share repurchases.
Share repurchases are a significant driver of AZO’s stock price action. They are aggressively reducing the share count, about 3.2% for the quarter and 3.9% for the year, in addition to the mid-single-digit reduction posted in the previous year.
AutoZone analysts are lifting their price targets in response to the news. The consensus estimate forecasts a low-single-digit increase from critical support levels but is up 22% in the last year, with recent revisions leading to the $3,800 to $4,000 range.
