Morgan Stanley Flags Stocks for Big Q3 Surprises

Morgan Stanley Highlights Stocks That Could See Big Earnings Surprises This Quarter

Research suggests Morgan Stanley's picks, including Reddit and Roblox, could surprise with strong ad revenue growth, while Capital One might shine on share buybacks.
It seems likely that these stocks will see positive reactions if they beat estimates, based on past trends like John Deere's recent earnings beat.
Evidence leans toward tech and finance sectors leading Q3 surprises, but investors should watch market conditions closely.
Big earnings surprises this quarter could offer opportunities, though risks like economic shifts remain.

Key Takeaways from Morgan Stanley's Insights

Morgan Stanley, a top investment bank, has pointed out a few stocks that might deliver better-than-expected results in their Q3 2025 earnings reports. This could mean higher profits or sales than what analysts predict, often leading to stock price jumps. The picks focus on companies in tech and finance, where growth in ads and smart money management could drive the surprises.

Why Earnings Surprises Matter in Investing

Earnings surprises happen when a company reports numbers that are much better (or worse) than expected. A positive surprise can make investors excited, pushing the stock up. For example, if a firm beats earnings per share (EPS) forecasts, it shows strong business health. Morgan Stanley's list highlights firms they rate as "overweight," meaning they think these stocks are worth buying more of. This quarter, with economic recovery in play, such surprises could be key for portfolios.

How to Spot Potential Surprises

Investors can look at past performance, analyst notes, and market trends. Tools like earnings calendars help track report dates. Morgan Stanley uses data on revenue streams and costs to predict upsides. For Q3 2025, they see ad businesses booming for some tech firms.

In the world of investing, few things get hearts racing like a big earnings surprise. Picture this: a company steps up to report its quarterly results, and instead of meeting the usual expectations, it smashes them out of the park. Stock prices can soar, investors cheer, and suddenly, everyone's talking about it. That's the thrill Morgan Stanley is hinting at with their latest picks for Q3 2025. As we head into the earnings season, which kicks off in mid-October, the bank has flagged stocks that could deliver those jaw-dropping moments. But why does this matter, and how can everyday investors like you make the most of it?

Let's start with the basics. Earnings reports are a company’s version of a report card. They show how much money was made, spent, and left as profit over three months. Analysts from banks like Morgan Stanley crunch numbers and make guesses – called estimates – on what those figures will be. When a company beats those guesses, it's a positive surprise. History tells us these can lead to quick gains. For instance, studies from financial sites show that stocks beating EPS estimates by 5% or more often rise 1-2% the next day on average. But it's not always straightforward; sometimes the market expects even more.

Morgan Stanley's role here is huge. As one of the biggest players on Wall Street, their analysts dig deep into company data. For this quarter, they've spotlighted a handful of stocks they believe have "upside potential." In other words, they believe the real results might outperform what the market has already priced in.The focus is on Q3 2025, covering July to September, a time when consumer spending, ad markets, and banking fees are in the spotlight. With inflation cooling and interest rates possibly dropping, conditions are ripe for surprises.

Take the broader market context. The S&P 500 has been on a roll in 2025, up about 15% year-to-date, driven by tech and AI booms. But not all sectors are equal. Tech stocks, in particular, have seen wild swings. Morgan Stanley notes that ad revenues are bouncing back after a sluggish 2024. Companies tapping into this could shine. Finance firms, meanwhile, benefit from deal-making and buybacks. The bank's "overweight" ratings on these picks signal confidence.

Now, who are these stocks? The trio includes Reddit (RDDT), Capital One Financial (COF), and Roblox (RBLX). Each has unique strengths. Reddit, the social platform, is ramping up ads amid growing user engagement. Capital One is set for aggressive share repurchases, boosting shareholder value. Roblox, the gaming giant, is expanding into ads too. Morgan Stanley sees "material upside" in their bookings and profits.

But let's not forget risks. Earnings surprises aren't guaranteed. Economic hiccups, like slower consumer spending, could derail plans. Plus, high expectations mean even good results might not impress. Investors should diversify and not bet everything on one report.

To prep, check earnings dates: Capital One on 20 October, Reddit on 27 October, Roblox on 30 October. Use tools like Yahoo Finance or Investing.com for estimates. Morgan Stanley's notes suggest watching ad metrics for tech picks and capital plans for finance.

In summary, big earnings surprises this quarter could be game-changers. Morgan Stanley's highlights offer a roadmap. Whether you're a newbie or seasoned trader, staying informed is key. Read on for deep dives into each stock and a real-world example with John Deere to see how surprises play out.

Deep Dive into Morgan Stanley's Stock Picks

Reddit (RDDT): Riding the Ad Wave

Reddit has come a long way from being just a forum for memes and discussions. Now, it's a serious player in digital ads. Morgan Stanley rates it overweight, expecting big earnings surprises this quarter. Why? The company has over 2 billion posts and 20 billion comments, creating a goldmine for advertisers. Analysts like those from Oppenheimer have raised price targets to $300, citing success in monetizing content.

In Q3, expect focus on impressions and pricing stability. Consensus EPS is around $0.05, but upside could come from ad growth in a $250 billion market outside Google and Meta. Stock has doubled since April 2025, trading at about $200. If it beats, we could see 13% more upside to $227 average target.

Practical tips: Watch user growth metrics. If daily active users top 100 million, it's a win. For investors, consider buying before the 27 October report if sentiment is positive.

Capital One Financial (COF): Capital Returns in Focus

Capital One stands out in finance for its credit cards and banking. Morgan Stanley sees it poised for surprises thanks to share buybacks and global expansion via Discover Financial. The stock has rallied 40% in six months, now at $215 or so.

Analyst Terry Ma from Barclays calls it a top pick, with a $257 target implying 20% upside. Q3 earnings on 20 October could highlight accelerated repurchases, boosting EPS. Consensus revenue: $9.8 billion, EPS $3.50.

Examples: Past quarters saw surprises from lower loan losses. In Q2 2025, they beat by 10%. Tips: Monitor interest rates; lower rates help borrowing.

Roblox (RBLX): Gaming Meets Advertising

Roblox is more than games; it's a platform with millions of users. Morgan Stanley and Wells Fargo see ad entry as a big driver for Q3 surprises. Stock up 140% since April, at $110.

Ken Gawrelski from Wells Fargo targets $155, citing ad bookings boosting EBITDA. Report on 30 October; consensus EPS -$0.40 (loss), but bookings could surprise.

Stats: 80 million daily users. Tips: Look at engagement hours; higher means more ad potential.

Past Example: John Deere's Earnings Surprise

John Deere (DE) provides a perfect real-life example of how big earnings surprises can unfold – and sometimes surprise in unexpected ways. In August 2025, Deere reported Q3 fiscal 2025 results (their Q3 ends July). Analysts expected EPS of $5.63, but Deere delivered $6.64, a beat of 18%. Revenue hit $13.2 billion vs. $12.8 billion forecast. This was driven by strong demand in construction equipment, despite farm sector slowdowns.

Yet, the stock dropped 8% post-report. Why? Guidance for full year was cut due to tariffs and falling ag demand. Shares closed at $480, down from $522. This shows surprises aren't always positive for prices if the future outlook dims.

Historically, Deere has a strong track record. Zacks notes they've beaten estimates in four of the last five quarters, average surprise of 12%. In Q2 2025, $8.53 EPS vs. $7.90 expected.

Factors: Precision ag tech boosted margins to 20%. But headwinds like high interest rates hurt farmers.

Lessons: Always read the full report. Surprises can come from cost cuts or sales spikes. For investors, use Zacks Rank; Deere was #2 (Buy) pre-report.

General Tips for Navigating Earnings Season

Track calendars on sites like Nasdaq.
Use ratios like P/E to gauge value.
Diversify across sectors.

Suggested Internal Links:

Our Guide to Tech Stock Investing
How to Analyze Financial Stocks
Past Earnings Surprises Review

Authoritative External Sources:

Morgan Stanley Investor Relations: https://www.morganstanley.com/about-us-ir
CNBC Market News: https://www.cnbc.com/markets/

Wrapping Up: Seize the Opportunities

Morgan Stanley's highlights point to exciting possibilities with Reddit, Capital One, and Roblox for big earnings surprises this quarter. Past cases like Deere remind us of the ups and downs. Stay informed, diversify, and consider professional advice.

Call to Action: Subscribe to our newsletter for more stock insights, or consult a financial advisor to build your strategy.

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