Smaller stocks that could still win big this year include Wayfair and Cinemark , according to Morgan Stanley. While the three major stock indexes are trading at all-time highs, recent data points show signs of economic cooling. But heading into the fall, investors are optimistic that easing monetary conditions could help revitalize the U.S. economy. The CME FedWatch tool shows a high likelihood that the Federal Reserve will cut interest rates by at least a quarter percentage point at its policy meeting next week. The Morgan Stanley sales desk shared its top small- and mid-cap stock ideas “that still feel early/underappreciated and are highly idiosyncratic” in this environment. The three names all have an overweight rating, market capitalizations below $20 billion and could offer upside between 20% to 50% based on Morgan Stanley analysts’ base and bull cases. Wayfair Morgan Stanley highlighted e-commerce furniture store Wayfair as a winner. The bank’s bull case price target of $130 implies upside of 44% from Thursday’s close. “With a rate cutting cycle on the horizon and hopes of a housing cycle bottoming forming, Wayfair appears to be one of the most spring-loaded assets in Internet as a share gainer in the stabilizing (dare we say improving) category of Home Furnishings,” the bank wrote. “[Morgan Stanley retail analyst] Simeon Gutman said 2Q was the quarter he has been waiting for since upgrading the stock in Jan ’24 and while there is some uncertainty on the tariff backdrop with section 232 in focus, he thinks Wayfair will be able to navigate through headwinds esp relative to other furniture retailers as a marketplace that doesn’t have to absorb the higher input costs themselves.” Other Wall Street shops appear to be split on the name, with 18 analysts assigning it a strong buy or buy rating and another 18 rating it as a hold. Wayfair’s stock has surged 103% this year. Cinemark Morgan Stanley is also bullish on movie theater chain Cinemark. The bank’s price target of $35 is about 24% above where shares closed on Thursday. “For those who still like to try to ‘buy low’ esp when there is lots of debate/controversy … the lead story in the NYT Business section this weekend was ‘How Hollywood Missed Its Mark This Summer’ flagging that the North American box-office posted its worst summer since 1981, adjusting for inflation and ex-Covid, coming to the conclusion that theaters may have permanently lost ~20-25% of their customers. [Morgan Stanley head of U.S. media research Benjamin] Swinburne thinks the death of the movie theater has been greatly exaggerated and sees real self-help here which could see sentiment reverse in 4Q25/FY26,” its sales desk wrote. Next year, Swinburne forecasts the box office could get to $11 billion, which would put it back to its 2019 levels. Films that could boost this attendance include a full slate of both popular movie franchises as well as original titles. Cinemark stock has stumbled 9% this year. Shares gained 8.9% this week after “The Conjuring: Last Rites” was released, which Cinemark said was its second-biggest opening weekend of all time for a domestic horror movie. Lionsgate Studio Film and television producer and distributor Lionsgate Studio could also go higher. Lionsgate Studios is down marginally year to date. “Fresh off the split from Starz, this pure-play Fim & TV studio asset appears set to drive a path towards higher normalized earnings in a Media landscape that is consolidating,” Morgan Stanley wrote. The bank was bullish on both Lionsgate’s film and television businesses. “At Motion Picture, the theatrical slate is taking shape for FY27 (while the reviews on ‘The Long Walk’ horror film / adaption from Stephen King coming out next week w/ 95% on Rotten Tomatoes), with ‘Michael’ (Jackson) now slated for April 2026, ‘Hunger Games’ prequel in Nov 2026, and part one of ‘The Passion of the Christ’ sequel coming in March 2027,” Morgan Stanley said. “At Television, plans to double scripted TV series deliveries next year reflect the timing of returning major series and broadly speaks to Lionsgate’s strong position as a third-party supplier of premium content.” ( Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here . )
