Red-Hot Tech Companies Highlight Jefferies Top Growth Stocks to Buy

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After another huge week for the markets, things are starting to look a touch expensive, so it really makes sense for investors who buy growth stocks to hone in on the companies reporting good earnings with solid guidance, and those that are in the right growth area. The higher the market goes, the more stocks have to prove they are worth it, and at this level, it’s getting harder and harder.

Jefferies analysts are focused in on some outstanding growth stocks to buy, some of which have delivered blow-out numbers. While not suitable for all investors, they continue to make good sense for investors looking for growth stocks with good alpha potential.

Activision Blizzard

This company remains a top pick on Wall Street. Activision Blizzard Inc. (NASDAQ: ATVI) develops and publishes online, personal computer (PC), video game console, handheld, mobile and tablet games worldwide. It develops and publishes interactive entertainment software products through retail channels or digital downloads and downloadable content to a range of gamers.

The company reported solid earnings last week that beat estimates, despite weaker Call of Duty sales, which the analysts had expected. The company’s forward guidance was better that expected, but Jefferies still feels the numbers are conservative.

Some analysts feel the company could earn up to $3 per share by 2018 if it can optimize the King Digital advertising opportunities and unlock synergies, which the analysts noted in the report that advertising in the company’s Candy Crush franchise was off to a solid start. They also highlight the possibility for stock buybacks and an increase in the dividend.

Jefferies noted last year that the new Overwatch game has blown past 10 million users since its release in late May of 2016 and has generated $500 million since its launch, already more than the analysts $400 million for the year.

Shareholders receive a 0.6% dividend. The Jefferies price target for the stock is 55, and the Wall Street consensus target is $48.10. The stock closed Friday at $47.23, up a whopping 18% on the day.

Lumentum

This top company looks to benefit big-time from the Facebook Voyager project. Lumentum Holdings Inc. (NASDAQ: LITE) manufactures and sells optical and photonic products in the Americas, the Asia-Pacific, Europe, the Middle East and Africa. It operates in two segments.

The Optical Communications segment offers components, modules and subsystems that enable the transmission and transport of video, audio and text data over high-capacity fiber optic cables.

The Commercial Lasers segment offers diode, direct-diode, diode-pumped solid-state, fiber and gas lasers. This segment serves customers in markets and applications, such as manufacturing, biotechnology, graphics and imaging, and remote sensing, as well as in precision machining, including drilling in printed circuit boards, wafer singulation and solar cell scribing. Its lasers products are used in various original equipment manufacturer applications.

The company reported numbers that beat estimates, but the guidance for the next quarter was slight lower on revenue, and slightly higher on earnings per share. The analysts’ report noted:

Importantly, the company is working on several handset OEMs for 3D sensing and the CEO said he could see $100 million+ a quarter growing up to a $1 billion opportunity annually (Last 12 month revenues are about $1 billion), which we believe could drive upside to our estimates. We raise our estimates for fiscal 2017 and fiscal 2018, and they’re now 4% and 12% ahead of consensus.

This company is expected to provide Facebook with an open line system with white boxes such as terminal amplifiers and reconfigurable optical add drop multiplexers. This is all part of Facebook’s extensive new Voyager platform.

The $51.50 Jefferies price target compares with the consensus target of $46.17. The shares closed on Friday at $47.45.