Investing

Jefferies New Economy Top Growth Stocks to Buy With Solid Upside Potential

If you would have told anybody at the turn of the century that in a short 15 years that technology would be leaps and bounds from where it was in 2000, they probably would have laughed. After all, everybody had cell phones, the Internet was becoming ubiquitous, what could change? Well, everything. The iPhone wasn’t even introduced until 2007, and the landscape for 2016 and beyond is vastly different.

The new economy is more than just technology. It’s payment systems, controlling huge amounts of data and more. A new Jefferies research report highlights the top growth stock picks for this week, and they are all part of the new economy. All four are rated Buy and make good sense for growth portfolios with risk tolerance.

MasterCard

This continues to be one of the top credit card players in the world. MasterCard Inc. (NYSE: MA) operates the self-described world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities such as shopping, traveling, running a business and managing finances easier, more secure and more efficient.

Jefferies believes the setup for the stock in 2016 looks very promising, especially after the recent sell-offs. The analysts also believe that Wall Street’s expected revenue growth of 6.3% may be aggressive, but they do cite the fact that MasterCard does have a modest discount valuation. It is possible the credit card giant may experience multiple headwinds in 2016, including higher rebate expenses, low gas prices and Chase deconversion. Jefferies still likes the stock in the current environment, with the possibility for mid-teens constant currency earnings per share (EPS) growth.

MasterCard shareholders receive a small 0.85% dividend. The Jefferies price target for the stock is $112, and the Thomson/First Call consensus target is $111.06. Shares closed on Monday at $86.77.


NVIDIA

This top tech stock that reported outstanding earnings in November and was recently added to the Jefferies Franchise Picks list. NVIDIA Corp. (NASDAQ: NVDA) is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles.

The company is also moving into visual computing chips for cars, mobile devices and supercomputers. NVIDIA has a technology partnership with electric car maker Tesla, and recently posted very strong earnings. The company has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year.

The company posted earnings that were way ahead of estimates, and the first-quarter outlook implies EPS 26% ahead of current consensus. With gaming revenues up 44% year over year, the analysts believe there remains high overall Wall Street skepticism around the company, as most are unaware of the positive dynamics in the PC Gaming and eSports markets.

Some Wall Street analysts feel that virtual reality could see 10 million in annual shipments in three to five years, and NVIDIA will be a huge player. In fact, it’s possible that those shipments could represent as much as $750 million per year for the company and competitor AMD. Jefferies also cites the large Technology Assessment Management Systems in gaming, autos, cloud enabled by NVIDIA’s graphics leadership.

Investors receive a 1.62% dividend. Jefferies has a $38 price objective, and the consensus target is $31.65. The stock closed Monday at $28.42.