In a market where earnings growth is getting harder to find, many on Wall Street are quick to pull the trigger if an earnings report falls short or some other headline issues causes selling. The fact of the matter is that most solid growth companies occasionally will have a hiccup, and when they do the stock will get sold off for little or no reason. That’s the time for savvy investors to swoop in and accumulate shares.
Jefferies recent “Picturing the Week’s Opportunities” research piece focuses on large cap growth stocks that are very solid but have taken a hit either from earnings disappointment or an event-driven issue. All make good sense for growth stock investors looking for value, and all are rated Buy at Jefferies.
This company could have a revenue explosion over the next three years if the Jefferies team is right. Acadia Healthcare Co. Inc. (NASDAQ: ACHC) is a provider of in-patient behavioral health services. Acadia operates a network of 226 facilities with approximately 9,200 beds in 37 states, the United Kingdom and Puerto Rico. Acadia provides psychiatric and chemical dependency services to its patients in a variety of settings, including in-patient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school-based programs.
The company posted stellar earnings last year, and Jefferies thinks that its revenues can double in three years, owing to not only strong organic growth, but potential acquisitions. Also cited in the past was that analysts believe political support for expanded Medicaid coverage for adult mental health could grow the company’s addressable market by up to 30%.
Acadia reported strong results in February, with 8% same-store sales gains, and the analysts noted that while guidance was below expectations, they think the company is being extremely conservative, and there is a degree of currency headwinds to account for, in addition to a recent equity offering. They also noted that 40% of EBITDA is from the United Kingdom, and concerns over the country leaving the European union have also weighed on shares.
The Jefferies price target for the stock is $85, and the Thomson/First Call consensus target is $78.31. The stock closed Monday at $53.45.
Some feel this top company would be an outstanding addition to a networking giant as a takeover candidate. Infinera Corp. (NASDAQ: INFN) provides Intelligent Transport Networks, enabling carriers, cloud operators, governments and enterprises to scale network bandwidth, accelerate service innovation and simplify optical network operations.
Infinera’s end-to-end packet-optical portfolio is designed for long-haul, subsea, data center interconnect and metro applications. Infinera’s unique large-scale photonic integrated circuits enable innovative optical networking solutions for the most demanding networks.
The analysts note that Alphabet’s recent announcement that it will be adding 12 new data center regions is a definite positive for Infinera. Trading at just 13.6 times EV/EBITDA with gross margins set at 46% and EBIT margin at 8%, the stock is cheap at current levels.
Jefferies has a $22.50 price target, and the consensus price objective is $22.23. Shares closed Monday at $15.24.