With the earnings season all but over, and the NFL season right around the corner, Wall Street is already looking toward the third and fourth quarter, trying to handicap how the year will wind up. One thing is for sure, the surprising rally out of the Brexit sell-off has fooled many managers as cash levels remain huge and skeptics still abound. One very noticeable trend is portfolio managers leaning on mega-cap and large-cap liquid companies to produce gains.
This week the analysts at Jefferies are focusing their top growth stock picks on some of those very large and liquid stocks, and two of them are technology leaders that posted outstanding second-quarter earnings. All four of the stocks we highlight make good sense for long-term growth accounts with a degree of risk tolerance.
This company is the absolute leader in online retail, and it is also a dominant player in cloud storage business. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites, which primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers. In addition, the company serves developers and enterprises through Amazon Web Services (AWS), which provides compute, storage, database, analytics, applications and deployment services that enable virtually various businesses.
AWS is the undisputed leader in the cloud now, and many top analysts team see the company expanding and moving up the enterprise information value chain and Addressing a larger total available market. The company has had numerous recent product announcements, including Aurora for relational database engine, Quicksight for business intelligence and AWS Database Migration Support Service.
Amazon reported a very strong quarter with good revenue and unit growth acceleration. Jefferies notes that net sales rose 31% year over year, and while forward guidance was somewhat mixed, the firm thinks it reflects normal seasonal operating spending conditions as the company prepares for the holiday season, which is busier every year. The sales guidance was better than expected, but the GAAP operating income came in lower. Jefferies also sees Amazon opening 18 new fulfillment centers in the third quarter alone, versus just six in last year’s third quarter.
The Jefferies price target for the stock is $950, and the Wall Street consensus price objective is $863.71. Shares closed Friday at $758.51.
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) provides online advertising services in the United States, the United Kingdom, and rest of the world. The company offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal Internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome, and Google Play, as well as technical infrastructure and newer efforts, such as Virtual Reality.
The Google segment also sells hardware products comprising Chromecast, Chromebooks, and Nexus. The Other Bets segment includes businesses, such as Access/Google Fiber, Calico, Nest, Verily, GV, Google Capital, X, and other initiatives.
Jefferies points out the company reported better-than-expected second-quarter results, with the best top-line growth since the third quarter of 2014. Paid clicks came in above Wall Street estimates, growing 29%, while Google websites paid click growth was 37%, with YouTube and mobile accounting for much of this strength. EBIT margins also continued to see outstanding growth at 39%, versus 37.5% in the same period last year.
Jefferies raised its price target to a remarkable $1,000, and the consensus target is $936.50. The shares closed Friday at $791.34, up over 3% on the day.