Jefferies Top Growth Stock Picks Have Huge Upside and Earnings Potential

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Increasingly, the companies that we cover on Wall Street are starting to agree that while the future is still bright for the U.S. economy, it may one of stock market gains that are much lower than the norm has been over the past 10 years. When that is the case, then investing strategies often shift from indexing to a more disciplined stock-picking routine, and that’s when investors need solid growth ideas.

Jefferies highlights the firm’s top growth stocks to buy each week, and this week is no exception. While these stocks are better suited for accounts that have a higher risk tolerance, they all make good sense now, and all have outstanding upside potential. We found four picks that look extremely good now.

Aurora Cannabis

The Jefferies team has become wary of the industry, but this stock remains a top pick. Aurora Cannabis Inc. (NYSE: ACB) produces and distributes medical cannabis products. It is vertically integrated and horizontally diversified across various segments of the cannabis value chain, from facility engineering and design to cannabis breeding, genetics research, production, derivatives, high value-add product development, home cultivation, wholesale and retail distribution.

The company’s products consist of dried cannabis and cannabis oil, CanniMed vegan capsules and hemp products. It also sells vaporizers, consumable vaporizer accessories and herb mills for using herbal cannabis products. Its CanvasRX is a network of cannabis counseling and outreach centers, and the company provides cannabis analytical product testing services.

The analysts feel that Aurora can become EBITDA positive by next year, though they note that the relatively low number of retail stores and outlets has held sales back.

The Jefferies price target for the shares is $5.25. A Wall Street consensus was not available. The stock closed trading on Friday at $3.68 per share.

e.l.f. Beauty

After a hot initial public offering a few years back, and this has come back nicely for investors looking to add shares. e.l.f. Beauty Inc. (NYSE; ELF) offers products for eyes, lips and face to consumers through its retail customers, stores and e-commerce channels. The company offers a range of products for eyes, such as eye shadow, eyeliner, mascara, eyelashes, eyebrows, concealer and primer, brushes and tools, and sets and palettes.

The company sells its products in national and international retailers (with international primarily serviced by distributors) and direct-to-consumer channels. It sells its products in retail stores in the United States across mass, drug store, food and specialty retail channels. The analysts estimate that 24% of its consumers are Hispanic.

The stock has struggled, but the Jefferies analysts remain positive and noted this in their research:

We raise our second half estimates to reflect strong consumption patterns with Nielsen data indicating a sales acceleration to +16%, incremental space gains at retailers owing to superior performance (and in advance of Spring 2020 floorsets), evidence of a rebound in brand equity from our survey of 1000+ US consumers on their beauty habits (#5 in terms of brands respondents are using now and didn’t use a year ago) and international distribution.

Jefferies has a price target of $20.25 a share, while the posted consensus target price is $18.23. The stock closed at $17.14 on Friday.