Investing

Jefferies Top Growth Stock Picks Have Huge Upside and Earnings Potential

Marvell Technology

This top company is one of the favored mid-cap technology picks at Jefferies. Marvell Technology Group Ltd. (NASDAQ: MRVL) is a fabless supplier of mixed-signal and analog semiconductor products to a number of storage, computing and communication applications, including hard disk drives, personal computers, servers, Ethernet switches, printers and connectivity markets.

Top analysts around Wall Street remain very positive on the company’s 2017 purchase of Cavium, and many feel the deal adds significantly to the growth element for the stock. The addition also helps make Marvell solidly positioned in data center, cloud, enterprise, security and 5G.

The Jefferies team met with Marvell Technology management recently and noted this:

We hosted the company’s VP of Investor Relations for investor meetings this week and came away with increased confidence in the company’s 5G and Networking product cycles. Marvell believes it can currently address $4000 of silicon content per base station. Given low market share in 4G, we think 5G base station silicon would largely be upside from Marvell’s current quarterly revenue run rate. In the Networking business, we model a 20% year over year decline in the third quarter, due in large part to an inventory correction in the supply chain. That said, the new management team has identified Networking as a growth biz and reinvested in it and we view the business with an attractive growth profile.

Marvell Technology shareholders receive a 1.00% dividend. The $29 Jefferies price target compares with the $27.86 consensus price objective, as well as the most recent closing price of $24.04 a share.

Charles Schwab

The iconic discount broker rocked the discount brokers recently with the elimination of commissions for online trading. Charles Schwab Corp. (NYSE: SCHW) is a leading provider of brokerage, banking and investment-related services to consumers and businesses. The firm has two business segments. Investor Services provides retail brokerage, banking, advice and other financial services, while Institutional Services provides business-to-business services to independent investment advisers and company benefit plan sponsors.

The analysts commented on the changes in commissions in the research report:

We think the commission cuts recently highlight the rising importance of scale and a diversified product offering and our 2020 estimated EPS estimates for the discount brokers come down by ~21% on average. We believe the tougher competitive and commission environment will drive more mergers and acquisitions and e*trade is the most likely candidate. We believe the acceleration in the shift to fee-based advice will continue and our survey suggests that of the respondents with brokerage accounts (only 25%), 61% indicated they would consider banking exclusively with a discount broker. We see Schwab as best positioned to capitalize on product, tech and customer service.

Charles Schwab shareholders receive a 1.82% dividend. Jefferies has set its price target at $43. The consensus estimate is $41.22, and the stock closed on Friday at $37.28, up over 3% on the day.

These four stocks offer investors strength in their specific industries and the ability to generate some significant portfolio alpha. All are suitable for growth accounts that have a larger degree of risk tolerance.

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