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 be one of stock market gains much lower than the norm has been over the past 10 years, and especially this year. 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 its top growth stocks to buy each week, and this week is no exception. Jefferies has reviewed third-quarter results and is very positive going forward on some of the top stocks in the firm’s coverage universe. Here we focus on stocks that stumbled some with third-quarter results or guidance and may be offering outstanding entry points.
This remains a top video gaming pick on Wall Street and Jefferies is still very positive on the shares. Activision Blizzard Inc. (NASDAQ: ATVI) develops and publishes online, personal computer (PC), video game console, handheld, mobile and tablet games worldwide. The company develops and publishes interactive entertainment software products through retail channels or digital downloads and downloadable content to a range of gamers.
Shares of the gaming giant have been volatile and are down a stunning 45% from highs posted last fall. Some recent positive announcements could be meaningful in helping the stock to regain traction. Jefferies said this after the company posted stellar results:
Company reported last week. Activision Blizzard beat 3Q EPS by 12c, but only raised fiscal year EPS by 2 cents, which investors will likely push-back on. We believe normal conservatism is at play here, though we had hoped for a better initial outlook given the early strength from Modern Warfare and Call of Duty Mobile. We were encouraged to learn that the World of Warcraft player base has sustained elevated levels into 4Q and 4Q investments in Call of Duty Mobile set the stage for healthy contribution in 2020. We continue to believe that the visible 2020 content slate will be enough to drive double digit percentage EPS growth and note that management expressed confidence in returning to growth next year.
The Jefferies price target on the shares is $65, while the Wall Street consensus target is $59.62. The stock closed Monday at $52.52 a share.
This high-profile old-school software stock has backed up in price and is offering the best entry point in some time. Adobe Systems Inc. (NASDAQ: ADBE) is a diversified software company that offers electronic document technology and graphic content authoring applications to creative professionals, designers, knowledge workers, high-end consumers, developers and enterprises.
Top Wall Street analysts see the company benefiting from artificial intelligence, predictive analytics, automation bots, speech recognition and natural language processing and image recognition. Some on Wall Street see earnings increasing a solid 30% or more for 2020.
Jefferies has felt for years that Adobe deserves a premium multiple to its peers due to its strong competitive position in the creative space and above-average growth prospects. The report noted this:
The Company hosted their MAX analyst day last week. The fiscal year 2020 revenue guide implies ~18% growth, in-line with Street estimates and ahead of Jefferies estimates of 17% (and we note that the company’s initial fiscal year guide tends to be conservative). In addition, while Adobe typically reiterates the fiscal 4Q guide, they surprised to the upside and raised Digital Media (DM) net new annual; recurring revenue by $25 million to $475 million. We raised our fiscal year 2020 rev estimates to $13.15 billion from $13 billion.
Jefferies raised its price target to $350 from $340, and the consensus target is $316.76. Shares closed at $290.27 on Monday.