Investing

Jefferies Top Growth Stocks to Buy Now May Be Huge Q3 Winners

Costco

This has become the ultimate destination for the American consumer regardless of the economy, and it stands to have a massive summer selling season. Costco Wholesale Corp. (NASDAQ: COST) has a unique business model. It operates membership warehouses, and it buys the majority of its merchandise directly from manufacturers, essentially cutting out the middleman. Costco sells in bulk but also at a lower price, thus fueling its rapid growth. With consumers having more free cash to spend as gasoline prices have dropped, this major retailer may continue to see large revenue gains.

Costco remains one of the few conventional retailers where metrics like store traffic, market share gains and a validated model could bode well for international growth and expansion. The company is largely unharmed by e-commerce, and it continues to add stores in strategically mapped out locations.

Wall Street loves the company’s pricing authority on key items and the leading merchandising offerings, and the relatively new Costco co-branded card with Visa is a real positive. Add in the company’s growing online presence and the future looks bright. The analysts said this:

We took a deeper look into our May 2021 club consumer survey at company and cohort-specific levels, as well as broader industry trends. Additionally, we recently spoke with the management teams of BJ’s Costco and Walmart. Our takeaways include: 1) the pandemic is driving higher engagement/spend across cohorts; 2) we view increasing gen merch/services as key to extending spending; 3) omni-channel efforts vary by retailer and the consumer is still deciding; and 4) more and bigger streamlining tech is coming.

Costco shareholders receive a 0.80% dividend. Jefferies has a $445 price target, and the consensus target is $408.41. The shares closed on Friday at $398.94.

PayPal

This has long been a Wall Street favorite, and it continues to deliver solid results. PayPal Holdings Inc. (NASDAQ: PYPL) operates as a technology platform company that enables digital and mobile payments on behalf of consumers and merchants worldwide.

The company enables businesses of various sizes to accept payments from merchant websites, mobile devices and applications, as well as at offline retail locations through a range of payment solutions across its payments platform, including PayPal, PayPal Credit, Venmo and Braintree products.

PayPal’s platform allows customers to pay and be paid, withdraw funds to their bank accounts and hold balances in their PayPal accounts in various currencies.

Jefferies is very positive on the company:

On August 2nd, pricing for PayPal Checkout, Pay With Venmo, Pay in 4, and PayPal Credit will increase to 3.49% + $0.49 for US small- to mid-sized businesses (SMB) merchants, up from 2.9% +$0.30 currently. We estimate 6-7% of total payment volume is US SMB branded volume and will be affected by the price increase. Meanwhile, volume-based pricing on “unbranded” volume will be lowered to 2.59% (from 2.90%) in a move we believe is aimed at Stripe. We believe the impact is baked into the fiscal year 2021 guide, but estimate the price hikes adding ~3% of top-line growth in fiscal year 2022 and 2023. As a result, we took our estimates through 2023 slightly higher, but assume management reinvests a portion of the pricing tailwind back into the business.

The $340 Jefferies price target compares with the $314.04 consensus target and Friday’s closing share price of $290.24.


These three companies are dominant in their respective business silos and poised not only to post solid second-quarter results, but each has very promising runaways for the rest of 2021 and beyond. Growth stock investors with long-term time horizons may want to consider buying shares now.

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