Technology Dominates Jefferies Top Growth Stock Buys This Week

With earnings all but over for the third quarter, Wall Street has handicapped the winners and losers, and now it’s time for what many hope is a year-end rally to get the indexes up more. The Nasdaq leads all the major indexes decidedly, up 8.3%, versus less than 2% for the S&P 500 and a very sluggish one-quarter of 1% for the Dow Jones Industrial Average.

In a new Jefferies research report, the weekly U.S. Growth Stock calls are led by some technology leaders that could be poised for an outstanding fourth quarter and a very strong 2016. We highlight four that are appropriate stocks for aggressive accounts with a high risk tolerance.

Activision Blizzard

This company reported outstanding earnings recently, made a huge acquisition and is a Jefferies Franchise pick stock as well. Activision Blizzard Inc. (NASDAQ: ATVI) develops and publishes online, personal computer (PC), video game console, handheld, mobile and tablet games worldwide. It develops and publishes interactive entertainment software products through retail channels or digital downloads, as well as downloadable content to a range of gamers. Its Call of Duty franchise has propelled earnings for this industry powerhouse for years.

The big news recently was the company’s purchase of Candy Crush saga creator King Digital Entertainment. Jefferies, and most of Wall Street, think the buy is an outstanding move for the company, and specifically the synergies between the two companies is cited. Analysts feel that the key to unlocking some monster value is creating and cross-promoting the Activision product inside the King Digital mobile distribution network.

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Jefferies thinks the guidance Activision gave when it reported is very conservative. The firm also thinks the content the company will release in the rest of 2015 is outstanding and not fully reflected in the guidance. The growth in the quarter was particularly impressive given two challenges: the strong dollar and unfavorable comparisons to the prior year quarter, which were lifted by strong sales of The Amazing Spider-Man 2. Much of that growth was fueled by Destiny, Heroes of the Storm and Hearthstone, which now have 70 million registered players combined. The three titles have generated over $1.25 billion in non-GAAP revenues to date.

Activision investors receive a 0.7% dividend. The Jefferies price target for the stock is raised to $45. The Thomson/First Call consensus target is $40.90. The stock closed Friday at $35.

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