It sure seemed it was a matter of if and not when we would get a substantial pullback, and much to the chagrin of the uber-bulls on Wall Street and in the financial media, it is upon us. In fact, it could stretch farther, maybe even past 10%, but the difference between a healthy correction and a bear market is huge, and from the look of the economy and everything else, we are not headed for a bear market.
In a new research roundup from Jefferies, while they were among cooler heads expecting a reversal, they also remain positive on one of the higher volatility sectors of the stock market. In this week’s top growth stocks to Buy, they stick with some big cap plays that posted solid results. All are rated Buy at Jefferies.
This absolute leader in online retail and dominant player in cloud storage business remains the top internet pick at many firms on Wall Street. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers.
Amazon Web Services (AWS) is also the undisputed leader in the cloud now, and many top analysts see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market. The company serves developers and enterprises through AWS that provides compute, storage, database, analytics, applications and deployment services that enable virtually various businesses.
The company absolutely blew out its earnings, and the Jefferies report said this:
The company reported robust fourth quarter revenue results last week. Operating Income was record-high driven by solid ad revenue and robust retail volume. As usual, guidance was conservative on margins for the first quarter. We find our long-term thesis intact and reiterate our view that Amazon will take online penetration from 10% currently to 25-30% long-term, the AWS opportunity will be a revenue growth engine with margin accretion for the entire business while international opportunities provide even further upside.
The Jefferies price target for the shares is a massive $1,750, and the Wall Street consensus target is $1,583.84. The stock closed trading on Monday at $1,390 per share.
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused around key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
The search leader provided mixed quarterly results, and the analysts said this in their research coverage:
Company reported fourth earnings last week and the quarter raised concerns around margin compression. Rising traffic acquisition costs and a seasonal spike in sales and marketing expenses drove operating margins below 30%. Despite these factors, 2017 op margins remained at 32%, in-line with 2016, and we think margins could drift modestly higher over time given the investments the company has in place. Top line outperformance continued with 24% revenue growth and we note Google Cloud is now at a $4 billion run rate.
Jefferies has a $1,360 price target for the shares. That compares with the consensus estimate of $1,256.16, as well as the closing price on Monday of $1,062.39.