One thing’s for sure: if the last two weeks haven’t left some investors a little shell-shocked, then they are lying or they sold out in front of all the selling. Truth is, most of the early selling and volatility was a result of inverse volatility exchange-traded funds that got absolutely mauled as the selling and volatility spiked. The chances for a 1987-type crash or 2008 meltdown seem unlikely as the economy is in great shape and rates remain low.
In this week’s Jefferies U.S. growth stock calls, the team stays with some very high-profile technology and biotech stocks that, while certainly not for risk-averse growth or income accounts, could provide incredible upside potential.
This remains a top pick on Wall Street and Jefferies remains very positive on it. 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 and downloadable content to a range of gamers.
The company reported outstanding results that beat expectations, and the Jefferies report said:
Activision reported results, beating forecasts and guiding 2018 conservatively. Since 2011, the company has ended the year 19% higher than the initial outlook, on average, which suggests $3.00 in earnings per share could be achievable. We note that the beat this quarter was driven by a resurgence on Call of Duty as well as in game spend. We raised estimates and note that our new $3.02 estimate for 2019 is ahead of consensus.
Shareholders receive just a 0.51% dividend. The Jefferies price target for the shares is $86, and the Wall Street consensus target is $74.04. The stock closed Friday at $67.08.
This is an online travel leader that is poised for a potential big 2018. Expedia Inc. (NASDAQ: EXPE) is the leading internet travel pure-play with exposure to online travel in the United States, Europe and Asia. The company’s portfolio of brands includes Expedia, Orbitz, HomeAway, Travelocity, Hotels.com, Trivago, Egencia, Hotwire, Wotif, Venere and Classic Vacations.
The stock was hammered on a bad earnings print, and the analysts said this:
Company reported last week and shares were off sharply due to weaker than expected results and guidance. The EBITDA guide for 6-11% growth came in well-below estimates and implies modest margin dilution at the midpoint, driven by investments in new hotel supply, new products and better customer experience. We think management is making the right investments to remain competitive and while the margin story push to 2019 makes us cautious on execution, we think the overall fundamentals remain intact.
Investors receive a 1.15% dividend. Jefferies kept its massive $170 target price, and the consensus target is $151.76. Expedia closed Friday at $104.
This top biopharmaceutical company has been a potential takeover target for years, and that may be coming to fruition. Nektar Therapeutics (NASDAQ: NKTR) discovers and develops medicines in areas of high unmet medical need. Its research and development pipeline of new investigational drugs includes treatments for cancer, autoimmune disease and chronic pain.
The company leverages its chemistry platform to discover and design new drug candidates that utilize its polymer conjugate technology platforms, which are designed to enable the development of new molecular entities that target known mechanisms of action.
The report said:
According to a recent news report, the company is exploring strategic options including the potential sale of the company. We do not find this news surprising and note that following the ‘214 dataset 3 weeks ago, Nektar now fits our mergers and acquisitions thesis as 90% of valuation is derived from proprietary candidates. We believe current partner Bristol-Myers would make sense on the short list of potential acquirers and also believe marketers of leading checkpoint inhibitors could be logical buyers.
The $88 Jefferies price target is well above the consensus target of $62.83. The stock closed most recently at $74.64.
This company has reported strong earnings over the past two years and remains a top pick at Jefferies for 2018. Nvidia Corp. (NASDAQ: NVDA) is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles.
Nvidia is also moving into visual computing chips for cars, mobile devices and supercomputers. The company has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year.
Top analysts feel the stock is maturing to a platform company from a pure chip company, and Jefferies sees the stock continuing to benefit from four secular trends: virtual reality, PC gaming, chips in the automobile industry and graphic processing units (GPUs) in the cloud.
Once again the company shredded earnings expectations:
Nvidia reported last week and beat earnings per share by $0.35. Company guided April quarter sales 17.5% ahead of consensus. Data Center revenues grew >100% for the 7th consecutive quarter. We raise fiscal 2019 estimates by 40% and our new price is 40x our new calendar 2019 EPS estimates. Our new 5 year earnings per share power target is $15.50, up from $13.
Investors receive a 0.28% dividend. Jefferies raised its price target to $300. The consensus target is $221.58, and shares closed Friday at $232.08.
These four red-hot stocks could have substantial upside, especially if the market simmers down. While they are not suitable for risk-averse investors, those with a higher risk level could be well rewarded by buying shares now.
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