The top Wall Street firms that we cover are starting to agree that while the future is still bright for the U.S. economy, it also may be one of stock market gains much lower than the norm has been over the past 10 years. When that is the case, then investing strategies often shift from indexing to a more disciplined stock-picking routine. That’s when investors need solid growth ideas.
Jefferies highlights the firm’s top growth stocks to buy each week, and this week is no exception. The Jefferies team has reviewed third-quarter results and is very positive going forward on some of the biggest and most powerful technology and momentum giants. We found four that look like solid picks for more aggressive growth accounts, and all are on the firms Franchise Picks list, which contains the 22 top picks Jefferies has now.
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:
Our early checks point to a strong release for Modern Warfare (launched 10/25) versus what we believe are modest expectations. Calls to GameStop locations were positive and the game has an opening weekend sentiment score of 67, per our online sentiment tracker SpikeTrap (vs. 63 for Black Ops 4). We conservatively model 22 million units sold of Modern Warfare and note that every additional 1 million sold contributes 3c to EPS.
Jefferies has a $65 price target on the shares, and the Wall Street consensus target is lower at $58.17. The stock closed on Monday at $55.71 a share.
The search giant continues to expand and, while search is king, the cloud presence is growing fast. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on 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.
Google has outlined expanding capabilities to facilitate commerce, capitalizing on the “treasure trove” of data provided by seven different properties, each with at least a billion active users (Android, Search, Chrome, Maps, Play, YouTube and Gmail).
Advertising remains a huge growth area, and the analysts noted this following the third-quarter results:
The Company reported third quarter results last week. Revenues beat on both core ad strength and rapid growth in other rev segments (Google Cloud, G Suite, Play and hardware). Other revenues grew 39% and was driven by the cloud. Margins and EPS also beat after adjusting for charges (French fine) and unrealized equity losses (we believe ride hailing investments). We think shares can continue to work owing to ongoing strength in core ad business and other revenue segments and the still attractive valuation at 11.4x 2020 EV/EBITDA, in-line with the S&P despite 2 times the EBITDA growth.
Jefferies raised its price target to $1,550 from $1,500, while the consensus figure is $1,450.33. The shares closed at $1,289.61 on Monday.