The Wall Street firms that we cover increasingly agree that while the future’s still bright for the U.S. economy, the future may be one of much lower stock market gains than has been the norm over the past decade. 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 fourth-quarter results and they are 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.
This top company appears to have turned the corner in a big way, though shares sold off after earnings. Advanced Micro Devices Inc. (NYSE: AMD) is one of the largest suppliers of PC microprocessors and graphics processors worldwide to computing original equipment manufacturers. The company’s main product lines include desktop, notebook and graphics processors, and embedded/semi-custom chips.
Shares rose last year on the back of Google’s announcement concerning Stadia at last year’s game developers conference. The AMD CEO had noted that Google’s cloud gaming platform was using AMD Radeon GPUs, and the announcement confirmed it. The close partnership suggests that Google ultimately may announce that it will use EPYC 2 server MPUs.
Despite solid results, the shares backed up after the report, and the analysts noted this:
The Company reported last week and fourth quarter revenues/EPS beat by 90 basis points/$0.01, though the first quarter outlook was 3.4% below consensus due to lower consoles. For 2020, AMD guided to 28-30% revenues growth and gross margins to increase by 2.3% to 45%. However, our bottoms up gross margin calculation suggests conservatism in the gross margin outlook and we think the company takes share for the next two years. We expect server share gains to accelerate as cloud customers become more familiar with EPYC and believe the March 5th analyst day could be a catalyst.
Jefferies has a solid $58 price target on the shares, which compares with a lower Wall Street consensus target of $47.72. The shares closed Monday at $48.02 apiece.
The huge social media leader has been on a roll, and the analysts remain very positive. Facebook Inc. (NASDAQ: FB) is the largest social network, with over 2.3 billion monthly active users and over 1.6 billion daily active users. The company generates revenue from advertising and from payments, with over 95% of revenue from advertising. It generates close to 50% of revenues in the United States and Canada and is expanding rapidly in international markets.
The company’s solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends. Messenger, a messaging application for mobile and web on various platforms and devices, enables people to reach others instantly, as well as enable businesses to engage with customers. WhatsApp Messenger is a mobile messaging application.
The company posted very solid fourth-quarter results, and Jefferies said this:
Company reported last week and stock beat expectations by 1%/2% on the top/bottom line, respectively, though investors were looking for more of a beat with the expectations high into the print (shares were up +9% YTD). Going forward, management expects revenue growth deceleration in the first quarter and said that the majority of the ad targeting headwinds are ahead of the company. That said, we still see mid-20% revenue growth for fiscal 2020 versus 27% in fiscal 2019. We would be buyers on any stock weakness. We are excited about commerce advertising, Facebook messenger and Instagram.
Jefferies has a $250 price target, and the consensus target is in line at $249.33. Facebook stock closed most recently at $204.19.
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