If you would have told anybody at the turn of the century that in a short 15 years that technology would be leaps and bounds from where it was in 2000, they probably would have laughed. After all, everybody had cell phones, the Internet was becoming ubiquitous, what could change? Well, everything. The iPhone wasn’t even introduced until 2007, and the landscape for 2016 and beyond is vastly different.
The new economy is more than just technology. It’s payment systems, controlling huge amounts of data and more. A new Jefferies research report highlights the top growth stock picks for this week, and they are all part of the new economy. All four are rated Buy and make good sense for growth portfolios with risk tolerance.
MasterCard
This continues to be one of the top credit card players in the world. MasterCard Inc. (NYSE: MA) operates the self-described world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities such as shopping, traveling, running a business and managing finances easier, more secure and more efficient.
Jefferies believes the setup for the stock in 2016 looks very promising, especially after the recent sell-offs. The analysts also believe that Wall Street’s expected revenue growth of 6.3% may be aggressive, but they do cite the fact that MasterCard does have a modest discount valuation. It is possible the credit card giant may experience multiple headwinds in 2016, including higher rebate expenses, low gas prices and Chase deconversion. Jefferies still likes the stock in the current environment, with the possibility for mid-teens constant currency earnings per share (EPS) growth.
MasterCard shareholders receive a small 0.85% dividend. The Jefferies price target for the stock is $112, and the Thomson/First Call consensus target is $111.06. Shares closed on Monday at $86.77.
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NVIDIA
This top tech stock that reported outstanding earnings in November and was recently added to the Jefferies Franchise Picks list. 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.
The company is also moving into visual computing chips for cars, mobile devices and supercomputers. NVIDIA has a technology partnership with electric car maker Tesla, and recently posted very strong earnings. 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.
The company posted earnings that were way ahead of estimates, and the first-quarter outlook implies EPS 26% ahead of current consensus. With gaming revenues up 44% year over year, the analysts believe there remains high overall Wall Street skepticism around the company, as most are unaware of the positive dynamics in the PC Gaming and eSports markets.
Some Wall Street analysts feel that virtual reality could see 10 million in annual shipments in three to five years, and NVIDIA will be a huge player. In fact, it’s possible that those shipments could represent as much as $750 million per year for the company and competitor AMD. Jefferies also cites the large Technology Assessment Management Systems in gaming, autos, cloud enabled by NVIDIA’s graphics leadership.
Investors receive a 1.62% dividend. Jefferies has a $38 price objective, and the consensus target is $31.65. The stock closed Monday at $28.42.
PayPal
This company was spun-off from eBay last year and many on Wall Street think the real growth is in the payment sector. PayPal Holdings Inc. (NASDAQ: PYPL) operates as a technology platform company that enables digital and mobile payments on behalf of consumers and merchants worldwide. It enables businesses of various sizes to accept payments from merchant websites, mobile devices and applications, as well as at offline retail locations through a range of payment solutions across company’s payments platform, including PayPal, PayPal Credit, Venmo and Braintree products. PayPal’s platform allows customers to pay and get paid, withdraw funds to their bank accounts, and hold balances in their PayPal accounts in various currencies.
Jefferies thinks that solid revenue growth over the next five years is possible and the scarcity value, or lack of competition, could help drive the multiple for the company. Some Wall Street analysts have pointed to the new acquisitions PayPal has made like Venmo and Paydiant that are leveragable with the combination of Paydiant. Many also think that the eBay separation is likely to help the company’s positioning with large merchants.
Jefferies noted recently that while the company only reported in-line numbers and guidance its first time out, the strong secular growth in the payments industry and improved operating margins make the stock a solid buy. Also, Jefferies is not overly concerned about Apple’s recent announcement of its entry into this already crowded market, especially given Venmo’s entrenched user base and its social media component.
The $44 Jefferies price target is higher than the consensus target of $40.94. Shares closed on Monday at $31.47.
Qlik Technologies
This top stock is down 40% since last fall. Qlik Technologies Inc.’s (NASDAQ: QLIK) QlikView Business Discovery platform lets people quickly bring data sources together to create dynamic visual applications that can be navigated and searched intuitively. QlikView uses Natural Analytics to reflect the way human curiosity searches and processes information, while delivering the enterprise manageability, governance and service offerings organizations require.
Qlik Technologies was named last spring the top “cross-industry” vendor in the KLAS Report, “Healthcare Analytics: Moving Toward the Continuum of Care,” for having the best understanding of health care analytics and for being considered one of the most important vendors to a customer’s organization in terms of it future business intelligence and analytics plans.
The company newer Qlik Sense product, which has helped push the company in the business intelligence and analytic market, is seeing strong demand trends as the second-quarter licensing total of $76.3 million was much higher than estimates and the strongest since 2011. New customer license and maintenance billings were up strong last year and are expected to grow again in 2016.
The Jefferies price target is $46. The consensus target is $41.92. The stock closed Monday at $25.09.
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New economy, new technology and the pace of innovation is hardly slowing down. Investors looking to the future need to own companies like these that are adapting and offering goods and services that consumer and corporations are embracing, and will continue to for years.
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