Top China Companies Among Jefferies Growth Stocks to Buy

Investing

Published: July 25, 2016 10:10 am

Last Updated: January 13, 2020 5:20 am

With the markets continuing to print new highs, and interest rates continuing to hover near lows, the market is getting a much more difficult place to find stocks to buy that are not fully valued. Despite the lofty perch of the market, there is a very good chance that the economy is starting to pick up, and if that’s indeed the case, we could be poised to go even higher.

In a new research report, Jefferies analysts looked for companies that have good upside potential and also are presenting investors with very good levels at which to buy shares. Jefferies also looks to China for ideas, and two of the following stocks are market leaders there. All four are rated Buy at Jefferies.

Alibaba

This time two years ago, this company was the hottest thing on the planet and getting ready to come public. Alibaba Group Holding Ltd. (NYSE: BABA) is the largest online and mobile commerce company as measured by gross merchandise volume, and it had the highest profile initial public offering (IPO) of 2014. The stock has acted horrible since, printing highs at $120 in mid-November of 2014.

Plain and simple, the dominance in Alibaba’s core business, the very hard barrier to entry for competition and new growth opportunities like cross-border e-commerce make the stock extremely attractive. With most of the damage to the China equity markets seemingly subsided for now, the residual effect to the company may all subside some.

The Jefferies team sees the company as cheap, with outstanding premium growth potential. They also note that the company has gone beyond e-commerce and developed into a sophisticated new type of conglomerate in the cyber-era with e-commerce as the base for the rest of the four businesses: logistics, finance, data-computing and cross-border infrastructure. They expect a whopping 24% compounded annual growth rate between now and 2018 for e-commerce in China.

The Jefferies price target for the stock is $101. The Wall Street consensus target price is lower at $96.20. The stock closed Friday at $84.49 per share.

Baidu

This is another top Chinese company that the Jefferies team remains very positive on. Baidu Inc. (NASDAQ: BIDU) provides internet search services in China and internationally. It operates through Search Services, Transaction Services and IQiyi segments. It offers Chinese language search platform on its Baidu.com website that enables users to find relevant information online, including web pages, news, images, documents and multimedia files through links provided on its website. It also offers transaction platforms, including Nuomi.com to connect online and offline services provided by third parties.

The company provides transaction services as well, such as Baidu Nuomi, Baidu Takeout Delivery, Baidu Maps, Baidu Connect, Baidu Wallet and others. iQiyi is an online video platform with a content library that includes licensed movies, television series, cartoons, shows and other programs. Other companies on Wall Street are bullish on Baidu as well.

Jefferies has a $188 price objective for the stock, but the consensus target is higher at $194.40. Shares closed most recently at $160.88.
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.

PayPal 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. Its platform allows customers to pay and get paid, withdraw funds to their bank accounts and hold balances in their PayPal accounts in various currencies.

The company recently completed a deal with Visa that could help PayPal by making it an option when people pay in stores with their smartphones. But some analysts worry the tie-up gives Visa the better economics of the deal. While the agreement gives PayPal access to Visa’s digital network in exchange for promoting its cards, Jefferies feels the stock could stay range-bound for a while.

The $48 Jefferies price target compares with the consensus price target posted at $43.94. The stock closed most recently at $37.42.

Stericycle

The Jefferies analysts feel this company could restore investor confidence with just an inline earnings report. Stericycle Inc. (NASDAQ: SRCL) collects and processes regulated and specialized waste for disposal services, as well as collects personal and confidential information for secure destruction. It offers regulated solutions for medical waste disposal, pharmaceutical waste disposal and hazardous waste management; sustainability solutions for expired or unused inventory; and secures information destruction of documents and e-media.

The company’s compliance solutions comprise Steri-Safe and clinical services programs for training and consulting; inbound/outbound communications; data reporting; and other regulatory compliance services.

The company also provides reusable sharps disposal management services, an integrated waste stream solutions program and regulated recall and returns management services for expired or recalled products. The company serves health care businesses, including hospitals, physician and dental practices, outpatient clinics and long-term care facilities, as well as retailers and manufacturers, financial and professional service providers, governmental entities and other businesses.

The Jefferies price target is posted at $140, but the consensus target is much lower at $116.50. The shares closed last Friday at $107.25.

These four very good ideas have all either been beaten up lately or have traded way below highs printed in the past couple of years. All make sense for more aggressive accounts looking for upside.

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