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Jefferies Top Growth Stocks to Buy Have Big Upside Potential
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We are getting to that time of year on Wall Street when the going is getting a lot slower. Earnings for the second quarter are just about over, people are getting their last vacations in for the summer as school in some parts of the country already has started, and the trading really slows down on Wall Street. With markets range-bound after making new all-time highs, we checked our Wall Street research database in search for new top growth stock calls.
A new Jefferies research report has four new growth stocks to buy that could have some serious upside potential. While a touch more aggressive than some people may be looking for, they appear to have good entry points and are solid picks for the last half of 2016.
Activision Blizzard
This company reported very solid second-quarter results last week and remains a top pick on Wall Street. 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. The company’s Call of Duty franchise, which has propelled earnings for this industry powerhouse for years lead a strong product inventory along with other favorites like Skylanders and Guitar Hero.
The big news last fall was the company’s purchase of Candy Crush saga creator King Digital Entertainment, and most of Wall Street thinks the buy is an outstanding move for the company and specifically the synergies between the two companies is cited. Many analysts feel that the key to unlocking some monster value is creating and cross-promoting the Activision product inside the King Digital mobile distribution network.
Some analysts feel the company could earn up to $3 per shares by 2018 if it can optimize the King Digital advertising opportunities and unlock synergies. Jefferies notes that the new Overwatch game has blown past 10 million users since its release in late May and already has generated $500 million since its launch, more than the analysts’ projections of $400 million for the year.
Shareholders receive a 0.64% dividend. The Jefferies price target for the stock is raised to $55 from $45, and the Wall Street consensus price target is lower at $46.24. The stock closed Tuesday at $41.25.
Criteo
This French-based advertising tech company is becoming a very hot commodity on Wall Street. Criteo S.A. (NASDAQ: CRTO) is a technology company that engages in the digital performance marketing in France and internationally. Its Criteo Engine solution includes recommendation algorithms that create and tailor advertisements to specific user interest by determining the specific products and services to include in the advertisement; prediction algorithms that predict the probability and nature of a user’s engagement with a given advertisement; and bidding engine for executing campaigns based on objectives set by the clients.
The Criteo Engine solution also comprises dynamic creative optimization; software systems and processes that enable data synchronization, storage and analysis of distributed computing infrastructure in multiple geographies; and experimentation platform, an offline/online platform to enhance the prediction abilities of its models. In addition, it offers data assets, which collect information about the interaction of users with its advertisers’ and publishers’ digital properties; and access to advertising inventory.
The Jefferies internet team recently met with the CFO Benoit Fouilland, and they came away very positive and maintain their bullish stance. They noted this in their report:
While adtech firms have recently come under pressure from header bidding (which negatively impacts pricing), the company remains confident it can adapt and is less susceptible to this practice.
The Jefferies price target is posted at $63, and the consensus target is $50.77. Shares closed Tuesday at $40.53.
Intellia Therapeutics
Jefferies upgraded this company from Hold to Buy. Intellia Therapeutics Inc. (NASDAQ: NTLA) is a gene editing company focused on the development of therapeutics utilizing a biological tool known as the CRISPR/Cas9 system. The company develops in vivo programs focused on liver diseases, including transthyretin amyloidosis, alpha-1 antitrypsin deficiency, hepatitis B virus and inborn errors of metabolism; and ex vivo applications of the technology in chimeric antigen receptor T cell and hematopoietic stem cell product candidates.
Intellia has a strategic collaboration and license agreement with Novartis focused on the development of new ex vivo CRISPR/Cas9-based therapies. The Jefferies team based their rating change on the recent pullback in the shares and continued expectation for CRISPR/Cas9 to be a transformative gene editing technology. They made these comments in the report:
The second quarter 2016 earnings confirmed the company will have sufficient cash to support their operations through 2020 and the analyst believes the upcoming preclinical proof of concept data for in vivo liver programs for CRISPR/Cas9 being presented at CSL on 8/17 could provide potential upside.
The Jefferies price target is $33, and the consensus target is set at $35.50. The share closed Tuesday at $18.76.
Priceline
This internet travel leader was a big 2015 second-half laggard and took a huge leg down earlier this year before rebounding sharply. Priceline Group Inc. (NASDAQ: PCLN) operates Booking.com, which provides online accommodation reservation services, as well as Priceline.com, which offers hotel, rental car and airline ticket reservations services, as well as vacation packages and cruises through its Name Your Own Price and Express Deals travel services. It also operates Agoda.com, an online accommodation reservation service for consumers in the Asia-Pacific region, and RentalCars.com, which offers car rental reservation services.
Trading at a low 17 times fiscal year 2017 earnings estimates, the travel giant is seen by many Wall Street analysts as an “open-ended” growth story. Many on Wall Street continue to see comparisons easing for international bookings and margins will improve in the second half of the year and into 2017.
Priceline reported earnings last week, and while revenue was in line with Wall Street estimates, earnings per share and EBITDA came in better. Bookings growth was solid driven by a 24% year-over-year gain in hotel room bookings. Jefferies is above consensus going forward and did note that while the recent terror attacks in Europe impacted gross bookings and cancellations in respective markets, they did not have an impact on overall growth.
The Jefferies price target is set at $1,700, and the consensus is lower at $1557.71. The stock closed Tuesday at $1407.01.
These four growth companies are better suited for more aggressive growth accounts. All could bring stellar gains through the rest of 2016, as all have solid franchises and market share in their respective arenas of business.
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