With 2016 all but complete, many investors are looking back on the outstanding gains the market posted this year, much of which has moved the indexes higher since the election, with an eye for stocks that stand to continue to outperform in 2017. One thing is for sure, the bull market may be getting tired, and despite the potential positives for the new Trump administration, caution may be the operative word for 2017.
In a series of recent research reports, Jefferies analysts are out with some very solid growth stock calls that look like good ideas for investors to add to their portfolios now. All are rated Buy, and make good sense for aggressive growth accounts with a touch more risk tolerance.
Comcast
This broadcasting and cable-related stock could have solid upside potential. Comcast Corp. (NASDAQ: CMCSA) is one of the nation’s largest video, high-speed internet and phone provider to residential customers under the XFINITY brand and also provides these services to businesses. Comcast has invested in technology to build an advanced network that delivers among the fastest broadband speeds and brings customers personalized video, communications and home management offerings.
Comcast has consistently been growing earnings substantially with extremely strong content revenue growth. Increased revenue at NBC Universal is also giving the company some earnings tailwinds, and a growing sports lineup is adding to revenues.
Some top Wall Street analysts see cable giants like Comcast as a top growth story that still has plenty of room to run, as well as generating solid earnings to support continued stock buybacks.
The Jefferies team noted this in a recent report.
The analyst Michael McCormack believes Comcast could meaningfully accelerate capital returns in 2018 and sees the potential for an incremental $7 billion in returns in 2018, above his $5 billion forecast; which could support valuation into the mid-$90’s. Within Cable, he anticipates positive net video additions in 2017, as the company reaps the benefits from the multi-year deployment of X1. Mike’s revised 2017 free-cash-flow forecast of $9.6 billion is above consensus estimates for $9.4 billion and implies more than 13% growth from 2016.
Comcast investors are paid a 1.55% dividend. The Jefferies price target for the shares is set at $80, and the Wall Street consensus price objective is $76.14. The stock closed trading on Wednesday at $70.45 a share.
Monster Beverage
This top consumer discretionary stock recently was upgraded to Buy at Jefferies. Monster Beverage Corp. (NASDAQ: MNST) is increasing its convenience-store penetration through innovations. The company has had success launching Muscle Monster protein and energy drinks, a zero-calorie energy-drink line and other new products that have enabled it to grow market share big-time over the past few years. With high margins and a growing market share, the stock is a solid add.
The analysts noted in their research coverage:
We see accelerating sales growth as US trends inflect and international share gains drive 11% topline growth. Success with recent US innovation represent upside to our forecast. Underperformance in the past year has driven valuation to attractive levels relative to history, just 18x EV/EBITDA. We raise our target and note our earnings-per-share estimates are modestly ahead of the Street.
It is also important to remember that the Coca-Cola owns 31.5% of Monster Beverage, giving the company a huge advantage in distribution and marketing.
Jefferies has a $58 price target on the stock, and the consensus target price is listed at $54.29. Monster Beverage shares closed most recently at $44.91.
Radware
The Jefferies team recently started coverage of this company and initiated the shares with a Buy rating. Radware Ltd. (NASDAQ: RDWR) is a global leader of application delivery and application security solutions for virtual, cloud and software defined data centers. Its award-winning solutions portfolio delivers service level assurance for business-critical applications, while maximizing IT efficiency.
Radware’s solutions empower more than 10,000 enterprise and carrier customers worldwide to adapt to market challenges quickly, maintain business continuity and achieve maximum productivity while keeping costs down.
Jefferies said this in its report:
Radware is a major player in DDoS attack mitigation appliances and application delivery controllers. Based on our analysis, we expect their Application-to-Subscription transition will hit a positive inflection point in the second half of 2017. The will be providing the DDoS mitigation software module for Cisco’s Next Gen firewalls (Firepower 4100/9300). Shares trade at 20.9x 2018 estimated earnings-per-share, a premium to the group given its growth potential from Cisco’s Firepower.
The $18.50 Jefferies price target compares with the consensus analyst target of $14.79. The stock closed near that on Wednesday at $14.50 per share.
Tracon Pharmaceuticals
This a very aggressive play, but it has big upside to the Jefferies price target. Tracon Pharmaceuticals Inc. (NASDAQ: TCON) is a clinical stage biopharmaceutical company that focuses on the development and commercialization of novel targeted therapeutics for cancer, wet age-related macular degeneration and fibrotic diseases. Its lead product candidate is TRC105, which is in Phase 2 clinical trials for oncology indications, including soft tissue sarcoma, renal cell carcinoma, glioblastoma and hepatocellular carcinoma.
The company’s other product candidates are TRC205, an endoglin antibody that is in preclinical stage for the treatment of fibrotic diseases, and TRC102, a small molecule, which is in clinical development for the treatment of lung cancer and glioblastoma.
Jefferies said this in a research report:
We believe the company’s lead anti-endoglin MAb TRC105 has demonstrated activity signals across multiple solid tumors including angio, GTN, RCC and HCC that should be confirmed in multiple 2017 readouts and drive long-term revenue opportunities. We see additional upside to our model if the company’s earlier stage programs show potential.
The Jefferies price target is a whopping $10. Yet, the consensus target is set even higher at $13.75. The stock closed Wednesday at $4.70.
Clearly these stocks are not suitable for all accounts, but they do offer investors a wide range of opportunity, depending on risk tolerance. Given the big run in the markets, we do suggest investors consider buying partial positions here and see if we don’t pull back some in January.
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