Investing

Jefferies Has 5 Top Growth Stocks to Buy Now That Have Solid Upside Potential

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One good thing about the fourth-quarter earnings season coming to an end is that investors get a chance to reflect on the entire previous year, as well as look ahead for the potential positives for the current year. One thing is for sure, with a pricey market and a new president going full speed ahead on executive orders, the likelihood for a spike in volatility is front and center.

In a series of new reports, Jefferies analysts focus on five top growth stocks, which are all rated Buy at the firm. While they had mixed results when reporting earnings, and one is yet to come, they all remain outstanding growth stories for investors that have patience and a touch more risk tolerance.

Activision Blizzard

This company 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 has propelled earnings for this industry, but the new launch is expected to be weak and could affect numbers when the company reports this week. Jefferies sees 2017 guidance as the biggest issue going forward, as the company has been conservative in past years and outperformed estimates.

Some analysts feel the company could earn up to $3 per share by 2018 if it can optimize the King Digital advertising opportunities and unlock synergies. Jefferies noted last year that the new Overwatch game has blown past 10 million users since its release in late May of 2016 and has generated $500 million since its launch, already more than the analysts $400 million for the year.

Shareholders receive just a 0.6% dividend. The Jefferies price target for the stock is $55, and the Wall Street consensus target is $47.77. The stock closed Friday at $43.69.

Amazon

This absolute leader in online retail and a dominant player in cloud storage business remains a top pick across Wall Street. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers.

Amazon Web Services (AWS) is also the undisputed leader in the cloud now, and many top analysts see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market. The company serves developers and enterprises through AWS, which provides compute, storage, database, analytics, applications and deployment services that enable virtually various businesses.

Amazon reported a mixed quarter last week, missing sales estimates by 2% while earnings beat expectations. Guidance for revenue growth in the first quarter was a solid 23%, but the company indicated that operating income growth would likely be substantially lower. The stock got hammered and may be offering investors a great entry point, as the long-term story remains intact.

Jefferies has a $975 price target. The consensus target is $929.10, and shares closed Friday at $810.20, down over 3% on the day.

Electronic Arts

This leading video game developer should benefit from not only the continuing rise in new console sales, but also the rising trend of mobile gaming. Electronic Arts Inc. (NASDAQ: EA) produces top-selling games and related content and services under the EA brand in various categories, including action-adventure, role-playing, racing and first-person shooter games.

The company, which is very well known for its EA sports games like Madden Football, has made the move into mobile play by adapting many of the top franchise titles, which have been popular for years, into the mobile arena.

When the company reported third-quarter fiscal 2017 results, adjusted earnings per share blew past the consensus estimate. Revenues came in at more than $2 billion, and the company cited increases in digital revenues and strength in mobile games, and the company’s hits like Battlefield 1 and FIFA 17 were big factors.

The $110 Jefferies price objective compares with the consensus target of $94.38. Shares closed at $81.28 Friday.

Charles Schwab

The iconic discount broker looks solid from a technical standpoint. Charles Schwab Corp. (NYSE: SCHW) is a leading provider of brokerage, banking and investment-related services to consumers and businesses. It has two business segments: 1) Investor Services, which provides retail brokerage, banking, advice and other financial services, and 2) Institutional Services, which provides business to business services to independent investment advisors, and to company benefit plan sponsors.

The company reported a solid quarter in January, with results that came in right in line with the Wall Street estimates. The company held its business update last week and provided financial guidance and sensitivities, as well as an update on strategic initiatives, which included cutting its commission on trade from $8.95 to $6.95, which hammered the stock. The Jefferies report noted:

Trading was only 11% of revenues in 2016, so the commission cut won’t have much P&L impact. Management offered baseline guidance for ’17 and that guidance doesn’t include an interest rate increase. We continue to like the stock for net new asset growth, and we expect 20%+ EPS growth in 2017 and 2018.

Shareholders receive a 0.8% dividend. The Jefferies price target is $48. The consensus target is $45.88, and the stock closed Friday at $40.17.

Visa

This top credit card issuer is becoming a huge leader in digital pay. Visa Inc. (NYSE: V) is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable electronic payments.

The company operates one of the world’s most advanced processing networks, VisaNet, that is capable of handling more than 56,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa’s innovations, however, enable financial institution customers to offer consumers more choices: pay now with debit, pay ahead of time with prepaid or pay later with credit products.

The company reported solid numbers despite some currency headwinds, and Jefferies noted:

Payment volumes, transactions and cross border spending all accelerated during the quarter. Integration of Visa Europe looks to be on track and the company expects 2-3% earnings-per-share accretion in fiscal 2017, helping to contribute to mid-teens EPS growth.

Investors receive a 0.77% dividend. The $93 Jefferies price target is less than the $95.48 consensus. Shares closed last Friday at $86.08.

These five top growth stocks to buy make good sense going forward. Given the market’s big run, investors may want to consider partial positions here and see if we don’t get a pullback.

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