Needless to say, the stars aligned for stock investors this week as a host of good earnings were met by a much more docile Federal Reserve. Not only did it keep rates steady but promised a very passive forward agenda that looks to be based almost exclusively on incoming data. While there is still a chance the Fed could raise rates this year, given the fall meltdown still fresh in memories, aggressive hikes seem out of the question now.
The massive midweek rally reinforced the bulls, and it makes sense to stay involved in equities now, as the near term looks far more constructive than it did even a month ago. At 24/7 Wall St. we remain bullish on companies that are printing positive numbers for the quarter and giving solid forecasts.
In a series of new research notes, Deutsche Bank raised its price targets on stocks of four top companies that posted outstanding results and had positive forward guidance. All are rated Buy and make good sense for growth accounts with a reasonable investment time frame.
The huge social media leader’s stock has been incredibly volatile recently, but it posted outstanding results for the quarter. Facebook Inc. (NASDAQ: FB) is the largest social network with over 2.0 billion monthly active users and over 1.4 billion daily active users. The company generates revenue from advertising and from payments, with over 95% of revenue from advertising. It generates close to 50% of revenues in the United States and Canada and is expanding rapidly in international markets.
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The company’s solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile and web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.
Deutsche Bank loved the results and noted this:
Facebook reported strong 4Q upside and a pivot towards a “back to normal” focus on innovation, concentrating on projects that “can have a major improvements on people’s lives”. Mark Zuckerberg listed several key product areas, most notably eCommerce/shopping products on Instagram. Despite repeated calls for “deceleration” throughout the call (seven times by our count) and limited estimate changes, we feel better about the ad outlook and see the innovation pivot creating product catalysts for the balance of the year. One concern the company highlighted, however, was targeting risks associated with potential privacy rules from platforms like iOS, Android, and/or browsers. This is particularly noteworthy post the Facebook Research App given Apple’s move to invalidate Facebook’s root certificates across internal test apps, rendering them unopenable to FB employees.
The Deutsche Bank price target was raised to $200 from $195, and the Wall Street consensus price target is $184.67. The shares closed trading on Thursday at $166.69, up almost 11% on the day.
Royal Caribbean Cruises
This company looks solid as many people continue to take expensive cruises. Royal Caribbean Cruises Ltd. (NYSE: RCL | RCL Price Prediction) is the world’s second largest cruise company. It owns and operates three cruise brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises, and it holds a 50% stake in TUI Cruises, a 49% stake in Pullmantur Cruises and a 66% stake in Silversea. In total, the company operates 59 ships with 535 destinations across all seven continents.
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Many on Wall Street feared the numbers for the quarter would decline, including yield decelerations due to elevated industry capacity. Royal Caribbean had very positive commentary on bookings when it reported, and Deutsche Bank said:
The company’s initial 2019 outlook and commentary should put to bed, for now, fears of any broad-based softness in cruise fundamentals. Although Street estimates are likely to migrate slightly higher from pre-quarter levels on the heels of strong yield guidance, we believe Royal Caribbean’s multiple can continue to expand (every turn is ~$11 to stock) as the stock still appears cheap, in our opinion, on both an absolute and relative basis
Royal Caribbean shareholders receive a 2.50% dividend. Deutsche Bank raised its price target to $140 from $134, while the consensus target is $134.84. The shares closed at $120.05 on Thursday.
ServiceNow
This stock had an outstanding 2018 and remains a top pick. ServiceNow Inc. (NYSE: NOW) develops and sells a hosted, subscription-based suite of services designed to automate various IT department functions, such as help desk, operations management and change/release management.
The company also sells a number of applications that automate various self-service related applications outside of the IT department, such as HR onboarding, facilities requests and governance, risk and compliance.
ServiceNow blew out earnings for the quarter, and the analysts said this:
Billings Results and Guide Easily Top Estimates. Against what we believed to be a 25%-27% growth bogey for the subscription billings guide for 2019, ServiceNow guided to 31%-32% growth (higher than their guide for 2018 a year ago) and posted fourth quarter 2018 subscription billings growth of 39%, well above our 34% estimate and one of the highest growth rates in the SaaS industry. Total backlog of $5.1 billion in the quarter was up by 35%, similar to fourth quarter 2017 growth despite the company’s much larger scale.
The $205 Deutsche Bank price objective was raised to $230. The consensus target price is $212.57, and shares closed at $220.02, up over 13%, on Thursday.
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Wynn Resorts
This top company saw the departure of its namesake founder last year, but shares have rallied back smartly. Wynn Resorts Ltd. (NASDAQ: WYNN) operates Wynn Macau and Encore at Wynn Macau resort located in the People’s Republic of China.
The Macau resorts feature approximately 284,000 square feet of casino space, which offers 24-hour gaming and a range of games, with 458 table games and 708 slot machines, private gaming salons, sky casinos and a poker room. Its two luxury hotel towers have a total of 1,008 guest rooms and suites, as well as casual and fine dining in eight restaurants, approximately 57,000 square feet of retail shopping in stores and boutiques, approximately 31,000 square feet of space for lounges and meeting facilities, and the Rotunda show. Recreation and leisure facilities include two health clubs, spas, a salon and a pool.
The company also owns and operates the Wynn Las Vegas and Encore at Wynn Las Vegas resorts, with a total of 4,748 hotel rooms, suites, and villas; 232 table games; 1,866 slot machines; a race and sportsbook and poker room in approximately 186,000 square feet of casino gaming space, including a sky casino and private gaming salons.
Deutsche Bank was very positive on the results for the quarter and said this:
Wynn Resorts delivered healthy upside to our property level forecasts with Macau results exceeding our estimate by ~$34 million ($15 million hold benefit) and Consensus Metrix Consensus by ~$38 million. Las Vegas was modestly weaker than expected ($105 million verse Deutsche Bank estimate of $113 million vs Consensus of $109 million) as table hold, while normal, hampered the year over year EBITDA comparison by $5 million, and bad debt expense was a net $2 million headwind.
Shareholders are paid a 2.57% dividend. The $130 Deutsche Bank is now $145, which compares to the $126.38 consensus price objective and the most recent close at $123.01.
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These four top growth stocks have started 2019 off in a big way for shareholders. The good news is that all had taken a beating in the 2018 selling barrage and still are offering investors solid entry points.
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