Increasingly, top companies that we cover on Wall Street are starting to agree that the volatility the stock market is encountering now, along with the beating the economy is taking, should fade in the second half of 2020. However, the future may be one of stock market gains that are much lower than the norm has been over the past decade. When that is the case, then investing strategies often shift from indexing to more disciplined stock picking, and that’s when investors need solid growth ideas.
Jefferies highlights the firm’s top growth picks to buy each week, and this week is no exception. While these stocks are better suited for accounts that have a higher risk tolerance, they all make good sense now and have outstanding upside potential. We found five stocks among Jefferies top U.S. growth calls for this week that look extremely attractive now. Remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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Activision Blizzard
This is a top gaming pick on Wall Street and Jefferies remains very positive on the shares. 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. Its legacy franchise Call of Duty game continues to be hugely popular. The analysts said this when discussing earnings last week:
Company reported last week. We advised investors to stick with Activision, as numbers will likely move higher throughout the year and new releases are on the horizon beyond 2020. Numbers will likely need to continue to move higher for the stock to work from here, but second half guidance looks conservative and new Blizzard titles are on the horizon post 2020 (Overwatch 2, Diablo 4). The company remains our top pick.
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Investors receive a 0.55% dividend. Jefferies has an $80 price target on the shares, while the Wall Street consensus target is $69.71. Activision Blizzard stock closed Monday at $75.46, up over 3% on the day.
GoDaddy
This company is probably the most well known for constructing websites. GoDaddy Inc. (NYSE: GDDY | GDDY Price Prediction) is a technology provider to small businesses, web design professionals and individuals. It delivers cloud-based products and personalized customer care. The company operates a domain marketplace, where its customers can find the digital real estate that matches their idea. It provides website building, hosting and security tools to help customers construct and protect their online presence.
GoDaddy provides applications that enable connecting to customers and managing businesses. It also provides search, discovery and recommendation tools, as well as a selection of domain name for ventures. It provides productivity tools, such as domain-specific email, online storage, invoicing, bookkeeping and payment solutions to run ventures, as well as marketing products.
Jefferies said this after the company reported results for the quarter:
Company reported last week. Go Daddy proved again that it can deliver consistent execution in any weather. Even while fighting a pandemic, the company can be a low teens revenue grower, with steady free cash flow margin improvement, plus a $500 million reloaded share buyback program after $1 billion purchased over the past year. Go Daddy seems to be getting more nimble with its product offerings, including a new freemium option, although we would like to see a broader sell through across the portfolio.
Jefferies raised its $85 price target to $90. The consensus target is $79.62, and Go Daddy stock closed at $75.47 on Monday.
HubSpot
This stock has rallied up from the March lows but looks ready to break out. HubSpot Inc. (NYSE: HUBS) is a cloud-based provider of inbound marketing tools such as website content management, blogging tools, email campaign, search engine optimization, social media monitoring and management, customer relationship management and others for small businesses and midsized companies.
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The company’s tools provide a single console for marketing professionals to generate new customer leads, convert leads to customers and customers to repeat customers. The Jefferies analysts remain impressed:
HubSpot reported a strong first quarter, getting out of the gate quickly in 2020. COVID-19 headwinds hit in late March and the company lowered guidance as a result. We are encouraged that after an initial 2-3 weeks of headwinds to retention and bookings in March and early April, HubSpot began to benefit from a tailwind from companies looking to shift from offline to online marketing and that cancellations and downgrades have started to stabilize into a new normal in April. We believe the decision to provide fiscal year 2020 guidance itself reflects the resilience of the business model and the company’s customers/partners.
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The Jefferies price target was lifted to $202. The consensus target is $167.29, and Hubspot stock closed most recently at $183.54.
Neurocrine Biosciences
This biopharma company is partnering with a top big pharmaceutical company and the data has been very solid. Neurocrine Biosciences Inc. (NASDAQ: NBIX) is focused on developing and commercializing therapies for neurological and endocrine disorders. The company’s lead asset is Ingrezza, approved for the treatment of tardive dyskinesia and in development for the treatment of Tourette syndrome.
The company has partnered with AbbVie on elagolix, in development for the treatment of endometriosis and uterine fibroids, and it is developing opicapone as an adjunct therapy for Parkinson’s disease.
The Jefferies report said this:
We remain positive for NBIX based on survey-predicted growth prospects for Ingrezza. Our docs prescribe Ingrezza to a significant portion of new patients for both mod-to-severe and mild TD, and see a pattern to continue through 2021. Despite a foreseen Covid impact in the second and third quarter of 2020, we think Ingrezza sales could re-accelerate in 2021, driven by a new sales force and TD awareness program. For the first quarter of 2020 our revenue estimate exceeds consensus by 3%, despite first quarter insurance resets.
The $115 Jefferies price target compares with the $118.05 consensus figure. Neurocrine Biosciences stock closed at $113.57, up close to 4% on Monday.
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RingCentral
This smaller cap company could be a great takeover target, and it is a member of the Jefferies Franchise Picks list. RingCentral Inc. (NYSE: RNG) offers a cloud-based solution for business communications that replaces legacy and expensive on-premise communications systems. It is delivered as an application that follows the user regardless of device (office phone, smartphone, desktop, tablet). Features include voice, text, fax, audio conferencing and integration with document and customer relationship management systems.
For some time, Jefferies has believed the company has multiple catalysts, including continued traction with mid/enterprise customers, increased partner traction, international expansion and continued dislocation in the industry from legacy PBX/UC vendors.
Last year, Avaya entered into a strategic partnership with RingCentral in which it will introduce a new unified communications as a service (UCaaS) solution. Under the agreement, RingCentral will contribute $500 million to the deal and will be Avaya’s exclusive provider of UCaaS solutions.
After the solid results, the analysts noted this:
Despite significant global disruption, RNG posted a strong first quarter and raised 2020 subscriber revenue guidance by more than the beat (ex-FX). Work-from-home measures are spurring adoption and faster sales and implementation cycles. Strong April data (+40% growth in new logos) is encouraging, and we expect the ramp of ACO, continued momentum w/ other partners, traction upmarket, and international growth to drive 2020 and likely lead to acceleration in 2021. Guidance looks appropriately conservative and leaves room for outperformance as the macro backdrop improves.
The $245 Jefferies price target was raised to $290. The posted consensus target is $251.14. RingCentral stock saw a more than 3% gain on Monday to close at $275.03.
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These five top stocks to buy are surviving nicely, with solid results posted and, best of all, reasonably positive outlooks through the second quarter and beyond. It’s important after the big snapback rally we have had that investors tread carefully and perhaps scale into positions.
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