Technology

Jefferies Top Growth Stocks to Buy Are Momentum Monsters for 2018

Lee Jackson

Published: November 6, 2017 9:55 am

Last Updated: January 12, 2020 6:36 am

Like we have said recently, as the aging bull market continues to grind higher, the only way for companies to continue to sustain the big market moves is with solid earnings that meet or exceed expectations and with positive forward guidance. With most of third-quarter results in the books, some big-time winners are emerging, and four of them are tech and gaming giants.

In a series of new reports, Jefferies crunches through the third-quarter numbers and is extremely positive on four major stocks that should continue to excel the rest of this year and well into 2018. All four are rated Buy, and make good sense for aggressive accounts that have big risk tolerance.

Activision Blizzard

This remains a top pick on Wall Street and Jefferies says to buy the shares now. Activision Blizzard Inc. (NASDAQ: ATVI) develops and publishes online, personal computer (PC), video game console, handheld, mobile and tablet games worldwide. It develops and publishes interactive entertainment software products through retail channels or digital downloads and downloadable content to a range of gamers.

The company reported outstanding results that the beat estimates and raised forward guidance. Top Wall Street analysts agree the company guidance is conservative and, with multiple game releases coming the rest of this year, the stock remains a top buy. The Jefferies report noted this:

The Company reported a strong third quarter beat and raise last week. As our analysis suggested, 50%+ of Destiny units were downloaded, the highest of any new console game we have tracked. In addition, Activision Blizzard generated a record $1 billion in high-margin in-game spending throughout the quarter. The results support our thesis that the company is evolving into a more recurring, profitable business. Blizzcon and the Call of Duty: WWII November 3rd launch both happened last. We think the biggest announcement could be a World of Warcraft expansion. We take estimates and price target higher. Our fourth quarter 2017 estimate is $1.03, Street looks for $0.89.

The Jefferies price target for the shares is $82, and the Wall Street consensus target is $70.04. The stock traded early Monday at $63.40.

Adobe Systems

This high-profile old-school software company has been posting outstanding earnings. Adobe Systems Inc. (NASDAQ: ADBE) operates in three segments. The Digital Media segment provides tools and solutions that enable individuals, small and medium businesses, and enterprises to create, publish, promote and monetize their digital content. The other segments are Digital Marketing and Print and Publishing.

Top analysts feel there are an additional 11.7 million potential users, driven by growth in the creative community, student and teacher penetration and conversions from the piracy. Market and value expansion provide additional upside. The company posted outstanding second-quarter numbers and the rest of the year looks very solid.

Adobe is also reasonably safe route for investors looking to own a company with marketing automation product, which has become huge. Adobe also a partnership with Microsoft, which Jefferies feels is expanding, and it also has Facebook and Google as partners in the ad cloud.

Jefferies has a $190 price target, and the consensus target is $178.86. The shares traded Friday morning at $181.20.

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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.

The company posted solid results, and Jefferies said this in the research:

Company reported earnings last week and posted a 12c beat on earnings per share and raised the fiscal 2018 guidance by 10c. The key holiday launch of Star Wars Battlefront on 11/17 will be the near term focus and biggest swing factor for fiscal 2018. We believe if Star Wars can encourage users to spend on virtual goods, similar to FIFA, the game could drive meaningful upside to fiscal 2018 and 2019 EPS, though our expectations have been tempered in response to criticism from beta testers. We remain bullish on the company and expect them to benefit from more in game spend, downloads and mobile

The $138 Jefferies price target compares with the consensus target of $127.40. The stock was last seen trading at $112.85.

Facebook

The huge social media leader has continued to post gigantic numbers, and it is one of the top picks in internet media for 2017 across Wall Street. Facebook Inc. (NASDAQ: FB) operates as a mobile application and website that enables people to connect, share, discover and communicate each other on mobile devices and personal computers worldwide.

Its 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.

Top analysts feel that Facebook’s long-term forecasts are more easily attainable, especially as the company continues to grow and employ new platforms for online advertising. Jefferies is in that camp as well and noted this in its report:

The Company reported last week. Facebook is growing at 2x the rate of its large cap Internet peers while delivering 50%+ operating margins. We see further upside ahead from user growth and the company sees upside potential to its $80 U.S. average revenue per user through better targeting as well as improvements on Instagram. There remains opportunity to increase Instagram ad load and to expand the ad base to include more direct response oriented advertisers. Company did guide to big growth in capital and operating expenditures in 2018, but note that their growth guidance for 2017 was high versus what they’ve achieved so far.

Jefferies has set its price target at $225. The posted consensus target is $196.53, and shares were trading at $179.75.

These four outstanding companies are in the right place. not just for the rest of this quarter, but for next year and years to come. It is important to note they have all made big runs, so buying partial positions and looking for a pullback may make sense.