Increasingly, the top Wall Street firms that we cover are starting to agree that while the future’s still bright for the U.S. economy, and despite a strong 2019 start, the next few years may be one of stock market gains that are much lower than the norm has been over the past 10 years. When that is the case, then investing strategies often shift from indexing to a more disciplined stock picking routine, and that’s when investors need solid growth ideas.
Jefferies highlights its top growth stocks to buy each week, and this week is no exception. While these companies are better suited for accounts that have a higher risk tolerance, they all make good sense now, and all have outstanding upside potential. We found four that look solid now, and they are among the top U.S. growth calls at Jefferies for this week.
The huge social media leader has been incredibly volatile and had an absolutely wretched 2018. 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.
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.
Despite the terrible earnings results posted last year and other negatives, Facebook posted very solid first-quarter results. Jefferies said this:
The Company reported first quarter results last week, with a strong beat showcasing the strength in the organic business. In addition, operating expense growth came in lower than expected, demonstrating prudent mgmt. and leaving the door open for further upside through 2019. While the company did highlight ongoing negotiations with the FTC, which may result in a $3-5 billion fine, we see this as a short-term issue that FB will resolve. We raised our 2020 estimated EPS estimate, but continue to see the potential for upside, driven by better than expected monetization of Instagram.
The Jefferies price target for the shares is $230, and the Wall Street consensus target is $219.67. The shares closed trading on Tuesday at $193.40.
HubSpot
This stock has rallied recently and may be a breakout candidate. 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 mid-sized companies.
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. Jefferies remains impressed and noted this:
The company’s annual proxy statement showed that management beat internal annual recurring revenue targets for 2018 and ARR growth accelerated in ’18. Our work shows new customer bookings accelerated sharply and we remain confident in our above consensus sub rev estimate. The Company reports on 5/7. We do believe the recent outage for HUBS products represents a potential near-term risk as it may have impacted the ability to close deals but we remain confident in our above consensus estimates for 2019.
Jefferies has a $200 target price, while the consensus price objective is just $179.78. The stock was last seen trading at $184.49.