3 monster growth stocks that have legs for future earnings
Which investment strategy has stood the test of time? Investing in growth. Wall Street pros argue that stocks with exaggerated growth prospects reflect some of the most attractive moves out there. This growth potential extends beyond the short term, with these names defined to provide considerable returns through 2020 and beyond. That said, finding actions that fall into this category can be challenging, to say the least. According to analysts, one strategy is to take a step back and look at the big picture, focusing on names that can see long-term growth in addition to their impressive gains accumulated in the year. With that in mind, we used the TipRanks database to point out three growth stocks that received significant praise from analysts. All three of these indicators have already achieved great growth in 2020 and are prepared to continue rising further and further. Penn National Gaming (PENN) First, we have Penn National Gaming, which owns and operates gaming and racing facilities, as well as video game terminal operations across the United States. This name has increased 146% in the year to date, but some on Wall Street analysts believe that there is still plenty of fuel in the tank. PENN recently announced results for the third quarter that ended estimates. For the quarter, the company expects margins to expand by more than 900 basis points and adjusted EBITDAR to increase 5% year on year, although revenue has fallen 10% year on year. Weighing in for JP Morgan, five-star analyst Joseph Greff told clients: “The regional game recovery seen during May / June continued into the third quarter, with revenues better than feared; we had previously assumed a slower ramp as the suppressed demand normalized and little / no creep of post-COVID efficiency gains. That said, Greff acknowledges that, given the stellar performance of the stock price, some other analysts “threw in the towel with downgrades.” However, he still sees “value and catalysts ahead”. The analyst commented: “… there is a tug of war in terms of investor sentiment – which we consider healthy for stocks and almost necessary for them to continue to rise; in our opinion, investors in traditional gaming stocks are not fully encouraged and, in fact, we think there is a lot of investor skepticism about PENN’s ability to compete with DraftKings, Fanduel, Caesars Entertainment, MGM / GVC, et al. , given The relative size of the PENN balance sheet to finance the acquisition costs of early-stage sports betting customers, but we believe that this risk, insofar as it is significant, to compete is now reduced due to ~ $ 950 million raised with its recent capital increase. In addition, PENN recently launched the Barstool Sports betting app in Pennsylvania. Calling the early launch “encouraging from both a volume and marketing spend point of view,” Greff argues that he demonstrates “the potential of his unique stock capture approach”. In addition, the momentum is increasing for Barstool Sportsbook. In addition, Greff believes that the current sports betting and iGaming environment resembles the emergence of regional markets in the 1990s, when states with budget deficits turned to new sources of revenue, such as gambling on boats to help finance budget deficits. Exposing this, the analyst stated: “We think that the states will look at the USSB and iGaming in the same way and PENN will be one of the winners. We like the US regional land game / sports betting / iGaming scene and see the benefits. ” It should come as no surprise, then, that Greff stayed with the bulls. In addition to the overweight rating, he left a $ 83 price target for the stock. Investors may be pocketing a 32% gain if that goal is met in the next twelve months. (To see Greff’s history, click here) What does the rest of Rua have to say? 9 purchases, 3 withholdings and 1 sale were issued in the last three months. Therefore, PENN obtains a moderate consensus purchase rating. Based on the average price target of $ 76.77, the shares may rise 22% next year. (See Penn National Gaming stock analysis at TipRanks) Redfin (RDFN) Starting in the map-based search space, Redfin expanded its product offering to take the tour at home, listing debut and deposit processes more quickly is easy. On Wall Street, some think that name is experiencing more than just an increase in demand for COVID, with its 113% gain over the year just beginning. Although RDFN is emerging from a strong pre-announcement in the third quarter, investors were somewhat disappointed with the results. BTIG’s Jake Fuller points out that the shares were probably traded because “expectations were high and the revenue scale was modest at ~ 2%”, and “dynamic investors tend to reward volume-led beats and the RDFN actually fell short expectations on that front “. It does not help that RDFN is not a focus name for many, suggesting that investors may not have looked beyond revenue disclosure, according to Fuller. However, he argues that Street may be missing key pieces of the puzzle. The five-star analyst mentioned: “What may be being overlooked here is that the RDFN has increased commission rates with no obvious impact on conversion, and this should translate into a significantly stronger gross profit outlook for the RDFN.” To do this, he increased his estimate of gross profit to 2021 by 47%. Looking at the details of the quarter, RDFN experienced robust demand, with Real Estate Services revenue increasing 36% year over year. Site traffic and transactions have also increased compared to the previous quarter. However, it should be noted that the positive side was driven by revenue per transaction. “This is important because it suggests that expected increases in commission rates are finally contributing,” said Fuller. “By our count, Real Estate Services revenue went from 1.68% of GTV in the third quarter of 2019 and 1.78% in the second quarter of 2020 to an estimate of 1.85% in the third quarter of 2020. A hit of four points in the gross margin suggest a high flow in this. Although it is difficult to assess the durability of demand, price gains and a better margin profile must be sustainable ”, commented Fuller. In line with his optimistic approach, Fuller takes the side of the bulls, reiterating a Buy rating and a target price of $ 65. This goal conveys his confidence in the RDFN’s ability to rise 45% more next year. (To see Fuller’s history, click here) Returning to the rest of the Street, opinions are more varied. With 6 purchases, 5 retentions and 1 sale attributed in the last three months, the word on the street is that RDFN is a moderate purchase. At $ 50, the average target price implies an 11% upside potential. (See Redfin stock analysis at TipRanks) Vertiv Holdings (VRT) As a leading global provider of hardware, software and services, Vertiv Holdings helps facilitate an interconnected market for digital systems where large amounts of indispensable data need be transmitted, analyzed, processed and stored. Up to 71% year to date, more gains may be on the horizon, says Wall Street. Even with the great appreciation of the stock price, Nigel Coe, an analyst at Wolfe Research, sees a favorable risk / reward profile. “We believe that Vertiv is a rare breed that can attract a wide variety of investors: a mid-cap growth company that can deliver an attractive margin expansion with a discounted valuation, led by a first-class executive team,” he explained. him. When it comes to VRT’s growth path, its main end customer markets are data center and telecommunications. These spaces are areas where Coe expects to see growth in 2020 and 2021, as well as long-term secular winds due to increased data intensity and 5G updates. In addition, management has traced a path to 500 basic points of margin expansion, driven by efforts to keep fixed costs constant through a variety of operational upgrades and a reduction in organizational complexity. “This is the manual that Executive President David Cote has so successfully implemented under his management at Honeywell, and it gives us the conviction that a similar manual can be implemented at Vertiv,” said Coe. It should be noted that VRT ended the second quarter of 2020 with a net debt of around US $ 2.1 billion and net debt / EBITDA reaching 4.2x. Even at the upper end of the range, Coe argues that the balance sheet can quickly deleverage. To do so, he calculates the excess capital of $ 1 billion by 2023, assuming a net debt / EBITDA ratio of 2x. “Currently, we don’t see Vertiv as a history of clear capital deployment, but that could come to light in the period 2022/23 – we could certainly see acquisitions that reinforce its power distribution capacity and perhaps in the DCIM layer. Other potential options include the settlement of cash subscription warrants (currently reflected in our calculation of diluted share counts) and the institution of a dividend that would expand the potential for institutional ownership. We also cannot ignore the scope of strategic partnerships with many larger players in the electrical equipment market that are not significant players in the data center, ”commented Coe. Everything that VRT has in its favor convinced Coe to reiterate an Outperform rating. Along with the call option, he set a price target of $ 23, suggesting a potential increase of 22%. (To see Coe’s history, click here) Are the other analysts in agreement? They are. Only purchase ratings, 4 to be exact, have been published in the past three months. So the message is clear: VRT is a strong buy. Given the average price target of $ 20.75, the shares may rise 10% next year. (See the analysis of Vertiv Holdings’ shares in TipRanks) Disclaimer: the opinions expressed in this article are exclusively those of the analysts presented. The content should be used for informational purposes only. It is very important to do your own analysis before making any investment.