Bulls are ready to narrow in on the winners after the S&P 500’s historic rally which culminated in the index reaching over 3,000 on July 10. But how are investors supposed to pick the stocks that are poised for success?
As investors, we look at many factors proven to increase the chances of finding the stocks that are best positioned for long-term success. These factors include financial blogger opinions, insider activity and news sentiment. The Smart Score from TipRanks combines all this data into a single numerical score with 10 being the highest.
We found three tech stocks with a “Perfect 10” score that are ready to outperform.
Salesforce.com, Inc. (CRM)
Salesforce is the leading provider of cloud-based business support software. They offer data-driven solutions in a world where the amount of data being produced is only growing.
On June 10, the company broke the news of its almost $16 billion deal to acquire Tableau Software Inc. (DATA). While share prices dipped after the announcement, analysts don’t appear to be concerned.
The company dominates the CRM space. With 20% market share, it has more control than its next three competitors combined. It already boasts around 10 million customer support cases in its Service Cloud and over 3 million Sales Cloud leads. Not to mention its other product offerings that include Salesforce Einstein, Salesforce Customer 360 and the Salesforce Lightning platform are expected to drive even more revenue growth.
Q1 2020 results were strong, with the company seeing revenue increase 24% year-over-year to $3.7 billion. Cash generated from operations reached almost $2 billion, demonstrating 34% year-over-year growth.
On June 25, management updated their Q2 2020 fiscal guidance with revenue now expected to fall within the range of $3.94 to $3.95 billion, demonstrating that more growth is on the way.
Just yesterday John Difucci
, a five-star analyst from Jeffries, reiterated his Buy rating and $189 price target. He believes that despite a platform outage in May, current consensus estimates are conservative. “Salesforce's pipeline remains robust and it is well positioned to achieve its long-term goals,” he added.
Another top analyst, Jennifer Swanson Lowe said on July 5, “Channel work shows robust demand for Salesforce's solutions, and recent merger disclosures show a "thoughtful and lengthy process" behind the Tableau deal.” She reiterated her Buy rating and $190 price target on the stock.
With a ‘Strong Buy’ analyst consensus and $183 average price target, it’s clear why TipRanks scored this stock a “10.”
CRM Smart Score Details
Twilio Inc. (TWLO)
The cloud communications platform company specializes in helping businesses improve their apps and digital interactions with customers. Since Twilio’s IPO three years ago, share prices have grown 256% and analysts don’t predict a slowdown anytime soon.
The company has a strong customer base with 154,797 active customer accounts (ACAs) as of March 31, up from 53,985 a year earlier. Its revenue from its recurring software-as-a-service (SaaS) revenue only is rising as the demand for effective online communications is only growing.
In February, Twilio acquired SendGrid, a cloud-based email services company. The company believes this acquisition drove the revenue growth witnessed in Q1. For Q1 2019, revenue was up 81% year-over-year, reaching $233 million. Compared to Q4 2018, its top line increased by 14%. The company updated its full year guidance on April 30, with expected revenue to fall between $1.10 billion to $1.11 billion, up from $1.065 billion to $1.077 billion.
On June 18, top analyst, Richard Valera
, initiated coverage with a Buy rating and $165 price target. “By leveraging its early market position, a highly efficient developer-led sales model and growing array of differentiated, higher-level functions on its platform. TWLO has delivered exceptional organic growth. As well, the company's recent move up the stack into the application space with its Flex contact center adds another, meaningful growth driver to its business,” he said.
Top rated financial blogger, Luke Lango, thinks that the stock’s big growth fundamentals, favorable market fundamentals and strong technical trends make it a must buy. “All three of those tailwinds should persist for the foreseeable future, meaning that TWLO stock should continue to defy valuation standards and stay in rally mode,” he added.
The Street is bullish on this “Perfect 10”. The stock has a ‘Strong Buy’ analyst consensus, receiving 13 buy ratings vs 2 holds over the last three months. Its $154 average price target suggests 6% upside potential.
TWLO Smart Score Details
Square, Inc. (SQ)
With consumers paying less and less with cash, digital non-cash payments are expected to reach 726 billion transactions by 2020. Square has designed its payment processing technology so merchants of all sizes can accept non-cash payments. The company also offers a digital peer-to-peer payments app, an enterprise payroll app and lending services.
Square has placed significant focus on gaining international market share. The company partnered with Sumitomo Mitsui Banking Corporation, with the bank distributing its reader in all branches located throughout the country. SQ stands out among its competitors as it offers many types of digital transactions as opposed to just e-commerce solutions.
Some investors might be concerned that SQ’s valuation is too high. The stock is currently being traded at 65.6x forward earnings and 10x sales. However, its growth projects might just be enough to reassure investors.
Management expects global retail sales to grow to almost $34 billion, or at a 5% compounded annual growth rate through 2025. Square GPV is also expected to increase into 2025 by a 20%-plus annualized rate while revenue is forecasted to be up 25%. The company is attributing these jumps to hardware and ancillary solution revenue.
Josh Beck, an analyst from KeyBanc, reiterated his Buy rating and $100 price target. “While its Cash App monetization narrative may take time to develop, we remain constructive on growth potential,” he said today.
Financial blogger, Chris Lau, believes that SQ’s outlook is more conservative than it should be. “If the company raises its 2019 guidance, then SQ stock could attract more buyers, causing the stock’s rally to accelerate,” he said.
The Street is more cautiously optimistic about the last “Perfect 10” on our list. The stock has a ‘Moderate Buy’ analyst consensus and $87 average price target, suggesting 6% upside.
SQ Smart Score Details
By Maya Sasson, for TipRanks