Wall Street’s forward looking nature remains key to understanding how the S&P 500 and the Nasdaq have jumped to new records despite the pandemic. The market is also not simply diving into stocks indiscriminately. It is the reason that tech powers like Apple AAPL and Nvidia NVDA rest near new heights and Royal Caribbean RCL and Marriott MAR have miles to climb before they hit their pre-coronavirus levels.
Positive signs of economic recovery continue to pop up, from existing U.S. home sales to solid PMI data. This coincides with the improving third quarter earnings outlook that came after a stronger-than-expected second quarter season (also read: Improving Economic Momentum Driving Earnings Gains).
On Monday, the S&P 500 jumped to another new high on the back of potentially important coronavirus treatment news. Meanwhile, people and businesses are adapting to the current conditions because there is really no other good alternative.
Plus, the historic monetary and fiscal support is helping prop up the equities market. And with interest rates so low, stocks could continue to climb higher.
With this in mind, let’s discuss three stocks that are poised to grow both their top and bottom lines during the current economic uncertainty that also boast strong Zacks Ranks at the moment…
JD is one of China’s biggest Internet companies by revenue. The e-commerce powerhouse sells everything from smartphones to clothing and food. The firm also operates travel services, sells industrial products, and runs a logistics and fulfillment segment. Plus, JD offers a variety of other professional services, including consumer targeting, marketing, analytics, and financing. And JD’s budding healthcare division features pharmaceutical and healthcare products and services.
JD might best be described as a digital Costco COST meets Amazon AMZN, and its shares have surged 167% in the last year to crush AMZN and Alibaba BABA. This includes a 27% expansion in the last two weeks that has it trading at new highs of around $79 per share. The recent strength came after JD posted strong Q2 results, with sales up around 30%. JD’s annual active customer accounts also jumped 30% to 417 million in the quarter, with mobile DAUs up 40%.
Despite sitting at new highs, JD trades at 0.95X forward 12-month sales, against the e-commerce market’s 4.8X and BABA’s 6.5X. JD’s earnings outlook has climbed since its report to help it earn a Zacks Rank #1 (Strong Buy) at the moment, alongside its “A” grade for Growth in our Style Scores system. Looking ahead, our Zacks estimates call for JD’s adjusted fiscal 2020 EPS figure to jump 45% on 25% stronger sales, with similar growth projected in FY21.
Activision Blizzard ATVI
Activision Blizzard’s portfolio includes everything from giant PC and console titles such as Call of Duty and World of Warcraft to mobile gaming standout Candy Crush. ATVI shares have climbed over 70% in the past 12 months to top its industry’s 43% average that includes Electronic Arts EA, Take-Two Interactive TTWO, and others. More recently, ATVI has benefitted from the stay-at-home push that’s boosted the already-booming video game industry that is projected to expand from $159 billion in 2020 to over $200 billion by 2023.
In early August, the gaming powerhouse topped our Q2 earnings and sales estimates, with revenue up 39%. ATVI’s overall monthly active users climbed 30% from the year-ago and 5% sequentially to reach 428 million. Our Zacks estimates call for ATVI’s third quarter revenue to climb another 41% to help lift its adjusted earnings by 91%.
Activision Blizzard’s longer-term earnings revisions have trended higher since its report to help it land a Zacks Rank #1 (Strong Buy). ATVI also boasts a strong balance sheet and investors should note that its $0.41 quarterly dividend payout is up 11% from 2019. The stock’s 0.50% yield comes in below the 10-year U.S. Treasury, but its low payout ratio means it has room to continue to raise its dividend, while also investing in growth.
Yeti sells high-end coolers and it has expanded its reach from commercial fishermen to tailgates, campfires, and commutes. The Austin-Texas-based company’s portfolio now includes drinkwear such as tumblers and mugs, chairs, and more. In fact, 57% of its revenue came from its drinkwear unit last quarter. Investors might want to think of Yeti in the same breath as Lululemon LULU. Both companies are new-age, higher-end retailers that have built strong brand loyalty in the social media age and are taking on the old guard as they expand internationally.
Yeti topped our Q2 revenue and earnings estimates on August 6. The company’s sales popped 7%, with direct-to-consumer revenue up 61% amid challenging times for many brick-and-mortar retailers. The cooler firm’s gross profit popped 18%, driven by expansion in its higher-margin DTC businesses, product cost improvements, and more, while adjusted earnings surged 38%. YETI shares have now soared 230% since the market’s March 23 lows to rest just off its new high at around $52 per share.
Yeti’s outlook appears strong heading into the second half, with Zacks estimates calling for its Q3 revenue to jump 13.4%, with Q4 projected to climb 14.5%. Better still, its fiscal year sales are expected to surge 11% in FY20 and another 14.3% in FY21 to reach $1.16 billion. Its adjusted earnings outlook is even stronger over this stretch and its positive bottom-line revisions help it earn a Zacks Rank #1 (Strong Buy). Yeti also boasts a strong history of earnings beats and it is part of a space that rests in the top 12% of our over 250 Zacks industries.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Marriott International, Inc. (MAR): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
Activision Blizzard, Inc (ATVI): Free Stock Analysis Report
TakeTwo Interactive Software, Inc. (TTWO): Free Stock Analysis Report
Costco Wholesale Corporation (COST): Free Stock Analysis Report
lululemon athletica inc. (LULU): Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report
Electronic Arts Inc. (EA): Free Stock Analysis Report
JD.com, Inc. (JD): Free Stock Analysis Report
Alibaba Group Holding Limited (BABA): Free Stock Analysis Report
YETI Holdings, Inc. (YETI): Free Stock Analysis Report
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