Which stocks are investors thankful for? The answer is clear: massive growth stocks. This is because these names demonstrate the potential for plenty of share price growth. We don’t just mean in the short-term. No, we’re talking over the course of the next few years.
However, no one said finding these stocks with stellar growth prospects was going to be easy. At the end of the day, any investment is accompanied by some degree of risk, with no sure-fire way to predict which names will come out on top. So what’s an investor supposed to do?
One option is to take advantage of TipRanks.com. The platform’s wealth of market data arms investors with the information they need to see the bigger picture. During our own search, we used the platform to zero in on 3 stocks primed to outperform the market in the coming year and beyond.
Let’s dive right in.
Mercadolibre, Inc. (MELI)
Mercadolibre was developed as an online marketplace for consumers in Latin American countries, with it now expanding its services to cater to the region’s under-banked community through its digital payments system, Mercado Pago. Given that $13.4 billion worth of goods are sold on the marketplace as well as its 93% year-to-date climb, it’s no wonder Wall Street is intrigued.
After its third quarter earnings release, its growth story sounds even more promising. In terms of total payment volume (TPV), MELI flew past the $7.2 billion consensus estimate, with the figure coming in at $7.6 billion. In local currency, this amounts to a 190% increase for off-platform and a whopping 300% gain for digital wallet. On top of this, the company was able to add 1.6 million active payers.
That being said, the postal strike in Brazil did take a toll on gross merchandise volume (GMV) by $35 million. In spite of this obstacle, GMV still gained 37%, up from 33% in Q2. While some expressed concern regarding its realized EBITDA margins of -9%, J.P. Morgan analyst Andre Baggio notes that this is a result of MELI’s investment back into the business. “Most of the year-over-year pressure came from a 9pp increase in branding initiatives inside marketing expenditure, which is not used to boost short-term results but rather to help build a stronger brand for the future. On top of marketing, MELI is also investing more in fulfillment and credit,” he commented.
The four-star analyst added, “We see MELI as very well positioned in the Latin American e-commerce and Fintech environments.” To this end, he kept his Overweight rating while reducing the price target from $750 to $700. Even at this lower target, Baggio thinks shares could surge 24% over the next twelve months. (To watch Baggio’s track record, click here)
Similarly, other Wall Street analysts have been impressed by MELI. It earns a ‘Strong Buy’ consensus rating thanks to the 7 Buys and 1 Hold assigned in the last three months. In addition, the average price target of $692 implies 22% upside potential. (See Mercadolibre stock analysis on TipRanks)
JD.com, Inc. (JD)
The Chinese e-commerce company just posted an earnings beat of monster proportions. As a result, several members of the Street believe that now is the time to add JD (up 53% year-to-date) to your shopping cart.
To kick off its third quarter earnings announcement, JD reported that revenue had grown at its fastest rate since Q2 2018, up 29% year-over-year. Not to mention even with the intense competition it faces in the space, annual active users increased by 13 million, with the new total landing at 334 million, and monthly active users were up 36%.
Credit Suisse’s Tina Long argues that JD’s focus on gaining users from “lower-tier” cities could drive this figure to further accelerate. She cites the fact that “(1) 70% of new users are from lower-tier cities; (2) Order and GMV growth in lower-tier cities was the highest in the past six quarters; (3) It performed particularly strongly in large ticket sized items like electronics & home appliances. Avg. ticket size in lower-tier cities was Rmb200, higher than peers” to back up this conclusion. As a result, she maintained her bullish call and bumped up the price target from $41.40 to $43.50, suggesting 36% upside potential. (To watch Long’s track record, click here)
Meanwhile, Alex Yao of J.P. Morgan reminds investors that the year-over-year decline in GPM and weak net margin guidance don’t impact the strong profit growth outlook. “We suggest investors focus on profit growth: 1) the GPM YoY decline in 3Q19 didn’t affect the solid OPM YoY improvement (2.2% from 0.6%); 2) higher revenue growth can also lead to solid profit growth even if JD sacrifices discretionary profit; and 3) acquiring more new buyers is positive for longer-term upside,” he explained. This prompted the four-star analyst to stay with the bulls, boosting the price target by $1 to $43. (To watch Yao’s track record, click here)
When it comes to the rest of the Street, the consensus is split right down the middle. 3 Buys and 3 Holds add up to a ‘Moderate Buy’. Based on the $39 average price target, the potential twelve-month gain is 23%. (See JD.com stock analysis on TipRanks)
Yandex N.V. (YNDX)
Yandex is a Russian internet and technology company that operates a popular search engine. On the heels of its announcement that it will be updating its corporate governance, some analysts are standing firmly behind YNDX, stating that the company’s 48% year-to-date growth is just the beginning.
In order to align its corporate governance with country interests, the Priority Share, which is currently held by Sberbank, will get more rights and will be held by the Public Interest Foundation (PIF). The PIF is set to be governed by a board of 11 directors, including members from the five top Russian universities, three non-governmental institutions and the company’s three representatives.
These new rights include the option to prevent a single entity from accumulating economic or voting interests in Yandex of 10% or more, down from the current 25% level, to make binding nominations for two members of the board, to temporarily replace the General Director of the Russian subsidiary and appoint the Interim General Director in special cases and Class A shareholders will be assigned with additional rights, including a requirement to get an approval from them for certain material transactions. Founder and CEO Arkady Volozh will also see his stake be moved to a family trust, with shares no longer being converted into Class A upon his death.
UBS analyst Ulyana Lenvalskaya sees the changes as a good thing for YNDX shares. “We think the proposed changes i) address the single-man risk/outline a clear succession plan and ii) create a new layer of Russian IP and data protection; as a result recently intensified regulatory pressure on Yandex is likely to diminish, we believe,” she noted. Bearing this in mind, she reiterated her Buy rating and $54.30 price target. This conveys her confidence in YNDX’s ability to rise 34% in the next twelve months. (To watch Lenvalskaya’s track record, click here)
Looking at the consensus breakdown, 2 Buys published in the last three months compared to no Holds or Sells amount to a ‘Moderate Buy’. Its $52 average price target also implies 29% upside potential. (See Yandex stock analysis on TipRanks)