For investors looking to hold stocks for a long period, growth stocks are best bets now, as the recent sell-off triggered by the positive news related to the coronavirus vaccine has led to better entry points for some high-growth stocks. Even though most growth stocks are now trading at expensive valuations, they have the capacity to generate huge returns in the long-term. Growth stocks typically outperform the broader market in the long run.
The iShares Russell 1000 Growth ETF (IWF), which offers exposure to large- and mid-cap US equities exhibiting growth characteristics, has gained 32.8% year-to-date versus the SPDR S&P 500 ETF Trust’s (SPY) 13.4% returns.
Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), and Facebook, Inc. (FB) are three growth stocks that delivered strong performance last quarter and are well positioned to generate attractive returns thanks to their solid growth attributes based on innovations and strategies.
Apple Inc. (AAPL)
In October, AAPL unveiled the iPhone 12 and iPhone 12 mini equipped with 5G technology. Featuring the most 5G bands on any smartphone, iPhone 12 models offer the broadest 5G coverage worldwide. The company’s products and services also include iPad, Mac, iPod, Apple Watch, Apple TV, a portfolio of consumer and professional software applications, iPhone OS (iOS), OS X and watchOS operating systems, iCloud, Apple Pay and a range of accessory, service and support offerings.
For its fiscal fourth quarter ended September 2020, AAPL’s net sales from services increased 16.3% year-over-year to $14.5 billion. While net sales in America increased 4.7% year-over-year to $30.7 billion, net sales in Europe increased more than 13% year-over-year to $16.9 billion. iPhone sales accounted for nearly 41% of net sales. EPS of $0.73 for the quarter surpassed the consensus estimate by 4.3%.
Analysts expect AAPL’s revenue to increase 15.3% for the quarter ending December, and 14.8% in 2021. The company’s EPS is expected to increase 20.7% in 2021, 9.3% in 2022, and at a rate of 12.6% per annum in the next five years. AAPL has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.
At the ‘Hi, Speed’ event held by AAPL in October, the company announced the MagSafe Duo Charger, which is a folding travel charger capable of charging the iPhone and either an Apple Watch or AirPods. Amazon Web Services (AWS), the cloud computing arm of Amazon.com, Inc. (AMZN), announced that it is integrating AAPL’s Mac Mini to its cloud.
On a year-to-date basis, AAPL has rallied 62.2% to close yesterday’s session at $122.72. During the past six months, AAPL soared 49.8%. As the technology advances and the demand for 5G increases, AAPL’s stock is expected to soar in the coming months.
How does AAPL stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #7 out of 30 stocks in Technology – Hardware industry.
Amazon.com, Inc. (AMZN)
AMZN is the world’s largest online retailer. The company generated nearly $3.5 billion in sales from its ‘Prime Day’ held in October. The company also announced attractive deals for Cyber Monday. AMZN not only dominates the cloud segment with AWS but also entered the healthcare segment launching Amazon Pharmacy last month.
The company reported promising results for the third quarter ended September 2020. AMZN’s net sales increased 37.4% year-over-year to $96.1 billion, as a greater number of people shopped online this year due to the pandemic. North America net sales increased 39.2% year-over-year to $59.4 billion. Moreover, net sales from AWS also increased 29% year-over-year to $11.6 billion. Net income increased 196.7% year-over-year to $6.3 billion. EPS increased 192.4% year-over-year to $12.37.
Analysts expect AMZN’s revenue to increase 36.6% for the quarter ending December 2020, 35.4% in 2020, and 18.3% next year. The company’s EPS is expected to grow 51.5% this year, 30.1% next year, and at a rate of 36.4% per annum over the next five years. AMZN’s earnings surprise history looks impressive with the company missing the consensus estimate in just one of the trailing four quarters.
Yesterday at the AWS re:Invent event, AMZN announced three new analytics capabilities that will improve the performance of Amazon Redshift data warehouses. The company also announced five new machine learning services – Amazon Monitron, Amazon Lookout for Equipment, the AWS Panorama Appliance, the AWS Panorama SDK, and Amazon Lookout for Vision. Last month, Zoom Video Communications, Inc. (ZM) extended its multi-year agreement with AWS. The stock has gained 71.5% year-to-date to close yesterday’s trading session at $3220.08. It is currently trading 9.4% below its 52-week high.
AMZN’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with a “B” for Trade Grade, and Buy & Hold Grade and an “A” for Industry Rank. Among the 59 stocks in the Internet industry, it’s ranked #15.
Facebook, Inc. (FB)
The most popular social media site, FB sees more than 1 billion stories shared every day. With a huge user base, the company is primarily driven by advertising revenue. FB’s products include Instagram, Messenger, WhatsApp and Oculus.
Confined at home, people have been taking to social media in order to stay connected, which is reflected in the company’s third quarter (ended September 2020). Monthly Active Users (MAUs) increased 12% year-over-year to 2.74 billion. Average Revenue per User (ARPU) increased 8.7% year-over-year to $7.89. FB’s revenue increased 21.6% year-over-year to $21.5 billion. EPS increased 27.8% year-over-year to $2.71.
Analysts expect FB’s revenue to increase 24.7% for the fourth quarter ending December 2020, 18.7% this year, and 23.8% next year. The company’s EPS is expected to increase 24.2% for the fourth quarter, 45.1% this year, and at a rate of 16.6% per annum over the next five years. FB’s earnings surprise history looks impressive with the company missing the consensus estimate in just one of the trailing four quarters.
On November 30th, FB reached an agreement to acquire Kustomer which is a top-rated CRM in order to give businesses access to best-in-class tools to help deliver excellent service and support. The company will launch Facebook News in the United Kingdom in January 2021. Last month, the company announced that people across India will now be able to send money through WhatsApp. The stock has gained 34.9% so far this year. It is currently trading 5.9% below its 52-week high of $304.67.
It’s no surprise that FB is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade, and Industry Rank and a “B” for Peer Grade. In the Internet industry, it is ranked #3.
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AAPL shares were trading at $123.03 per share on Wednesday afternoon, up $0.31 (+0.25%). Year-to-date, AAPL has gained 68.81%, versus a 15.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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