Where can you find affordable stocks to buy now? The market has put on a terrific rally recently. The S&P 500 is up 19% year-to-date. Boosted by a number of positive trade developments between the U.S. and China, the index has recently set a new all-time closing high of 2,995.
But that can make finding stocks at reasonable levels a challenge. Goldman Sachs picks up on this in its recent client report. “The valuation premium for growth is elevated today relative to history; Software in particular now carries the highest multiples since the Tech Bubble” writes the firm’s chief U.S. equity strategist David Kostin.
When it comes to the big tech names, the analyst has a warning for us. He says: “Rising market concentration and the political landscape suggest that regulatory risk will persist and could eventually weigh on company fundamentals.”
However for investors still keen to snap up growth stocks, don’t despair. The firm has dug deep into its coverage universe to pinpoint some key names. The bank looked for Russell 3000 stocks with a $1 billion-plus valuation that met multiple criteria. Namely: positive sales growth in the past three years, averaging at least 10%; consensus 10%-plus annual sales growth for the next two years; consensus 2019 net profit margins of 10%-plus; forward EV/sales ratios below 6x; and — crucially — low regulatory risk based on share of industry U.S. sales.
So let’s now dive in and see which five stocks make the cut:
Strong Growth Stocks to Buy: Lululemon (LULU)
Lululemon Athletica (NASDAQ:LULU) is excelling in a fast-growing market — athletic apparel that can be worn for relaxing and for sport. Indeed, the company recently reported stellar earnings results that showed its growth runway is only just beginning. Revenue, for example, grew over 20% year-over-year to $782.3 million, easily beating the $756.1 million consensus. Meanwhile 14% same-store sales growth sailed past the expected figure of 11.5%.
“For a while, we have highlighted [Lululemon] as a key market share grabber and innovator within athleisure and one of the most compelling growth stories in all of consumer,” cheers Oppenheimer’s Brian Nagel. “Last night’s report from [Lululemon] goes a long way in helping to support our positive thesis on the company and its shares.”
This five-star analyst has a $225 price target on the stock (24% upside potential).
Meanwhile, Susquehanna’s Sam Poser called the results “exceptional,” adding that LULU stock remains the “premiere retailer in our (and likely any) coverage universe.” Momentum is continuing, and as Poser says: “There is more room to run.”
Interested in Lululemon stock? Get the free LULU Stock Research Report.
Advanced Micro Devices (AMD)
Chipmaker Advanced Micro Devices (NASDAQ:AMD) also makes it onto Goldman Sachs’ top growth stocks list. AMD is buzzing right now. Investors are getting excited about AMD’s new “Zen 2” family of desktop processors about to hit the markets on July 7.
During trade show Computex, AMD CEO Dr Lisa Su announced that the new “Zen 2” core offers up to 15% estimated instructions per clock (IPC) uplift vs previous Zen offerings. Plus the company also unveiled its third-generation AMD Ryzen desktop processor family. This is based on the new 7nm “Zen 2” architecture.
“Next week (July 7th) is AMD’s big 7nm launch of 7nm Ryzen 3000 desktop CPUs and 7nm Navi GPUs and we expect a strong volume ramp for 2H19 based on our field checks in Taiwan recently” enthuses top Rosenblatt analyst Hans Mosesmann.
Take note because, as Mosesmann says: “AMD’s 7nm Ryzen 3000 on follow-on roadmap will dominate all segments of desktop CPUs for the 2-3 years in terms of cost, performance, and power in our opinion.” The five-star analyst has a buy rating on AMD and $42 price target (35% upside potential).
All this is very bad news for rival Intel (NASDAQ:INTC): “The notion that Intel may be cutting desktop prices by some 15% is amusing to us given that even cutting prices by 50% may not do the trick in limiting AMD share gains. Intel has a die size problem with its 14nm when compared to AMD’s use of TSMC’s 7nm” adds the analyst.
Ulta Beauty (ULTA)
Beauty store chain Ulta Beauty (NASDAQ:ULTA) boasts a bullish “strong buy” Street consensus. That’s with 8 recent buy ratings vs just 1 hold rating.
Shares in Ulta dropped 4% after Amazon announced that it had started selling beauty products used by licensed stylists, barbers and beauticians. However, as the analyst writes, the two businesses are actually more different than you may initially think. And that should limit the damage for a company like Ulta — especially in comparison to a company like Sally Beauty (NYSE:SBH) which specifically focuses on industry professionals.
“Amazon’s new online store specifically targets professional stylists (largely hair stylists, in our view), who will have to upload their license (such as state-issued cosmetology, barber, or esthetician licenses) in order to purchase products from the site. Ulta, meanwhile, targets the end-user beauty enthusiast” wrote Hofkin.
“Furthermore, Ulta does not offer any specific incentives for professional stylists, and we believe the company’s sales to this end-market are quite minimal” he added. Plus the analyst noted that one of the largest categories for professionals is color, which Ulta does not sell.
“There is no change to our Outperform rating, in light of what we view as a still-solid long-term growth story and given what we consider to be a reasonable to attractive valuation of a 25-26 times forward P/E multiple (below its three-year average of 28 times and its five-year average of 29 times)” the analyst concluded.
Supernus Pharmaceuticals (SUPN)
Supernus Pharmaceuticals (NASDAQ:SUPN) is developing innovative products to treat central nervous system diseases. It already has two commercial products on the market. These are Trokendi XR, a once-a-daily pill for migraine prevention, and Oxtellar XR an extended release pill for reducing or even completely preventing seizures.
“We anticipate the core Trokendi XR and Oxtellar XR businesses will continue to perform well, particularly the former, with the ongoing roll-out for the migraine prevention indication” comments Cantor Fitzgerald’s Matthew Lillis.
He reiterated his buy rating on the stock with a $60 price target. The analyst contended that: “Over the next 12-24 months, with provision of positive clinical trial data, we believe investors will better appreciate the value of pipeline assets SPN-810 and SPN-812 and the bipolar indication opportunity for Oxtellar XR.”
Keep your eye on SPN-812 specifically. This Phase 3-drug is intended to help treat ADHD (attention deficit hyperactivity disorder). According to Jefferies analyst David Steinberg, sales could reach $500M or more with a projected 2020 launch. Non-stimulant drugs represent a major opportunity in the “very large” ADHD market given “suboptimal” current options, says Steinberg.
The stock has only received three recent analyst ratings. However all three of these ratings are “buy.” What’s more, the average analyst price target of $59 indicates significant upside potential of 82% lies ahead.
Euronet Worldwide (EEFT)
Kansas-based Euronet Worldwide (NASDAQ:EEFT) is a provider of electronic payment services. The stock is rallying right now, and five-star Northland Securities analyst Michael Grondahl sees plenty of catalysts ahead. In particular, Visa (NYSE:V) has just announced that it will allow dynamic currency conversion (DCC) on international ATM transactions. With this rule change, Euronet will be able to expand its DCC offering to all Visa-issued cards on its ATMs in Europe and on new and existing ATMs around the world.
“We believe EEFT is on track for another seasonally strong summer in ATM/EFT that now has an increased TAM with Visa DCC. Ria (Money Transfer) continues to be a solid and growing business that still only has 4.8% market share. epay digital technology is creating new use cases and can be applied back into the ATM and MT businesses.”
“Overall, EEFT has plenty of opportunities to continue on a strong growth trajectory” the analyst concludes. In total, four analysts have published buy ratings on the stock in the last three months. Only one one analyst staying sidelined for now.
See what the experts are saying about your stocks now at TipRanks.com. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities.