Growth stocks, primarily in the technology sector, have witnessed a massive rally since the mid-March market slump. These companies have benefited from the change in consumer behavior and digital transformation caused by the pandemic.
The market-beating performance of growth stocks is evident from the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 30.7% year-to-date gain versus the broader S&P 500 index’s 14.8% returns.
These growth stocks are expected to continue their momentum in 2021 as well. Even though the vaccination process has started in the United States, it will take some time for the economy to reflect the impact. So, the demand for technology is expected to remain high in the upcoming quarters. Transformation in the way many companies operate could be permanent.
Companies like Amazon.com, Inc. (AMZN), PayPal Holdings, Inc. (PYPL), Advanced Micro Devices, Inc. (AMD), and Logitech International (LOGI) have seen significant gains this year. They have witnessed high revenues and EPS growth amid the pandemic and are well-positioned to see improve their financials further in the upcoming quarters. These companies are also innovating quickly to meet evolving customer needs.
Amazon.com, Inc. (AMZN)
AMZN needs no introduction. In addition to e-commerce, the company also provides cloud services through Amazon Web Services (AWS) to enterprise customers. AMZN’s stock has gained 73.3% so far this year.
AMZN has recently started to provide translation-on-the-go services through its Alexa smart-home device. AMZN is also poised to enter the online pharmacy business through Amazon Pharmacy which will deliver pharmaceutical products. This move could greatly increase the market capitalization for AMZN.
AMZN’s revenue grew at a CAGR of 28.2% over the last five years. The company’s EBITDA grew at a CAGR of 50.1% over the last three years.
AMZN is expected to see revenue growth of 36.7% for the quarter ended December 2020 and 18.3% in 2021. The company’s EPS is estimated to grow 10.5% for the quarter ended December 2020 and at a rate of 36.4% per annum over the next five years.
How does AMZN stack up for the POWR Ratings?
B for Trade Grade
B for Buy & Hold Grade
A for Industry Rank
B for Overall POWR Rating
The stock is also ranked #18 out of 61 stocks in the Internet industry.
PayPal Holdings, Inc. (PYPL)
PYPL operates an online platform that allows digital and mobile payments. The company has worldwide operations. PYPL’s stock has risen 118.6% year-to-date.
PayPal Ventures, a subsidiary of PYPL, has recently closed investments in Paxos and Tink which are both FinTech start-ups. The company has also launched a new service that will enable users to buy, hold, and sell cryptocurrencies. With the growing popularity and use of cryptocurrencies around the world, this move could greatly increase PYPL’s users.
The company’s revenue grew at a CAGR of 18% over the last five years. PYPL’s EBITDA grew at a CAGR of 19.8% over the last three years.
PYPL’s revenue is estimated to increase by 22.7% for the quarter ended December 2020 and 18.7% in 2021. The company’s EPS is expected to rise by 15.1% for the quarter ended December 2020 and 23% per year over the next five years.
PYPL’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade. It is ranked #2 out of 47 stocks in the Consumer Financial Services industry.
Advanced Micro Devices, Inc. (AMD)
AMD is involved in the development, production, and marketing of semiconductor products including microprocessors. The company’s products are used in computers worldwide. AMD’s stock price has increased 109.2% year-to-date.
The company has recently announced the production of the world’s fastest HPC accelerator which is meant for use in scientific research. The company has also entered into a joint development agreement with IBM to work on artificial intelligence and cloud computing projects.
AMD’s revenue has grown at a CAGR of 15.1% over the last five years. The company’s EBITDA has grown 157.3% year-over-year.
AMD’s revenue is expected to grow 41.7% for the quarter ended December 2021 and 26.3% in 2021. The company’s EPS growth is expected to be 46.9% for the quarter ended December 2021 and 38.2% per annum over the next five years.
It’s no surprise that AVGO has a “Strong Buy” in our POWR Ratings systems with a grade of “A” in Trade Grade, Buy & Hold Grade, and Industry Rank. In the 86-stock Semiconductor & Wireless Chip industry, AVGO is ranked #5.
Logitech International (LOGI)
LOGI develops, manufactures, and markets hardware and software products for use in gaming, social media, and other applications. The company has global operations. LOGI’s stock has gained 101.1% year-to-date.
LOGI has recently announced the release of Logitech G PRO X SUPERLIGHT, which is the company’s lightest wireless esports gaming mouse to date. The company has also entered into a partnership with Riot Games to produce a line of licensed League of Legends products.
LOGI’s revenue grew at a CAGR of 12.7% over the last five years. The company’s EBITDA has grown at a CAGR of 30.2% during the same period.
LOGI’s revenue growth is expected to be 20.7% for the quarter ended March 2021 and 38.4% for 2021. The company’s EPS growth is expected to be 80.5% in 2021 and 24.6% per annum over the next five years.
LOGI’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade and Buy & Hold Grade. It is ranked #8 out of 30 stocks in the Technology – Hardware industry.
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AMZN shares were trading at $3,187.19 per share on Monday morning, down $14.46 (-0.45%). Year-to-date, AMZN has gained 72.48%, versus a 14.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More…
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