What’s always in fashion on Wall Street? Growth. Given the current macro environment, however, compelling growth stocks have become even harder to spot. That said, despite the wild ride that has been 2020, a select few names could still shine bright and reward investors handsomely, so says the pros from the Street.
These tickers don’t have just any old growth prospects, they are some serious overachievers. Along with a track record of upward movements since 2020 kicked off, their solid businesses could drive share prices higher through 2020 and beyond.
Bearing this in mind, we set out to find stocks flagged as exciting growth plays by Wall Street. Using TipRanks’ database, we locked in on three analyst-backed names that have already notched impressive gains and boast strong growth narratives for the long-term.
Wix.com Ltd (WIX)
Founded as an online web development platform, Wix empowers its more than 72 million registered users to develop and create websites. Up 107% year-to-date, several members of the Street believe this name has plenty of fuel left in the tank.
Writing for JMP Securities, five-star analyst Ronald Josey has been impressed, to say the least. In the most recent quarter, the company added 9.3 million net registered users, the most ever in a quarter, driven by its increased marketing spend to take advantage of the digital shift brought on by the COVID-19 pandemic.
What’s more, Josey cites the fact that July new subscriber additions accelerated to 200%-plus as suggesting that the above trend is continuing to accelerate. However, he argues the most important growth indicator is cohort future collections, which was up over 90%, as “it talks to an elevated growth cadence of Wix’s Q2 new subscriber additions, and as Q2 trends continue into Q3, we believe this bodes well for 2021 and beyond (we note Q2 cohort collections were 66% year-over-year).”
Adding to the good news, the number of customers adopting higher-value products, such as Business and eCommerce subscription packages, is trending higher. Payment transactions nearly doubled quarter-over-quarter, which Josey believes speaks “to the adoption of Wix’s eCommerce products while highlighting Wix’s longer-term opportunity in payments.”
Josey added, “With accelerating trends around the adoption of Wix’s core products like Stores (which was recently upgraded), Ascend, and Payments, coupled with newer product offerings like Editor X (not in guidance), we are incrementally confident in Wix’s ability to navigate the current environment and the potential to deliver improving Collections growth for the foreseeable future.”
Taking all of the above into consideration, Josey maintains a Market Outperform rating and $363 price target. This target conveys his confidence in WIX’s ability to climb 43% higher in the next year. (To watch Josey’s track record, click here)
Where do other analysts stand on Wix? 14 Buys and 1 Hold have been issued in the last three months. Therefore, WIX gets a Strong Buy consensus rating. Given the $333.93 average price target, shares could surge 32% in the next year. (See Wix stock analysis on TipRanks)
Bilibili Inc. (BILI)
Next up we have Bilibili, which is a Chinese video sharing website based in Shanghai and centered around animation, comic and games (ACG). It has already notched a gain of 124% year-to-date, and some analysts believe that this growth story is anything but over.
Five-star analyst Alex Yao, of J.P. Morgan, tells clients he is “incrementally positive on BILI’s growth outlook.” But what’s behind his bullish thesis?
Yao noted, “Management’s comment of peak MAU reaching 200 million milestone in August 2020 makes us more positive on BILI’s long-term user growth beyond Gen-Z. We expect further user growth into Q4 2020 supported by League of Legend (LoL) World Championship Season 10 (in Sep/Oct 2020, BILI is one of the key broadcasting platforms).” To this end, the analyst estimates that MAU will surpass 400 million by 2023.
On top of this, BILI saw strong advertising revenue growth in the second quarter, with it up 108% year-over-year. According to Yao, this result “demonstrates its strong attraction to advertisers driven by its rich content and growing user base,” with the analyst expecting its solid execution in both user expansion and revenue diversification to increase its long-term addressable market.
Going forward, the company will most likely continue investing in branding and channel marketing to support user growth during strong seasonality. Expounding on the implications of this, Yao stated, “While such investment could expand near-term financial losses, we believe it could help BILI to accelerate user expansion and support monetization growth in the long run, as all of BILI’s revenue drivers (game, ads, subscription etc.) are directly linked to user growth.”
As a result, the analyst sees further user growth as a major potential catalyst. The launch of new mobile games as well as the acceleration of content provider advertising platform Huahuo, which helps content providers connect with brand advertisers, could also drive significant upside, in Yao’s opinion.
In line with his optimistic approach, Yao stayed with the bulls. Along with an Overweight rating, he keeps a $55 price target on the stock. Investors could be pocketing a gain of 32%, should this target be met in the twelve months ahead. (To watch Yao’s track record, click here)
Turning to the rest of the Street, the bulls represent the majority. With 4 Buys and 2 Holds assigned in the last three months, the word on the Street is that BILI is a Moderate Buy. At $53.43, the average price target implies 28% upside potential. (See Bilibili stock analysis on TipRanks)
Last but not least we have MercadoLibre, one of the largest eCommerce companies in Latin America. Given its rising market share, Wall Street thinks this name could see even more gains on top of its 89% year-to-date climb.
After hosting a meeting with members of MELI’s management team, Credit Suisse’s Stephen Ju is even more confident in its long-term growth prospects.
It should be noted that MELI expanded its category-take rates to Chile and Mexico in Q2 2020, with Brazil and Argentina set for 2H20 or early 2021. Ju points out that the resulting take rate rationalization could drive sellers to list more of their inventory and reduce prices. With this increased supply, he argues “MELI should be seeing the cascading benefits of an improving shopping experience and rising conversion rates.”
Additionally, in the previous quarter, there was a sequential 23% decrease in unit shipping costs. The mix of Flex and MELI Logistics, which integrates with micro carriers through a software layer, has also been improving.
Weighing in on this, Ju commented, “Its efforts to step up the buildout of its own logistics network to take down the dependency on Correios in Brazil is yielding these tangible results and also places the company to potentially underwrite a greater amount of free shipping subsidies as the unit cost of deliveries continues to decrease… All of this taken together means higher reliability, faster shipping times, and greater cost savings – which can be passed along to the consumer.”
Going forward, MELI is expected to invest in Consumer Electronics and CPG categories to fill selection gaps and improve price competitiveness. According to Ju, its expanded logistics footprint could enable the company to capitalize on this opportunity, with it then going on to tackle the groceries market.
If that wasn’t enough, despite the COVID-related headwinds, MELI has sold roughly 1 million mobile point-of-sale (mPOS) devices, versus 900,000 during Q1 2020, driven primarily by smaller merchants and SMBs. As the economy continues to reopen, TPV per device should also ramp up, in Ju’s opinion.
The analyst added, “Also with ~20 million Payers not yet Active Buyers on the Marketplace, there is a cross sell/upsell opportunity above and beyond that of existing fintech products such as QR codes, MELI-branded credit/debit cards, consumer credit, and asset management/Fundo.”
What’s more, Ju believes increased consumer recognition through brand advertising, particularly in Brazil and Mexico, could help fuel momentum.
Everything that MELI has going for it convinced Ju to reiterate his Outperform rating. Along with the call, he attached a $1,484 price target, suggesting 37% upside potential. (To watch Ju’s track record, click here)
In general, other analysts echo Ju’s sentiment. 9 Buys and 2 Holds add up to a Strong Buy consensus rating. With an average price target of $1,322.73, the upside potential comes in at 23%. (See MercadoLibre stock analysis on TipRanks)
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.