3 of the Highest-Growth Stocks in the Market Today


Motley Fool 30 June, 2021 - 07:24am 29 views

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Investors often focus on various valuation metrics to determine if a stock is a good buying opportunity. Valuation metrics can be useful, but the majority look back over just the past year. The irony is that long-term investors should be looking forward. As we look three, five, or 10 years into the future, backward-looking valuation metrics can be less helpful than you might intuitively think.

This is why growth stocks are so appealing to investors who plan to patiently hold for years. Given enough time, top growers can compound returns many times over, making supposed overvalued stocks look like bargains in hindsight. Therefore, paying attention to growth stocks is important. And Digital Turbine (NASDAQ:APPS), Peloton Interactive (NASDAQ:PTON), and Snap (NYSE:SNAP) are three of the highest-growth stocks around. Here's why their revenue growth rates are so important for prospective investors.

Just a little over a year ago, Digital Turbine's market capitalization was less than $1 billion. But CEO Bill Stone had visions of the company becoming what he calls a "unique next-generation [advertising technology] ecosystem" to capture its slice of what it believes to be an over $300 billion addressable market opportunity. Over a year ago, it acquired a company called Mobile Posse to help build the ecosystem. And during the past year, it's acquired AdColony, Appreciate, and Fyber. Its market cap has now soared past $7 billion, in part thanks to these acquisitions. 

Here's how fast Digital Turbine's business is growing: For fiscal 2020 (which ended in March 2020), the company generated revenue of almost $139 million, which was up 34% year over year. For fiscal 2021, its revenue jumped to almost $314 million, up 126%. And for fiscal 2022, management believes it can hit a whopping $1 billion -- that's nearly eight times what its revenue was just two years ago.

Digital Turbine helps developers get their apps downloaded on mobile devices by partnering with wireless carriers like T-Mobile US and AT&T. Because there are relatively few carriers, this exposes Digital Turbine to risk should any of these choose not to work with the company anymore -- for perspective, 26% and 23% of fiscal 2021 revenue came from mobile devices on T-Mobile's and AT&T's networks, respectively. Furthermore, most of its business is on Google's Android platform, part of Alphabet. And with Google changing up its ad business lately, perhaps it will start building something that encroaches on Digital Turbine's space.

Finally, some might see some execution risk with Digital Turbine considering how many big acquisitions it's made recently. It's challenging to integrate everything and make the combined company worth more than the sum of its parts. That said, it trades at just around seven times its sales for fiscal 2022 and just 35 times forward-earning estimates. For a growth stock, this is a relatively reasonable value that will pay off if Digital Turbine executes. 

But execute it must. When it acquired Fyber in May, Stone said "We believe that we now have all of the critical elements" to deliver on the company's vision. Therefore, this next year will be crucial to prove whether management's strategy is a good one. 

Unlike Digital Turbine, Peloton hasn't grown all that much via acquisitions thus far. But it's grown its top line at a better than 100% compound annual growth rate (CAGR) since its founding nonetheless. Revenue for fiscal 2020 (which ended in June) was up roughly 100% year over year to $1.8 billion. For fiscal 2021, management is now guiding for revenue of $4 billion, which will be up 122% from 2020. This guidance has been revised higher a couple of times because of ongoing incredible demand, and even takes into account the negative $75 million impact from the recall of its treadmills.

Peloton's impressive revenue growth is worthy of investors' attention because the profit margin for its subscription business is simultaneously expanding. The company has a two-sided business: It sells the workout equipment for a one-time sale and charges an ongoing monthly subscription for the connected features. Through the first three quarters of fiscal 2021, Peloton's gross margin for its subscription service was 62% compared to 57% during the comparable period last year.

Long term, Peloton's management believes the gross margin for its subscription business will be over 70%. And over time, if the company can continue retaining its customers as it has in the past, it seems likely that the subscription business will make up a bigger part of the revenue mix, boosting overall margin. Moreover, the subscription business has fewer expenses related to net profits. For example, you don't need to advertise it (people who own a Peloton are already well aware of the service), so sales and marketing expenses are lower. 

Peloton finished its most recent quarter with over 2 million active subscriptions. Long term, management wants 100 million. That sounds like a crazy ambitious goal, and maybe it is. But achieving just a fraction of it would take the company's subscription business to enormous heights and turn this into a much more profitable business at maturity. Therefore, this is a growth stock to keep on your radar at the very least. 

Snap's Spectacles 3. Its Spectacles will be a key part of its AR opportunity. Image source: Snap.

Snap, the parent company of popular social platform Snapchat, is growing fast, and it just keeps speeding up. The company's full-year revenue grew 43%, 45%, and 46% year over year in 2018, 2019, and 2020, respectively. However, for the first quarter of 2021, revenue was up an even better 66% compared to the same quarter last year. And it's guiding for 81% to 85% year-over-year revenue growth for the second quarter. Therefore, it's looking like 2021 will be Snap's third consecutive year of accelerating revenue growth -- a noteworthy feat for a multibillion-dollar business like this.

Snap's growth is much slower than that of Digital Turbine and Peloton. But it makes this list thanks to how long it might be able to sustain this stellar growth. At its investor-day presentation in April, management said it expects to drive greater than 50% annual revenue growth for the next "several" years.

For what it's worth, Snap's outlook seems reasonable to me. Consider that Snap has an engaged and growing user base among Gen Zers, an important demographic whose purchasing power is only increasing. And businesses are shifting advertising dollars to digital channels like Snap, which offer measurable results. This is leading to more competition for ad slots, which increases rates and leads to higher revenue for Snap.

However, I'm really eyeing Snap now because of its bottom-line growth. In the first quarter, the company was free-cash-flow positive for the first time since it went public in 2017, and its operating cash flow was $137 million -- a more than 20-fold increase from the meager $6 million it had in the same quarter last year. In short, it seems like Snap has finally turned the corner on profitability, meaning its ongoing revenue growth should drive stellar cash flows for the foreseeable future. 

This cash flow will give Snap a lot of optionality for the future. Specifically, the company sees a big opportunity in augmented reality (AR), making several big acquisitions in recent months. According to Reportlinker.com, the AR market was valued at around $49 billion in 2020 but is expected to reach almost $300 billion by 2025. Therefore, it seems Snap has indeed found a worthy place to reinvest its cash flow to grow its business for the long term.

For investors looking at growth stocks, Peloton and Snap are especially instructive stories. Revenue growth is important, yes. But are margins expanding as well (like Peloton's are)? If not, investors should dig deeper -- it might not be a great long-term opportunity. Furthermore, if business booms, will the growth company have a place to reinvest cash flow for more growth (like Snap has)? Expanding margins and a place to invest future cash flow are both important aspects to any growth investment, and both of these companies offer this to investors today.

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‘Bringing back mask mandate is a good idea’: doctor on Delta variant

Yahoo Finance 30 June, 2021 - 12:26pm

“We don’t want to wait until after the fact and get caught with this thing already ahead of us when we know that masks work,” Marvasti told Yahoo Finance Live. “To put this in context, the Alpha variant, which originated out of the UK, was about 50% more infectious and transmissible. The Delta variant is 60% more infectious than that.”

The Delta variant, which was first identified in India, has now spread to more than 80 countries. The Centers for Disease Control and Prevention (CDC) officials warn it will likely become the dominant strain in the U.S. in a matter of weeks as infections attributable to the highly contagious variant spread rapidly nationwide. COVID-19 cases caused by the Delta variant currently account for about one-fifth of new coronavirus infections in the U.S., according to the CDC.

“The CDC needs to act quickly, without waiting, to follow the WHO guidelines and ask everyone to put the masks back on so we can stay open, protect folks, and keep the economy going,” Marvasti said. “We’re already seeing preliminary numbers out of Israel where fully vaccinated people are getting sick.”

Preliminary findings by Israeli health officials found that about half of adults infected by the Delta variant in the country were fully vaccinated, the Wall Street Journal reported, and as it stands now, the Delta variant is likely causing about 90% of new infections in Israel.

Outbreaks of infections largely driven by the Delta variant have prompted governments from around the world to reimpose coronavirus-related restrictions. South Africa is imposing at least two weeks of lockdowns while about 10 million Australians are also under lockdown. Here in the U.S., Los Angeles County officials are urging all residents to wear masks in public indoor spaces, regardless of vaccination status.

“We have gotten into this false sense of security thinking it's okay to take off masks,” warned Marvasti. “The best thing to do is to start putting the masks back on to prevent another surge from happening, and if you’re unvaccinated, now is the time to get vaccinated before this Delta variant comes for you.”

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Royal Caribbean International said on Tuesday it would require unvaccinated guests over 12 years of age traveling from Florida to show proof of insurance that covers COVID-19 related medical expenses, quarantine and evacuation. The new policy comes after two unvaccinated teenagers tested positive on its Adventure of the Seas ship last week and two others were infected on Celebrity Millennium earlier this month. Celebrity had said it would bear expenses for the two cases.

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Former President Donald Trump lashed out at former Attorney General William Barr, calling him “weak” and “pathetic” in a scathing statement.

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Kevin Love played in just 25 games for the Cavaliers last season, and appeared in only 103 over the past three years.

Prince William announced a new Queen Elizabeth-approved sponsorship for his wife, the Duchess of Cambridge, and said it would make his grandfather, Prince Philip, "fascinated and very excited"

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As of June 9th, more than 169 million payments have been distributed in the third round of stimulus payments from the federal government, representing a total value of around $395 billion. The status of the possible fourth round is still up in the air, but in just a few weeks, the initial advance Child Tax … The post $3,600 stimulus payments start in 2 weeks, but there’s an important deadline today appeared first on BGR.

Covid-19 global updates: Moderna says vaccine works against delta variant, as WHO warns of global spread

The Washington Post 30 June, 2021 - 03:07am

The coronavirus vaccine developed by U.S. biotech firm Moderna is effective against the highly contagious delta variant, the company said in a release Tuesday, offering some hope even as the World Health Organization warned that the variant has spread to at least 96 countries.

Moderna said blood samples from fully vaccinated individuals produced antibodies against multiple variants and researchers measured only a “modest reduction in neutralizing titers” against the particularly virulent delta, first identified in India.

“As we seek to defeat the pandemic, it is imperative that we are proactive as the virus evolves,” Moderna chief executive Stéphane Bancel said in a statement. “These new data are encouraging and reinforce our belief that the Moderna COVID-19 Vaccine should remain protective against newly detected variants.”

The company, whose vaccine uses messenger RNA technology and requires two doses, submitted the data to the bioRxiv preprint server ahead of peer review. Moderna last month also signed an agreement to provide the United Nations-backed Covax initiative, which seeks the equitable distribution of coronavirus vaccines worldwide, with 500 million doses beginning later this year.

As much of the world still awaits coronavirus vaccine supply, the delta variant is tearing through unvaccinated populations everywhere from Britain to the United States to South Africa.

It has reached 96 countries, the WHO said in a weekly epidemiological update Tuesday, a number it warned was probably an underestimate as most nations lack the genome-sequencing capacity needed to identify virus variants.

According to the WHO, delta is 55 percent more transmissible than the virulent alpha variant first identified in Britain last year, a version that spurred infection waves in multiple countries. Now, the delta variant “is expected to rapidly outcompete other variants and become the dominant variant over the coming months,” the WHO said.

On Wednesday, France’s leading government scientific adviser said in a radio interview that the country was likely to suffer a fourth wave of infections caused by the delta variant, which accounts for at least 20 percent of new cases there.

But “it will be much more moderate than the previous three waves because the level of vaccinations is different compared to before,” Jean-François Delfraissy told French public radio, according to a Reuters translation of his remarks.

More than 63 percent of adults in France have received at least one dose of a coronavirus vaccine, the French Health Ministry says, with 41 percent fully inoculated.

Some countries with similarly high vaccination rates, including Britain and Israel, are grappling with new outbreaks of the delta variant but say widespread immunization has helped mitigate some of the pathogen’s worst effects.

In places such as Africa, however, where about 1 percent of the population is fully vaccinated, the variant is helping give rise to new infections and deaths. According to the WHO, new coronavirus cases in the African region increased by 33 percent over the past week, with covid-19 deaths jumping 42 percent.

In Russia, where vaccine uptake remains stubbornly low, authorities on Wednesday reported a record number of covid-related deaths for the second straight day, following an unprecedented surge in new cases that officials have blamed on the delta variant.

“The Delta variant will continue to complicate timelines for reaching a less disruptive new normal in countries with high vaccination rates as well as those with low rates,” said Scott Rosenstein, special global health adviser at the New York-based political risk firm Eurasia Group.

For lower-income nations with sluggish inoculation campaigns, Rosenstein said in a briefing note, “the risks of overwhelmed healthcare systems are the highest they have been since the beginning of the pandemic.”

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