In an environment of economic and equity market growth moderation, picking reliable, high-growth investments becomes even more important than usual. Economists expect U.S. GDP growth to drop to 1.9% in 2020, down from 3.1% in 2018. After gaining more than 25% in 2019, the S&P 500 index (.SPX) may have limited remaining upside next year. Growth stocks have outperformed the broad market throughout the decade-long bull market and may continue to do so in 2020. Here are seven of the best growth stocks to buy in 2020, according to CFRA.
Amazon (AMZN) has been one of the most successful growth investments in history over the past decade, gaining more than 1,210% overall. CFRA analyst Tuna Amobi expects more of the same in 2020. Amazon investors should anticipate both e-commerce and cloud revenue growth to slow over time. But CFRA is projecting another year of 20% revenue growth for Amazon next year, outpacing many of its smaller tech peers. Amobi says gross margins should continue to expand, improving profitability. CFRA has a “buy” rating and $1,950 price target for AMZN stock.
Growth is difficult to come by in the traditional cable TV business these days, but Amobi is projecting 5.4% revenue growth and 7.6% earnings per share growth from Discovery Communications (DISCA) next year. Amobi says Discovery’s near-term upside will come partly from return on capital and partly on economies of scale associated with its 2018 acquisition of Scripps Networks. Scripps synergies helped drive a 1.5% margin improvement in the third quarter. The Discovery GO streaming service is still gaining traction as well. CFRA has a “buy” rating and $35 price target for DISCA stock.
Despite a never-ending parade of negative headlines related to data abuse, political manipulation, content violations, regulatory crackdowns and antitrust risk, Facebook (FB) continues to deliver impressive growth numbers and outsized returns. In fact, 2019 has been another huge year for Facebook, with the stock up 48%. Analyst John Freeman says EPS will grow by another 19.7% in 2020 and daily active user count will rise another 5%. However, he says the biggest growth source for Facebook will be better monetizing its users. CFRA has a “buy” rating and $233 price target for FB stock.
Like its “FANG” peers Amazon and Facebook, Freeman says Alphabet (GOOGL) has another big year ahead in 2020. Freeman says the increasing profitability of Google Cloud is one of the biggest near-term growth drivers for Alphabet. Freeman estimates Google Cloud will reach $23 billion in fiscal 2021 revenue, up 170% from $8.5 billion in fiscal 2019. In addition to its cloud business and advertising business, Google’s Waymo autonomous vehicle business could be a major long-term growth driver for investors. CFRA has a “strong buy” rating and $1,737 price target for GOOGL stock.
The energy sector has rarely been a source of growth lately, but Noble Energy (NBL) may be an exception in 2020. CFRA analyst Stewart Glickman is projecting Noble will generate 43 cents in 2020 EPS, up from a 35-cent per-share loss in 2019. Noble’s Leviathan project, its second-largest natural gas development in the eastern Mediterranean region, will generate an estimated 800,000 million cubic feet per day of gas production in its first year of operation in 2020. The stock also pays a 2.1% dividend. CFRA has a “buy” rating and $24 price target for NBL stock.
Analyst Elizabeth Vermillion is bullish on construction equipment rental revenue in general, which is good news for United Rentals (URI). Vermillion says United’s strong position in residential, non-residential and infrastructure construction markets will help drive at least 2.5% organic revenue growth and 10% EPS growth in 2020. In addition to strong residential and non-residential construction markets in the U.S., Vermillion says large Canadian projects will help drive long-term growth through 2023. She says margins should also improve in 2020. CFRA has a “strong buy” rating and $153 price target for URI stock.
Valero Energy Corp.
Valero Energy (VLO) struggled with growth in 2019 given a difficult environment. However, Glickman is expecting 2020 will be a rebound year for Valero. He says changing sulfur regulations should increase distillate demand next year. CFRA is also projecting EPS will more than double to $9.71 in 2020. In addition to growth opportunities, Valero also pays a 3.8% dividend, creating an appealing total return. In the longer term, Valero’s Gulf Coast presence should benefit from a rise in U.S. refined exports, Glickman says. CFRA has a “buy” rating and $105 price target for VLO stock.
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