After a brutal year for the global economy in 2020, economists expect a combination of near-zero interest rates, aggressive stimulus spending and widespread vaccinations to trigger a sharp rebound in corporate earnings in 2021. Growth stocks historically thrive during periods of economic expansion in which there is cheap, easy access to capital. Growth stocks have left value stocks in the dust for more than a decade, and 2021 is setting up to continue that trend. Bank of America recently updated its list of top growth stocks for long-term investors to buy. Here are its analysts' top picks.
Advance Auto Parts
Auto stocks such as Tesla (TSLA) and Nio (NIO) have been some of the hottest stocks in the market. However, analyst Elizabeth Suzuki is also bullish on auto parts stocks such as Advance Auto Parts (AAP). Suzuki says the company is making significant progress toward its long-term goal of expanding operating margins to the mid-teen percentage range. In 2020, the average age of vehicles on U.S. roads hit an all-time high of 11.9 years, which is good news for auto parts retailers. Bank of America has a "buy" rating and a $185 price target for AAP stock.
Jeff Bezos shocked investors by recently announcing he is stepping down as CEO of Amazon (AMZN). Bezos will continue to serve as Amazon's executive chairman. The announcement came in Amazon's fourth-quarter earnings report in which it reported a 43.5% sales growth and its first quarter of at least $100 million in revenue. Analyst Justin Post says the Amazon growth train is heading full speed ahead. Post says the company is in good hands with incoming CEO and current head of Amazon Web Services Andy Jassy. Bank of America has a "buy" rating and a $4,150 price target for AMZN stock.
DexCom (DXCM) is a medical device company focused on glucose monitoring technology for patients with diabetes. Analyst Travis Steed says the company's long-term financial targets of at least 15% annual revenue growth, 20% operating margin and 30% earnings before interest, taxes, depreciation and amortization margins are likely too conservative. DexCom met its previous five-year financial targets in just two years. Steed says the upcoming G7 product launch will be a major bullish catalyst for the stock, which is already up 63% in the past year. Bank of America has a "buy" rating and a $500 price target for DXCM stock.
Social media giant Facebook (FB) has faced a barrage of negative headlines relating to privacy issues, content regulation, data collection, antitrust abuses, political biases and other issues. However, even in a global health crisis, Facebook continues to defy its critics and post quarter after quarter of impressive earnings and revenue growth. In the fourth quarter, Facebook reported 33% revenue growth, 31% ad revenue growth and 12% growth in monthly active users. Post says revenue and margin numbers will face difficult year-over-year comparisons in 2021. However, Bank of America has a "buy" rating and a $358 price target for FB stock.
Like Facebook, Google parent company Alphabet (GOOG, GOOGL) has battled an onslaught of negative headlines in recent years, including several antitrust lawsuits in the U.S. and around the world. Despite the regulatory and legal pressures, Alphabet recently reported another "clean" earnings and revenue beat in the fourth quarter, according to Post. The analyst says cloud services margins will likely continue to improve in the coming years, and he projects the cloud business will contribute $10 billion in profit growth for Alphabet over the next five years. Bank of America has a "buy" rating and a $2,440 price target for GOOGL stock.
Marathon Petroleum (MPC) is one of the largest independent U.S. petroleum refiners. Analyst Doug Leggate says Marathon shares are deeply discounted relative to the value of the sum of the company's parts. In late 2020, Marathon agreed to sell its Speedway retail gas station business to 7-Eleven for $21 billion. Leggate says Marathon plans to use the Speedway sale proceeds to pay down the company's debt, but the deal also creates opportunities for Marathon to reduce its outstanding share count by up to 50% via buybacks. Bank of America has a "buy" rating and a $70 price target for MPC stock.
Netflix (NFLX) has been one of the best growth stocks of all for the past decade, generating more than a 1,600% overall return in the past 10 years. Analyst Nat Schindler says Netflix's growth trajectory is still going strong. In the fourth quarter, Netflix reported 8.5 million net subscriber additions and 21.3% revenue growth, and it hit the free cash flow-neutral mark for the first time. Schindler says increasing competition, live sports and difficult year-over-year comparisons won't derail Netflix's global expansion in 2021. Bank of America has a "buy" rating and a $680 price target for NFLX stock.
T-Mobile (TMUS) is the third-largest U.S. wireless telecom provider after closing a merger deal with Sprint in April 2020. Not only is analyst David Barden bullish on T-Mobile, but the stock is also one of Bank of America's top overall picks for 2021. Barden says T-Mobile's plan for rapid Sprint integration, expedited 5G network expansion and aggressive marketing will generate impressive market share, revenue and earnings growth in the coming quarters. The analyst also says T-Mobile should de-lever its balance sheet relatively quickly following the $26 billion Sprint acquisition. Bank of America has a "buy" rating and a $155 price target for TMUS stock.
Twitter (TWTR) followed up an incredibly strong and volatile 2020 by permanently banning former President Donald Trump from its platform. Despite political controversy and regulatory uncertainty, Post is bullish on Twitter, which took a small step toward a subscription model in January when it acquired newsletter platform Revue. Post says Twitter's upcoming analyst day in February will be an opportunity for management to outline the product road map that will get Twitter to at least 20% long-term user growth and sustained online advertising market share growth. Bank of America has a "buy" rating and a $58 price target for TWTR stock.
Vertex Pharmaceuticals (VRTX) is a biotech company primarily focused on cystic fibrosis treatments. Analyst Geoff Meacham says the Vertex sell-off following its fourth-quarter earnings report was overdone. He says Vertex is positioned for three-year compound annual revenue growth of 16%, which differentiates the stock from many biotech peers. After recently pulling the plug on a drug candidate tested for treatment of alpha-1 antitrypsin deficiency, Vertex is continuing phase 2 testing of its promising candidate VX-864, to which Meacham says the market is currently assigning no value. Bank of America has a "buy" rating and a $275 price target for VRTX stock.
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