2 Growth Stocks Wall Street Predicts Will Rally More than 85% Growth stocks are projected to continue their upward price trend in the coming months, backed by strong consumer spending and favorable fiscal policies. Therefore, Wall Street analysts expect quality growth...
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Growth stocks are projected to continue their upward price trend in the coming months, backed by strong consumer spending and favorable fiscal policies. Therefore, Wall Street analysts expect quality growth stocks Mercadolibre (MELI) and Stitch Fix (SFIX) to generate significant returns in the coming months. So, let's take a close look at these names.
Strong consumer spending and favorable government policies have aided a growth stock rally so far this year as the global economy recovers from its pandemic-led slump. Though most European nations have re-imposed lockdowns and restrictions in the wake of a resurgence of COVID-19 cases, the White House has said that it has no intention of shutting down the U.S. economy because 82% of the U.S. population is vaccinated. This should instill confidence in the markets and allow growth stocks to gain momentum in the coming months.
Growth stocks tend to outperform the market in times of economic recovery. This is evident in the SPDR Portfolio S&P 500 Growth ETF's (SPYG) 29% returns over the past nine months.
Thus, Wall Street analysts expect MercadoLibre Inc. (MELI) and Stitch Fix Inc. (SFIX), which possess solid growth attributes, to rally by more than 85% in the near term.
MercadoLibre Inc. (MELI)
MELI, which is headquartered in Vicente Lopez, Argentina, provides online commerce platforms in Latin America. It runs the MercadoLibre Marketplace, an automated online commerce platform that allows businesses, merchants, and individuals to list merchandise, conduct sales, and purchases online, and the Mercado Pago FinTech, a financial technology solution platform that facilitates transactions on and off its marketplaces by allowing users to send and receive payments online.
In August, MELI announced the acquisition of Kangu, a Brazilian logistics company with operations in Brazil, Colombia, and Mexico. This acquisition is consistent with the platform's aim of boosting investment across its logistics network to improve seller productivity and provide the fastest delivery times in Brazil to its thousands of clients.
MELI's net revenue increased 86.6% year-over-year to $4.94 billion in the third quarter ended September 30, 2021. Its operating income grew 173.1% from the prior-year quarter to $417.39 million. The company's net income surged 159.5% from its year-ago value to $129.41 million, while its EPS increased 176.6% year-over-year to $2.60. Its revenue and total assets have grown at CAGRs of 66% and 49.9%, respectively, over the past three years.
The company's EPS is expected to grow 3662.5% year-over-year to $2.85 in its fiscal year 2021. Analysts expect MELI's revenue to increase 75.5% year-over-year to $6.97 billion in the current year.
Eight Wall Street analysts that have provided ratings for the stock rated it Buy. Closing yesterday's trading session at $1112.14, the average analyst price target of $2187.5 represents a potential 97.4% upside.
Click here to check out our E-commerce Industry Report for 2021
Stitch Fix Inc. (SFIX)
SFIX is an online personalized styling company. The San Francisco-based company operates primarily in the United States and the United Kingdom and delivers one-to-one personalization to its clients through the combination of data science and human judgment. In addition, SFIX offers a direct-purchase alternative, which allows customers to buy things without going through a Stitch Fix stylist (Fix).
During its fiscal fourth quarter, ended July 31, 2021, SFIX's net revenue increased 28.8% year-over-year to $571.16 million. Its operating income came in at $20.74 million, compared to a $14.27 million operating loss in the prior-year period. The company reported $21.47 million in net income, compared to a $44.47 million net loss in the fourth quarter of 2020. Its EPS amounted to $0.19, compared to a $0.44 loss per share. Its revenue has increased at a 23.5% CAGR over the past five years, and its total assets increased at a 19.4% annualized rate over the past three years.
The company's EPS is expected to grow 30.6% next year. In addition, analysts expect SFIX's revenue to increase 16% year-over-year to $2.44 billion in its fiscal 2021.
Of the 14 analysts that have provided ratings for the stock, four rated it Buy, and eight rated it a Hold. The $45.07 consensus price target represents an 85.9% potential gain from its last closing price of $23.87.
MELI shares rose $56.86 (+5.11%) in premarket trading Tuesday. Year-to-date, MELI has declined -33.61%, versus a 23.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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