Many analysts expect the U.S. economy to maintain its recovery pace this year. However, the U.S. ban on Russian oil imports has contributed to skyrocketing oil and commodity prices worldwide. Although the United States is said to have sufficient energy resources to meet its needs in the near term, 40-year high inflation in February, rising oil prices, looming interest rate hikes, and global supply chain issues with the lockdown of major Chinese cities could hurt the U.S. economic recovery in the near term.
However, analysts expect past stimulus spending to drive economic growth this year and beyond. So, growth-focused companies should benefit. Investors’ interest in growth stocks is evident from the iShares Russell Top 200 Growth ETF’s (IWY) 7% returns over the past year.
Wall Street analysts are optimistic about the upside potential of Shopify Inc. (SHOP), Block, Inc. (SQ), MercadoLibre, Inc. (MELI), Unity Software Inc. (U), and Teladoc Health, Inc. (TDOC), which possess strong growth attributes and high profit margins.
Shopify Inc. (SHOP)
Based in Ottawa, Canada, SHOP provides a cloud-based, multi-channel commerce platform designed for small- and medium-sized businesses internationally. The company offers a platform that enables merchants to create an omnichannel experience to manage products and inventory, process orders and payments, ship orders, build customer relationships, leverage analytics and reporting, and access financing.
On Nov. 8, 2021, SHOP’s Shopify Plus platform selected Rebuy, a no-code omnichannel personalization platform for e-commerce brands on Shopify, to join the Certified App Partner program. Rebuy’s personalization, marketing, retention services, white-glove support, and a custom shopping cart should enable SHOP to help its merchants improve their shopping experience.
For its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, SHOP’s revenues increased 41.1% year-over-year to $1.38 billion. Its revenue from merchant solutions came in at $1.03 billion for the first time in a quarter, up 47.3% from the prior-year period. The company’s gross profit came in at $692.66 million, representing a 37.3% increase from the prior-year period. The company had cash and cash equivalents of $2.50 billion as of Dec.31, 2021.
Analysts expect SHOP’s revenue to improve 30.8% year-over-year to $7.68 billion for its fiscal 2022, ending Dec. 31, 2022. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The company’s EPS is expected to grow at a 38.3% rate per annum over the next five years.
Over the past week, the stock has declined 9.4% in price and closed Friday’s trading session at $544.37. SHOP’s trailing-12-month gross profit margin has been 53.8%.
SHOP’s revenue and total assets have grown at CAGRs of 62.6% and 80.9%, respectively, over the past three years.
Analysts expect the stock’s price to hit $988.63 in the near term, representing 81.6% upside potential.
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Block, Inc. (SQ)
Formerly known as Square, Inc.,SQ is a San Francisco-based technology company that develops point-of-sale software that helps in digital receipts, inventory, and sales reports and offers analytics and feedback internationally. It also offers a developer platform, including application programming interfaces and software development kits.
On March 10, 2022, SQ announced two new software tools–Square Marketing and Square Loyalty–in Ireland to help businesses of all types and sizes to grow their sales and engage their customers with just a few clicks. This double-product launch aims to provide all sellers with easy-to-use, powerful marketing tools that have typically only been accessible to big businesses. SQ should witness high demand in the coming months.
For its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, SQ’s total net revenues increased 29.1% year-over-year to $4.08 billion. The company’s gross profit came in at $1.18 billion, representing a 47.1% rise from its year-ago period. It had cash and cash equivalents of $4.44 billion as of Dec. 31, 2021.
The $18.88 billion consensus revenue estimate for its fiscal year 2022, ending Dec. 31, 2022, represents a 6.9% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The company’s EPS has grown at a 39.9% CAGR over the past three years.
Over the past week, the stock has declined 4.3% in price to close Friday’s trading session at $101.93. SQ’s trailing-12-month gross profit margin has been 25%.
Over the past three years, the company’s revenue and total assets have increased at CAGRs of 75% and 61.9%, respectively.
SQ’s average price target of $187.29 represents an 83.7% upside potential.
MercadoLibre, Inc. (MELI)
Based in Uruguay, MELI operates online commerce platforms for the Latin American markets. The company's website allows businesses and individuals to list items and conduct sales and purchases online in either a fixed-price or auction format. It offers classified advertisements for motor vehicles, vessels, aircraft, real estate, and services and offers online payment services.
On Jan.20, 2022, MELI acquired shares in the Brazil-based 2TM Group, the parent company of leading cryptocurrency exchange MercadoBitcoin.com.br, among others in its blockchain-based portfolio, and made a strategic investment in Paxos Trust Company, a leading regulated blockchain infrastructure platform that powers the Mercado Pago cryptocurrency experience in Brazil. These investments further enhance MELI’s portfolio and reinforce its commitment to developing and using crypto assets and blockchain technology in the region.
MELI’s net revenues for its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, increased 60.5% year-over-year to $2.13 billion. The company’s gross profit came in at $853.17 million, representing a 74.5% year-over-year improvement. Its income from operations came in at $23.32 million, compared to a $25.13 million loss in the prior-year period. As of December 31, 2021, the company had $2.58 billion in cash and equivalents.
The $8.14 consensus EPS estimate for its fiscal year 2022, ending Dec. 31, 2022, represents a 342.4% year-over-year improvement. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Analysts expect the company’s revenue to be $9.57 billion for the same quarter, indicating a 35.4% rise from the prior-year period. Its EPS is expected to grow at a 128.1% rate per annum over the next five years.
MELI stock has declined 15.5% in price over the past week and ended Friday’s trading session at $891.69. Its trailing-12-month gross profit margin has been 50.6%.
Over the past three years, the company’s revenue and total assets have increased at CAGRs of 70% and 65.2%, respectively.
Analysts expect the stock’s price to hit $1578.50 in the near term, representing a 77% upside potential.
Unity Software Inc. (U)
U creates and operates an interactive real-time 3D content platform that provides software solutions to create, run, and monetize interactive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and AR/VR devices. The San Francisco company serves content creators and developers, artists, designers, engineers, and architects and offers its solutions directly through its online store, field sales operations, independent distributors, and resellers internationally.
On Feb. 17, 2022, U announced a new partnership with the world’s leading live music experience creator, Insomniac Events, to bring a brand new, persistent metaverse world to Insomniac Events’ fans where they can gather and engage virtually for live music performances regardless of location. By deploying U’s groundbreaking technology, both companies expect to offer a new standard of live entertainment to the fans.
For its fiscal 2021 fourth quarter, ended Dec. 31, 2021, U’s revenue increased 43.4% year-over-year to $315.86 million. The company’s non-GAAP gross profit came in at $252.25 million, indicating a 46.1% gain over the prior-year period. It had cash and cash equivalents of $1.06 billion as of Dec. 31, 2021.
Analysts expect the company’s revenue to reach $1.48 billion for its fiscal year 2022, ending Dec. 31, 2022, representing a 33% improvement from the year-ago period. It surpassed the Street’s EPS in each of the trailing four quarters, which is impressive. U’s EPS is expected to grow at a rate of 69.4% per annum over the next five years.
Over the past week, the stock has declined 11.4% in price and ended Friday’s trading session at $78.86. U’s trailing-12-month gross profit margin has been 77.7%.
The company’s revenue and total assets have increased at CAGRs of 42.9% and 101.8%, respectively, over the past three years.
The average price target of $150.50 represents a 90.8% upside potential.
Teladoc Health, Inc. (TDOC)
Dallas, Tex.-based TDOC provides virtual healthcare services using a technology platform on a business-to-business basis. The company serves health employers, health plans, hospitals, health systems, and insurance and financial services companies worldwide.
On Feb. 28, 2022, TDOC announced a first of its kind experience with Amazon, Inc.’s (AMZN) virtual assistant technology Amazon Alexa with the launch of voice-activated general medical virtual care from a Teladoc care provider on its supported Echo devices, such as an Echo, Echo Dot, and Echo Show. This partnership should help TDOC enhance its value and high-quality care to its members.
For its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, TDOC’s revenue increased 44.6% year-over-year to $5.54 million. The company’s gross profit came in at $379.25 million, up 45.7% from the prior-year period. As of Dec. 31, 2021, it had $893.48 million in cash and equivalents.
The $2.58 billion consensus EPS estimate for its fiscal year 2022, ending Dec. 31, 2022, represents a 27.2% year-over-year improvement.
TDOC stock has declined 18.2% in price over the past week and ended Friday’s trading session at $54.61. Its trailing-12-month gross profit margin has been 68%.
Over the past three years, the company’s revenue and total assets have increased at CAGRs of 69.4% and 126.4%, respectively.
Analysts expect the stock’s price to hit $102 in the near term, representing an 86.8% upside potential.
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SHOP shares were trading at $519.28 per share on Monday afternoon, down $25.09 (-4.61%). Year-to-date, SHOP has declined -62.30%, versus a -12.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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