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Major Indexes at Record Highs: Top 5 Growth Stocks Picks
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Wall Street has started the second half of 2024 with rejuvenated momentum. On Jul 2, the broad-market index, the S&P 500, and the tech-heavy Nasdaq Composite closed at record highs. The S&P 500 closed above 5,500 for the first time and the Nasdaq Composite ended above 18,000 for the first time too.
On Jul 3, the S&P 500 recorded another closing high at 5,537.02 and an intraday all-time high at 5,539.27. Similarly, the Nasdaq Composite posted another closing high as well as an intraday all-time high at 18,188.30. Year to date, the S&P 500 and the Nasdaq Composite have rallied 16.8% and 23.2%, respectively. The Dow is up 4.2% too.
A gradually declining inflation rate, less-than-expected consumer spending, recently released several soft economic data, a fall in the yield of the 10-Year Treasury Note and Fed Chair’s favorable comment on inflation boosted investors’ optimism about an interest rate cut in September.
Near-Term Positives
The core personal consumption expenditure (PCE) price index (excluding volatile food and energy items) rose 0.1% month over month in May compared with 0.3% growth in April. Year over year, core PCE inflation — the Fed’s most favorite inflation gauge — rose 2.6% in May compared with 2.8% in April. May marked the lowest monthly rise of this metric since March 2021. Personal spending rose 0.2%, less than the consensus estimate of 0.3%. The metric for April was also revised downward to a gain of 0.1% compared with 0.2% reported earlier.
The Institute of Supply Management (ISM) reported that the manufacturing purchasing managers’ index (PMI) came in at 48.5% in June compared with 48.7% in May. The consensus estimate was 49.4%. Moreover, ISM services PMI for June unexpectedly contracted to 48.8% from 53.8% in May. The consensus estimate was 52.8%. Any reading below 50% indicates a contraction in activities.
Automatic Data Processing Inc. (ADP) reported that the U.S. private sector added 150,000 jobs in June, below the consensus estimate of 165,000. This marked the slowest pace of growth since August 2021. In June, wages for job stayers rose 4.9% from the prior year, reflecting the slowest growth since August 2021. Wages for workers who changed jobs increased 7.7% year over year, down from 7.8% the month prior.
On Jul 2, at a central banking forum in Sintra, Portugal, Fed Chairman Jerome Powell said, “We’ve made quite a bit of progress and in bringing inflation back down to our target. The last reading and the one before it to a lesser extent, suggest that we are getting back on the disinflationary path. We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”
Following Powell’s comment and several key soft economic data, the yield on the 10-Year U.S. Treasury Note dropped to 4.354%. Subsequently, the CME FedWatch Tool currently showed a 72.6% probability that the Fed will reduce the existing benchmark lending rate by at least 25 basis points in September. The interest rate derivative tool also shows a 69.3% probability that the central bank will cut interest rate by 50 basis points by December 2024.
Our Top Picks
We have narrowed our search to five growth stocks that have solid upside left for 2024. These stocks have witnessed positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Growth Score A. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research
AppLovin Corp. (APP - Free Report) is engaged in building a software-based platform for mobile app developers to enhance the marketing and monetization of their apps in the United States and internationally. APP provides a technology platform that enables developers to market, monetize, analyze and publish their apps.
AppLovin has an expected revenue and earnings growth rate of 31.7% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 16.5% over the last 60 days.
Datadog Inc. (DDOG - Free Report) has been benefiting from strength in customer demand for offerings in modern observability, cloud security, software delivery and cloud service management. DDOG had 3,340 customers with an annual run rate of $100K or more at the end of the last reported quarter.
DDOG’s dollar-based retention rate was in the mid-110s in the first quarter as customers increased their usage and adopted more products. Besides an expanding portfolio, contributions from a solid cloud partner base, including Google Cloud, Microsoft Azure and Amazon Web Services, remain the key growth drivers of DDOG.
Datadog has an expected revenue and earnings growth rate of 22.1% and 16.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 8.5% over the last 60 days.
monday.com Ltd. (MNDY - Free Report) develops software applications in the United States, Europe, the Middle East, Africa, and internationally. MNDY provides Work OS, a cloud-based visual work operating system that consists of modular building blocks used and assembled to create software applications and work management tools.
MNDY also offers product solutions for work management, sales CRM, software development verticals, business development, presale, and customer success services. MNDY serves organizations, educational or government institutions, and distinct business units of an organization.
monday.com has an expected revenue and earnings growth rate of 29.5% and 23.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 19.3% over the last 60 days.
Zscaler Inc. (ZS - Free Report) is benefiting from the rising demand for cyber-security solutions due to the slew of data breaches. The increasing demand for privileged access security on digital transformation and cloud-migration strategies is a key growth driver for ZS.
A strong presence across verticals, such as banking, insurance, healthcare, public sector, pharmaceuticals, telecommunications services and education, safeguards ZS from the negative impacts of the ongoing macroeconomic headwinds. AS’ portfolio expansion through acquisitions with the likes of Avalor, Canonic Security and ShiftRight is praiseworthy.
Zscaler has an expected revenue and earnings growth rate of 32.4% and 67%, respectively, for the current year (ending July 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 30 days.
Williams-Sonoma Inc. (WSM - Free Report) is benefiting from its e-commerce business, B2B initiative and expansion plans. In the quarter, WSM’s margins rose owing to a solid operating model, including full-price selling and supply-chain efficiencies. The B2B segment grew 10% year-over-year, driving record-breaking demand.
WSM witnessed continued growth for its existing large project customers. Although the ongoing softness in the housing market and increase in occupancy costs are concerns, WSM is optimistic about the B2B segment, which is less affected by housing market fluctuations.
Williams-Sonoma has an expected revenue and earnings growth rate of 0.1% and 8.3%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 30 days.
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Major Indexes at Record Highs: Top 5 Growth Stocks Picks
Wall Street has started the second half of 2024 with rejuvenated momentum. On Jul 2, the broad-market index, the S&P 500, and the tech-heavy Nasdaq Composite closed at record highs. The S&P 500 closed above 5,500 for the first time and the Nasdaq Composite ended above 18,000 for the first time too.
On Jul 3, the S&P 500 recorded another closing high at 5,537.02 and an intraday all-time high at 5,539.27. Similarly, the Nasdaq Composite posted another closing high as well as an intraday all-time high at 18,188.30. Year to date, the S&P 500 and the Nasdaq Composite have rallied 16.8% and 23.2%, respectively. The Dow is up 4.2% too.
A gradually declining inflation rate, less-than-expected consumer spending, recently released several soft economic data, a fall in the yield of the 10-Year Treasury Note and Fed Chair’s favorable comment on inflation boosted investors’ optimism about an interest rate cut in September.
Near-Term Positives
The core personal consumption expenditure (PCE) price index (excluding volatile food and energy items) rose 0.1% month over month in May compared with 0.3% growth in April. Year over year, core PCE inflation — the Fed’s most favorite inflation gauge — rose 2.6% in May compared with 2.8% in April. May marked the lowest monthly rise of this metric since March 2021. Personal spending rose 0.2%, less than the consensus estimate of 0.3%. The metric for April was also revised downward to a gain of 0.1% compared with 0.2% reported earlier.
The Institute of Supply Management (ISM) reported that the manufacturing purchasing managers’ index (PMI) came in at 48.5% in June compared with 48.7% in May. The consensus estimate was 49.4%. Moreover, ISM services PMI for June unexpectedly contracted to 48.8% from 53.8% in May. The consensus estimate was 52.8%. Any reading below 50% indicates a contraction in activities.
Automatic Data Processing Inc. (ADP) reported that the U.S. private sector added 150,000 jobs in June, below the consensus estimate of 165,000. This marked the slowest pace of growth since August 2021. In June, wages for job stayers rose 4.9% from the prior year, reflecting the slowest growth since August 2021. Wages for workers who changed jobs increased 7.7% year over year, down from 7.8% the month prior.
On Jul 2, at a central banking forum in Sintra, Portugal, Fed Chairman Jerome Powell said, “We’ve made quite a bit of progress and in bringing inflation back down to our target. The last reading and the one before it to a lesser extent, suggest that we are getting back on the disinflationary path. We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”
Following Powell’s comment and several key soft economic data, the yield on the 10-Year U.S. Treasury Note dropped to 4.354%. Subsequently, the CME FedWatch Tool currently showed a 72.6% probability that the Fed will reduce the existing benchmark lending rate by at least 25 basis points in September. The interest rate derivative tool also shows a 69.3% probability that the central bank will cut interest rate by 50 basis points by December 2024.
Our Top Picks
We have narrowed our search to five growth stocks that have solid upside left for 2024. These stocks have witnessed positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Growth Score A. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research
AppLovin Corp. (APP - Free Report) is engaged in building a software-based platform for mobile app developers to enhance the marketing and monetization of their apps in the United States and internationally. APP provides a technology platform that enables developers to market, monetize, analyze and publish their apps.
AppLovin has an expected revenue and earnings growth rate of 31.7% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 16.5% over the last 60 days.
Datadog Inc. (DDOG - Free Report) has been benefiting from strength in customer demand for offerings in modern observability, cloud security, software delivery and cloud service management. DDOG had 3,340 customers with an annual run rate of $100K or more at the end of the last reported quarter.
DDOG’s dollar-based retention rate was in the mid-110s in the first quarter as customers increased their usage and adopted more products. Besides an expanding portfolio, contributions from a solid cloud partner base, including Google Cloud, Microsoft Azure and Amazon Web Services, remain the key growth drivers of DDOG.
Datadog has an expected revenue and earnings growth rate of 22.1% and 16.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 8.5% over the last 60 days.
monday.com Ltd. (MNDY - Free Report) develops software applications in the United States, Europe, the Middle East, Africa, and internationally. MNDY provides Work OS, a cloud-based visual work operating system that consists of modular building blocks used and assembled to create software applications and work management tools.
MNDY also offers product solutions for work management, sales CRM, software development verticals, business development, presale, and customer success services. MNDY serves organizations, educational or government institutions, and distinct business units of an organization.
monday.com has an expected revenue and earnings growth rate of 29.5% and 23.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 19.3% over the last 60 days.
Zscaler Inc. (ZS - Free Report) is benefiting from the rising demand for cyber-security solutions due to the slew of data breaches. The increasing demand for privileged access security on digital transformation and cloud-migration strategies is a key growth driver for ZS.
A strong presence across verticals, such as banking, insurance, healthcare, public sector, pharmaceuticals, telecommunications services and education, safeguards ZS from the negative impacts of the ongoing macroeconomic headwinds. AS’ portfolio expansion through acquisitions with the likes of Avalor, Canonic Security and ShiftRight is praiseworthy.
Zscaler has an expected revenue and earnings growth rate of 32.4% and 67%, respectively, for the current year (ending July 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 30 days.
Williams-Sonoma Inc. (WSM - Free Report) is benefiting from its e-commerce business, B2B initiative and expansion plans. In the quarter, WSM’s margins rose owing to a solid operating model, including full-price selling and supply-chain efficiencies. The B2B segment grew 10% year-over-year, driving record-breaking demand.
WSM witnessed continued growth for its existing large project customers. Although the ongoing softness in the housing market and increase in occupancy costs are concerns, WSM is optimistic about the B2B segment, which is less affected by housing market fluctuations.
Williams-Sonoma has an expected revenue and earnings growth rate of 0.1% and 8.3%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 30 days.