Goldman sees at least 40% growth for these 2 stocks
If until recently, growth stocks were generally recognized favorites in the market, then in today’s conditions of record inflation and a sharp increase in the interest rate of the Fed, now everything is different. For example, investment bank Goldman Sachs (NYSE:GS) has highlighted a number of fast-growing companies that are forecasting sales growth of 30% or more and whose shares have fallen 58% this year, writes Yahoo.
However, the Goldman analyst was able to discern a few among the falling stocks that it is quite possible to recommend to investors. Ryan Hammond, vice president of US stock strategy at Goldman, noted that although growth stocks are getting cheaper, they do not show a strong decline in value, which means that not all should be avoided, but only those growth companies that “burn cash”, then there are loss-making growth stocks that will be required to enter the financial market at a time when the cost of lending is rising.
Strong positions next year could have 2 stocks next year, according to data platform TipRanks, both of which are rated “strongly buy” and analysts at Goldman see gains of more than 40% each.
1. Credo Technology Group (NASDAQ:CRDO) – As a holding company, it outsources orders to its subsidiaries, which develop new semiconductor chips, produce prototypes, and outsource production to larger factories. Thanks to this production pattern, it has been able to produce the highest quality products: line cards, optical DSP chips, and electrical cables, all of which are vital components of wired network systems.
Credo entered the market in an IPO this year and traded at just $10 a share, but it cut its offer from 25 million shares to 20 million and ended up raising $200 million, after which its shares rose 28%.
The company’s financial results were strong, with earnings per share of 3 cents for the third quarter of fiscal year 2022, 2 cents for the fourth quarter of fiscal 2022, and again 3 cents for the first quarter of fiscal 2023 ending July 30. At the same time, revenue amounted to $46.5 million, which is 24% more than in the previous quarter. The company ended the first fiscal quarter with over $405 million in assets, of which $243.7 million was in cash and cash equivalents.
Although the company’s shares are relatively new to the public market, they received 4 analyst reviews, which were unanimously positive – “strongly recommended”. The current price is $12.82 and the average target price is $17.75, which implies an annual increase of about 38%.
2. Pure Storage (NYSE:PSTG) is another technology company that focuses on making computer memory cards. Its chips offer a solution to memory problems of any scale, from simple flash drives to the FlashStack compute and network server, which are used in applications from cloud computing to desktop virtualization and data center servers. Its market capitalization is $8.5 billion.
The company’s report for the second quarter of fiscal 2023 exceeded market expectations. Pure Storage posted 30% year-over-year revenue growth to $646.8 million. Revenue increased 35% year-over-year, driven by subscription services, which accounted for $232.2 million of total revenue.
Adjusted earnings per share of 32 cents, better than expected of 22 cents, and more than double the previous quarter’s earnings per share of 14 cents. Total cash and liquid assets at the end of the quarter was $1.4 billion, and operating cash flow in the second fiscal quarter was $159.4 million, of which $134.2 million was free cash flow. Although the company does not pay dividends, it returned $61 million to shareholders during the quarter through repurchases of 2.4 million shares.
Among the latest analyst reviews, the consensus rating was “strongly recommended” and the average target price was $39.50, which implies an increase of approximately 37% from the current trading price of $28.84.