As part of my 2013 previews and predictions, I will focus on stocks to watch in the new year. Last year, I chose 7 growth names and 7 value names to focus on. This year, I am upping the number to 10 in each category to try to get a little more diversification and expand on the number of sectors each list can hit. In this article, I will focus on the second half of the growth names. Now, to be on this list, a company doesn't necessarily need to have huge projected growth for 2013. This list also includes several companies whose stock prices are depressed as they look for a big rebound in 2013 after trouble in 2012. Also, some of the companies have a certain item of growth that investors will be looking for, maybe a certain product, or margins, etc. Part one of this series, released yesterday, included Apple (AAPL), Dendreon (DNDN), Potash (POT), SodaStream (SODA), and Zillow (Z). Here is part two, with the remaining five names to chew on.
Google makes this list for a couple of reasons. First, the first quarter of 2013 for Google will be the fourth quarter in which Motorola Mobility results are included in Google's financials. That means that starting with the second quarter of 2013, we will have comparable results to the post-acquisition quarters. Since Google's completed the acquisition, margins have fallen off a cliff, and Google will be looking in a margin rebound in 2013. Google is still in the process of integrating all of the acquisition, and it recently sold the Motorola Home segment to Arris (ARRS) for more than $2.3 billion.
Google is still growing at a fast rate though, which helps put it on this list. For 2013, analysts are currently expecting nearly 25% growth in non-GAAP revenues and more than 16% growth in non-GAAP earnings. That includes one more quarter of inflated growth from the acquisition, as analysts expect non-GAAP revenues to soar by more than 50% in Q1 currently. For such a large cap tech name, Google is still growing at a tremendous rate, one close to that of Apple. As Google continues to integrate the acquisition, they will continue to launch new and innovative products as they battle Apple. Google investors will also be looking for a margin rebound.
One of my predictions for 2012 was that both Mastercard and Visa (V) would both be up more than 25%. My belief was that a move to more online banking, as well as an increase in online shopping, would be tremendously beneficial for the credit card names. I also thought that Mastercard could hit $500 in 2012 if they split the stock. They didn't split the stock, but on Wednesday, Mastercard broke through the $500 level. The stock was up 32% in 2012, and investors will be looking for more success in 2013.
For the same reasons I liked Mastercard in 2012, I am choosing it to be on this list again for 2013. I chose Mastercard over Visa because analyst estimates for 2013 revenue and earnings growth were higher for Mastercard. Currently, analysts are looking for 12% revenue growth and 16% earnings growth. Given that the stock is now above $500, I think there is a much greater chance of a stock split this year, more so than there was when last year started around $375. If they were to split this stock back down to say $75 or $100, I think it would create a fair amount of demand from those that are afraid to buy a stock that costs more than $500. That would help boost the stock's return in 2013.
Intuitive Surgical (ISRG):
Intuitive is the surgical robot company that has the flagship da Vinci surgical system. The company is an industry leader with very little competition, and is still growing at a brisk pace. Current estimates for 2013 call for 17% earnings growth and 19% earnings growth. The company also has tremendous margins. For the first 9 months of 2012, Intuitive had gross margins above 72%, operating margins above 40%, and net profit margins above 30%.
The company is a profit monster, which is allowing the company to buy back stock and still increase its cash position. At the end of the third quarter, the company had more than $2.7 billion in cash and investments on the balance sheet, up more than $800 million in the past twelve months. With profits expected to still increase, the increased cash position will allow the company to buy back even more stock. With the stock price coming down recently from $550 to under $500, the company may be buying back stock now. Currently, 8 of 15 analysts have buy or strong buy recommendations, with the 7 others having holds. The median price target on the name is $620, well above where we are trading now. You won't find many companies that are industry leaders with little competition, sky high margins, solid growth, and a tremendous balance sheet. Intuitive is a jewel that fits in all of those categories.
The Canadian athletic apparel maker is one member of the exclusive high growth retail and consumer goods space. The company is boasting explosive growth, with current expectations calling for revenue growth of 37% and earnings growth of 46% this fiscal year, which ends at the end of January. For their following fiscal year, the one this list is concerned with, revenue growth is expected to be 24% and earnings growth is expected to be about the same.
I recently stated the LULU was perhaps the best buy in retail. This company still is in the early stage of its international growth plan, with the company currently researching a dozen or so new markets over the next two years. The company also has one of the best balance sheets around, perhaps one whose numbers rival those of Apple and Intuitive Surgical. If you are looking for a high growth retailer with plenty of growth ahead, lululemon is your name.
Research in Motion (RIMM):
The BlackBerry maker isn't a name expected to show huge growth, but it is on this list as a rebound, or turnaround name. The company's BlackBerry 10 launch is scheduled for the end of this month, and the company is looking to get back into the game with the new devices. This company has mostly been left for dead, but the stock is well off its recent lows. That is due to a couple of quarterly beats, where revenues and losses weren't as bad as expected. To view a decent history of RIMM's BB10 and financial story, see my articles here.
Current estimates call for an 8.7% rise in fiscal 2014 (ending February 2014) revenues. Additionally, a loss of just $0.54 is expected, compared the $1.18 loss analysts see for the fiscal year ending February 2013. One must also realize that current estimates call for $12.28 billion in revenues for that 2014 year, and just a few months ago, those estimates called for less than $10 billion. Blackberry 10 will be the force that drives this stock going forward.
Summary / Final Thoughts
The table below is a summary of where expectations are currently for each name. The growth numbers represent the currently expected growth for each, and for Research in Motion and lululemon, we don't have the final fiscal year numbers in yet. That is why I have the current expectations, so we can track where those estimates go over time. Again, this is part two of my growth stocks for 2013. I'm not recommending that investors buy every name on this list. These are just growth stocks to watch in 2013 that should do well if they can meet or beat these expectations. Some of these names are looking to continue prior growth, while a couple are looking for yearly rebounds.
*Estimates for their fiscal years. The estimates for RIMM are for the fiscal year ending in February 2014, and lululemon's ends in January 2014.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ISRG over the next 72 hours.
Additional disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.