“Sell on the good news.”
How many times have you heard that term used? It happens frequently when a company announces results that are better than analysts had expected because some investors begin to believe things can only get worse. But such thinking might lead to selling too early and missing out on lucrative gains down the road.
Such might be the case with Zoom Video Communications Inc. ZM, -16.69%, which said Aug. 30 that sales for its fiscal second quarter ended July 31 had increased 54% from a year earlier. It beat consensus estimates for sales and profit. The following day, the company’s shares were down 16%.
Zoom has been one of the biggest winners during the Covid-19 pandemic, which made remote work a necessity for millions and video conferences — often making use of Zoom’s user-friendly platform — a must. The company’s stock rose 411% from the end of 2019 through the close Aug. 30.
Below is a screen of stocks that have at least doubled during the pandemic and are expected to increase sales quickly through 2024.
So what was the problem with Zoom? One thing that may have disappointed investors was that the company’s forecast for earnings for its fiscal third quarter was $1.07 to 1.08 a share, while analysts polled by FactSet had anticipated guidance of $1.10 a share. That may be splitting hairs for a company whose main focus is sales growth.
Digging further, Mizuho Americas analyst Siti Panigrahi wrote in a note to clients that “churn rising earlier-than-expected” among small businesses with fewer than 10 employees led to the lower-than-expected guidance. Panigrahi maintained a “buy” rating on Zoom but cut his price target for the shares to $350 from $400. Even the lower price target would represent 20% upside within a year from the stock’s closing price of $292.08 on Aug. 30.
And something else that may be of interest is that analysts, based on consensus estimates in a FactSet survey, expect the company’s sales to increase at a high compound annual growth rate of 21.7% for the next three calendar years.
Pandemic winners expected to keep … winning
Starting with the components of the Russell 1000 Index RUI, -0.18%, 141 stocks have at least doubled since the end of 2019 — a fair point from which to measure performance that encompasses the entire pandemic, without starting after so many stocks tanked in February 2020. Among those 141, consensus sales estimates are available from FactSet through calendar 2024 for 85 companies. We are using calendar years for the estimates because a large number of companies (including Zoom) have fiscal years that don’t match the calendar.
Here are the 30 companies whose stocks have at least doubled since the end of 2019 that are expected to achieve the highest compound annual growth rates (CAGR) for sales, through 2024. Revenue numbers are in millions:
| Company | Expected three-year sales CAGR | Estimated revenue – 2021 | Estimated revenue – 2022 | Estimated revenue – 2023 | Estimated revenue – 2024 |
| Virgin Galactic Holdings Inc. SPCE, +8.96% | 410.3% | $2 | $14 | $65 | $265 |
| Acceleron Pharma Inc. XLRN, +0.84% | 62.7% | $133 | $203 | $318 | $571 |
| ChargePoint Holdings Inc. Class A CHPT, +1.24% | 62.0% | $202 | $336 | $555 | $860 |
| Plug Power Inc. PLUG, -0.27% | 50.0% | $499 | $756 | $1,149 | $1,687 |
| Zillow Group Inc. Class C Z, -0.34% | 42.6% | $6,595 | $9,910 | $14,461 | $19,130 |
| Carvana Co. Class A CVNA, -2.87% | 37.2% | $11,857 | $15,523 | $20,839 | $30,607 |
| DraftKings Inc. Class A DKNG, +0.07% | 34.7% | $1,278 | $1,762 | $2,398 | $3,121 |
| Roku Inc. Class A ROKU, -0.98% | 33.9% | $2,843 | $3,876 | $5,068 | $6,829 |
| Okta Inc. Class A OKTA, -0.52% | 33.7% | $1,189 | $1,633 | $2,154 | $2,843 |
| CrowdStrike Holdings Inc. Class A CRWD, -1.88% | 32.2% | $1,321 | $1,809 | $2,389 | $3,052 |
| Pinterest Inc. Class A PINS, -1.63% | 31.2% | $2,616 | $3,430 | $4,635 | $5,906 |
| Freshpet Inc. FRPT, +0.82% | 31.1% | $446 | $580 | $756 | $1,005 |
| 10x Genomics Inc. Class A TXG, +1.25% | 30.4% | $498 | $687 | $903 | $1,105 |
| Trade Desk Inc. Class A TTD, -0.82% | 30.3% | $1,170 | $1,510 | $1,930 | $2,587 |
| Zscaler Inc. ZS, +0.06% | 29.8% | $762 | $1,017 | $1,317 | $1,668 |
| Globant S.A. GLOB, -0.10% | 29.0% | $1,235 | $1,568 | $1,944 | $2,654 |
| Ultragenyx Pharmaceutical Inc. RARE, +0.52% | 28.5% | $356 | $407 | $508 | $755 |
| Atlassian Corp. PLC Class A TEAM, +0.28% | 26.8% | $2,315 | $2,836 | $3,598 | $4,714 |
| EPAM Systems Inc. EPAM, -0.55% | 26.4% | $3,665 | $4,627 | $5,731 | $7,394 |
| Tesla Inc. TSLA, +0.66% | 26.2% | $50,185 | $67,838 | $82,652 | $100,867 |
| Elastic N.V. ESTC, +0.33% | 25.9% | $746 | $953 | $1,206 | $1,489 |
| Peloton Interactive Inc. Class A PTON, -1.27% | 25.7% | $4,697 | $6,141 | $7,785 | $9,327 |
| Enphase Energy Inc. ENPH, -2.28% | 24.6% | $1,336 | $1,793 | $2,232 | $2,584 |
| ServiceNow Inc. NOW, +0.31% | 22.8% | $5,841 | $7,310 | $9,121 | $10,818 |
| Etsy Inc. ETSY, -0.67% | 22.4% | $2,280 | $2,747 | $3,351 | $4,179 |
| Floor & Decor Holdings Inc. Class A FND, +1.05% | 22.3% | $3,339 | $4,007 | $4,874 | $6,106 |
| Novavax Inc. NVAX, +2.28% | 22.0% | $1,984 | $5,493 | $3,048 | $3,607 |
| Zoom Video Communications Inc. Class A ZM, -16.69% | 21.7% | $3,894 | $4,667 | $5,489 | $7,027 |
| DexCom Inc. DXCM, +1.51% | 21.5% | $2,398 | $2,915 | $3,527 | $4,306 |
| PayPal Holdings Inc. PYPL, +0.07% | 20.9% | $25,753 | $31,558 | $38,229 | $45,484 |
| Source: FactSet | |||||
Click on the tickers for more about each company, including news, business profiles and price ratios.
The problem with a stock screen based on any one number is that the results might be skewed. Virgin Galactic Holdings Inc. SPCE, +8.96% is expected to show revenue of only $2 million for calendar 2021, and its estimate for 2024 is the lowest on the list. As you can see below, only 36% of analysts polled by FactSet rate Virgin Galactic a “buy” or the equivalent.
This underscores the importance of doing your own research on any investment of interest. For a stock, consider how likely the company is to be able to remain competitive over the next decade.
Leaving the group in the same order, here’s a summary of analysts’ opinions and, to the right, total returns for the stocks since the end of 2019:
| Company | Share “buy” ratings | Closing price – Aug. 30 | Consensus price target | Implied 12-month upside potential | Total return – Dec. 31, 2019, through Aug. 31, 2021 |
| Virgin Galactic Holdings Inc. SPCE, +8.96% | 36% | 24.88 | $34.82 | 40% | 115% |
| Acceleron Pharma Inc. XLRN, +0.84% | 79% | 132.76 | $154.50 | 16% | 150% |
| ChargePoint Holdings Inc. Class A CHPT, +1.24% | 88% | 20.89 | $36.00 | 72% | 112% |
| Plug Power Inc. PLUG, -0.27% | 65% | 26.13 | $40.68 | 56% | 727% |
| Zillow Group Inc. Class C Z, -0.34% | 65% | 96.10 | $162.42 | 69% | 109% |
| Carvana Co. Class A CVNA, -2.87% | 59% | 337.76 | $380.23 | 13% | 267% |
| DraftKings Inc. Class A DKNG, +0.07% | 67% | 59.25 | $69.93 | 18% | 454% |
| Roku Inc. Class A ROKU, -0.98% | 75% | 355.90 | $483.09 | 36% | 166% |
| Okta Inc. Class A OKTA, -0.52% | 65% | 264.98 | $276.77 | 4% | 130% |
| CrowdStrike Holdings Inc. Class A CRWD, -1.88% | 92% | 286.37 | $288.78 | 1% | 474% |
| Pinterest Inc. Class A PINS, -1.63% | 50% | 56.49 | $71.43 | 26% | 203% |
| Freshpet Inc. FRPT, +0.82% | 71% | 127.10 | $177.00 | 39% | 115% |
| 10x Genomics Inc. Class A TXG, +1.25% | 90% | 173.75 | $203.25 | 17% | 128% |
| Trade Desk Inc. Class A TTD, -0.82% | 65% | 80.71 | $88.23 | 9% | 211% |
| Zscaler Inc. ZS, +0.06% | 67% | 278.17 | $256.24 | -8% | 498% |
| Globant S.A. GLOB, -0.10% | 92% | 322.60 | $304.78 | -6% | 204% |
| Ultragenyx Pharmaceutical Inc. RARE, +0.52% | 63% | 95.79 | $143.67 | 50% | 124% |
| Atlassian Corp. PLC Class A TEAM, +0.28% | 64% | 366.03 | $343.53 | -6% | 204% |
| EPAM Systems Inc. EPAM, -0.55% | 71% | 636.30 | $661.50 | 4% | 200% |
| Tesla Inc. TSLA, +0.66% | 44% | 730.91 | $701.14 | -4% | 774% |
| Elastic N.V. ESTC, +0.33% | 83% | 159.03 | $184.06 | 16% | 147% |
| Peloton Interactive Inc. Class A PTON, -1.27% | 77% | 101.48 | $130.42 | 29% | 257% |
| Enphase Energy Inc. ENPH, -2.28% | 63% | 177.78 | $199.52 | 12% | 580% |
| ServiceNow Inc. NOW, +0.31% | 88% | 641.65 | $665.96 | 4% | 127% |
| Etsy Inc. ETSY, -0.67% | 76% | 217.71 | $215.93 | -1% | 391% |
| Floor & Decor Holdings Inc. Class A FND, +1.05% | 87% | 122.02 | $136.36 | 12% | 140% |
| Novavax Inc. NVAX, +2.28% | 67% | 233.23 | $264.20 | 13% | 5,760% |
| Zoom Video Communications Inc. Class A ZM, -16.69% | 50% | 347.50 | $376.65 | 8% | 411% |
| DexCom Inc. DXCM, +1.51% | 79% | 521.54 | $517.55 | -1% | 138% |
| PayPal Holdings Inc. PYPL, +0.07% | 87% | 288.47 | $332.83 | 15% | 167% |
| Source: FactSet | |||||
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