Wall Street is flying high, maintaining the momentum that it gathered in the last quarter. Defying the second wave of coronavirus in as many as 38 U.S. states, all three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — rallied strongly in the first three trading days of July.
Stock market's momentum is likely to continue owing to the gradual reopening of the U.S. and global economies despite the resurgence of COVID-19. Meanwhile, a handful of large-cap companies (market capital > $10 billion) with a favorable Zacks Rank have skyrocketed more than 100% amid coronavirus-induced economic devastations.
Impressive Rally of Global Stock Markets
Global equities plummeted after a significant downturn since mid-February when the outbreak of the coronavirus in China spread throughout the world. Imposition of full or partial lockdowns by almost all countries halted global economic activities and consequently valuations of most of the stocks plunged within six weeks.
Stock markets across the world took a sharp northbound turn in the last week of March buoyed by unprecedented fiscal and monetary stimulus of billions of dollars provided by various governments and central banks. The rally is gathering pace by the day as systematic reopening of the U.S. and major economies internationally has strengthened investors' confidence, outweighing the resurgence of the deadly virus.
The Dow, the S&P 500 and the Nasdaq Composite have rallied 44.3%, 45.1% and 57.3%, respectively, from their recent lows recorded on Mar 23. Germany's DAX has skyrocketed more than 50% since Mar 18. The FTSE 100 of the U.K. has appreciated more than 25% since Mar 23. Japan's Nikkei 225 and South Korea's Kospi have advanced more than 20% from March lows.
Economic Devastation May Be Less Severe Than Expected
Better-than-expected economic data of April, May and June, despite the fact that the aggregate economy is still way below its pre-lockdown level of activities, have shown fundamental stability of the U.S. economy.
Record-high job additions in May and June, a significant jump in consumer spending in May especially in retail sales and the housing market, and expansion of the sagging manufacturing and services sectors in June indicates that the coronavirus-led economic devastations may not be as severe as expected earlier.
Despite the resurgence of the deadly coronavorus in various states, it is unlikely that a second round of lockdown will be imposed. All 50 states have reopened their economies in some form since the last week of May.
The Trump administration's decision to give unemployment insurance and stimulus checks to retirees, fiscal and monetary stimulus to small and mid-sized businesses, and maintaining of the benchmark interest rate at as low as 0-0.25% should boost economic recovery.
Our Top Picks
We have narrowed down our search to six large-cap stocks that have popped more than 100% YTD with strong growth potential for the rest of 2020 and robust earnings estimate revisions. Notably, an upward earnings per share estimate revision for 2020, for any stock, simply means the market is expecting the company to do good business this year.
Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our six picks year to date.
Wayfair Inc. W is one of the world's leading online sellers of home goods products, consisting of furniture and home decor. The Zacks Rank #1 company has an expected earnings growth rate of 47.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 50.9% over the last 60 days. The stock has surged 144.9% year to date.
Etsy Inc. ETSY operates online market places for buyers and sellers primarily in the United States, the U.K., Canada, Australia, France and Germany. Its online market places include Etsy.com and Reverb.com.
The Zacks Rank #1 company has an expected earnings growth rate of 46.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 5.7% over the last 7 days. The stock has jumped 155.1% year to date.
Teladoc Health Inc. TDOC provides virtual healthcare services on a business-to-business basis in the United States and internationally. It covers various clinical conditions, including non-critical, episodic care, chronic, and complicated cases like cancer and congestive heart failure.
The Zacks Rank #2 company has an expected earnings growth rate of 18.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 1.8% over the last 60 days. The stock has soared 162.7% year to date.
Zscaler Inc. ZS operates as a cloud security company focusing on transforming networks and applications for a mobile and cloud-first platform. The Zacks Rank #2 company has an expected earnings growth rate of 26.8% for next year (ending July 2021). The Zacks Consensus Estimate for next-year earnings has improved 8% over the last 30 days. The stock has climbed 146.8% year to date.
Datadog Inc. DDOG provides monitoring and analytics platform for developers, information technology operations teams, and business users in the cloud in the United States and globally.
The Zacks Rank #2 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by more than 100% over the last 60 days. The stock price has appreciated 135.4% year to date.
Peloton Interactive Inc. PTON provides interactive fitness products in North America. It offers connected fitness products, such as the Peloton Bike and the Peloton Tread, which include touchscreen that streams live and on-demand classes.
The Zacks Rank #2 company has an expected earnings growth rate of 36.8% for the current year (ending June 2021). The Zacks Consensus Estimate for current-year earnings has improved 5.4% over the last 30 days. The stock price has advanced 112.6% year to date.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
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