Value investors may cringe, but believe it or not, there are a number of stocks that have skyrocketed in 2017 and still have room to grow. One of the first stocks that comes to mind is artificial intelligence (AI) and Internet of Things (IoT) stalwart NVIDIA (NVDA 3.65%), and it's not alone. Online-retail king Amazon (AMZN 1.30%) is enjoying another outstanding year, as is online restaurant-pioneer GrubHub (GRUB).
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Talk about being on a roll
Tim Brugger: (NVIDIA) What an encore! After reporting record-breaking fiscal 2018 second-quarter earnings, NVIDIA may have even trumped its earlier results in this latest period. Since sharing the good tidings on Nov. 9, NVIDIA shares are up another 6%, bringing its year-to-date growth to an even 100%.
NVIDIA isn't just growing, it's growing in all the right places, which is why its stock isn't slowing down. Last quarter's $2.64 billion in sales was a 32% jump over a year ago, and NVIDIA's earnings per share (EPS) soared 60%, to $1.33. Sequentially, NVIDIA grew EPS 45% compared to the second quarter's $0.92 a share. Is it any wonder its stock has doubled in 2017?
NVIDIA significantly increased profitability not only because of its outstanding top line, but because of its management of operating expenses, which rose a mere 7%, excluding one-time items. That's remarkable expense management considering NVIDIA's explosive sales growth. Based on NVIDIA's guidance of $2.64 billion this quarter, more of the same is on the way.
Data centers are becoming a significant growth driver for NVIDIA, with steady increases year over year of two and nearly three times revenue. Now, with its AI-driven TensorRT platform ready for the market, NVIDIA's data-center sales should continue to skyrocket. Many know the company from its dominant gaming market position, and that, too, continues to outperform, thanks to its relatively new GeForce graphics processing unit (GPU).
Toss in smart cars, smart cities, and other IoT solutions, along with machine learnings capabilities, and NVIDIA's ridiculously strong performance in 2017 will continue long into the future.
One of the world's biggest companies somehow got bigger
Rich Smith (Amazon.com): Actually, 30% seems a little slow to me. Do you mind if I nominate a stock that's gained 50%? Because that's what Amazon.com has done this year -- grown 50% in value.
That's a pretty amazing statistic when you think about it. After all, Amazon.com is worth more than half a trillion dollars right now. In the entire U.S. stock market, only three other stocks -- Apple, Alphabet, and Microsoft -- cost more than Amazon. Amazon is hugely expensive, yet despite the high price tag, investors somehow came to the conclusion this year that Amazon was undercharging stock shoppers, and its price needed to be market up... 50%.
Don't expect that to be the final sales price, either, because Amazon is not slowing down. If anything, it's speeding up. Through new initiatives to sell self-branded products on its website, to go local selling groceries to everyone, and to pioneer delivery by drone, Amazon is making it easier and easier for shoppers to make Amazon their first destination when thinking about buying ... well, pretty much everything, and every time.
On Wall Street, they already expect Amazon's new initiatives to power the company to 58% gains in annual earnings over the next five years -- and by that I mean 58% gains each and every year, over and over again, for the next five years. If those predictions come anywhere close to the mark, 30% gains will only be the beginning for Amazon.
Um... I mean, 50%.
The new fast food
Jeremy Bowman (Grubhub): You might not order food online, but chances are your kids do. The popularity of online food delivery have driven shares of Grubhub up 73% this year on three straight blowout earnings reports, as the company continues to put up strong growth numbers.
Grubhub is the biggest player in the fast-growing online food-delivery industry, with several brands under its umbrella, including Seamless, MenuPages, and now Eat24, which it recently purchased from Yelp. That acquisition strategy, which has helped concentrate its power, and a number of secular tailwinds, should ensure its ongoing growth.
E-commerce across all categories continues to take over, with Amazon on its way to becoming the country's biggest retailer by gross-merchandise volume, and video streaming has introduced a wide range of home-entertainment options that would have been unthinkable even just a decade ago. It's easier than ever for consumers to stay home, and not surprisingly, food delivery is on the rise. Domino's Pizza is one of the few restaurant chains to consistently buck the "restaurant recession," and other chains have turned to delivery to beef up sales.
Grubhub is facing increasing competition from Amazon and Uber, but both are focused on much bigger markets, and the Seamless parent has thus far staved them off, as it has a controlling market share in about half of the metropolitan areas. Unlike other young tech companies, Grubhub's model, which relies on sales commissions, is profitable, with profit margins around 10%. That should only widen as the company gets bigger.
As more Americans turn to food delivery and the convenience of ordering online, Grubhub should continue to thrive.
