The new year is here, but if you haven't reconfigured your portfolio for 2021, it's not too late. On the other hand, don't tarry. The incredible rally from March's low -- the one that lifted a lot of stocks in a big way -- looks poised to cool off. This year's investing environment could be considerably more lethargic, rewarding only the worthiest of names.
To that end, Adobe (ADBE -0.27%), PayPal Holdings (PYPL -1.83%), and Qorvo (QRVO -1.92%) are among the best of the best growth stocks to buy this month. Here's a closer look at these three companies. Consumer-minded technology ties them together, and that's no coincidence.
1. Not the Adobe you think you know
When the COVID-19 pandemic took hold and sent companies scrambling for solutions, Adobe wasn't a name they turned to. Names such as Zoom Technologies, Microsoft, and even Shopify were ready to meet the immediate needs of people suddenly forced to work from home or do business online.
Image source: Getty Images.
As the dust from the response to the coronavirus outbreak settles, it's becoming clear that corporations need higher-level solutions if they want to remain relevant in an environment where mobility and online commerce are the new norm. This is where Adobe's offerings really start to shine.
You may know Adobe as the company behind the PDF, which has made it easy to distribute uniform documents over the Web. The company's PhotoShop software is also a popular solution for manipulating and improving digital images. That's hardly all Adobe is, though. The organization's Creative Cloud and Experience Cloud allow users to optimize and custom-build websites, manage online ad campaigns, and collect consumer data that can be used to refine marketing messages. Back in October, the company even announced a partnership with Microsoft that will provide a customer relationship management platform that's powered by artificial intelligence.
These are tough developments for investors to fully understand, but the analysts who keep close tabs on such initiatives believe Adobe's going to leverage its portfolio to drive sales growth of 14% next year after this year's 18% improvement. Per-share earnings are projected to grow by nearly 18%.
The kicker: Adobe hasn't failed to top earnings estimates in any of its past eight quarters.
Data source: Thomson Reuters. Chart by author.
2. PayPal is stepping up its mobile wallet game
While Adobe's winning business lines may be tough to pin down, there's no doubt about PayPal's model. This company is the king of digital payments, almost any way you slice it. As expected, 2020's surge in online shopping led to a similar surge in PayPal's usage. The total volume of processed payments grew 36% year over year during the quarter ending in September, pushing operating profits up by 41%. The platform also added a net 15.2 million users in the three-month stretch.
That growth is of course likely to slow at least a little in 2021, but the company isn't simply sitting back and coasting. PayPal is turning the heat up on the one area where it's not a powerhouse: the mobile wallet space.
It's a crowded and somewhat complex arena. Technically, Apple and China's Alipay and WeChat boast more worldwide mobile payment customers, while Alphabet's Google and Samsung have carved out a respectable amount of the United States' digital wallet business for themselves. That's PayPal's biggest and most important single market.
Its lack of leadership within this sliver of the payments business, however, is largely a reflection of choosing not to address the mobile-payments opportunity. That's starting to change. In May, PayPal introduced QR codes that allow for contactless buying and selling, which CVS Health had adopted before the end of the following month. Then, during November's Q3 earnings call, CEO Dan Schulman explained that the mobile app will be updated this year to offer cryptocurrency management, direct deposit, budgeting tools, check cashing, and a buy now/pay later feature.
These overdue overhauls are part of the reason PayPal's top line is projected to grow nearly another 19% in 2021, matched by even more earnings growth.
Data source: Thomson Reuters. Chart by author.
3. Qorvo is the name bringing 5G to life
Finally, it may not be a household name, but there's a chance you or someone you know has used a Qorvo product. The company makes specialized semiconductors -- specifically, chips that power Wi-Fi devices, 5G connectivity, Internet-of-Things tech, and all sorts of amplifiers, just to name a few. They're things you don't give a second thought to, but they're also solutions you'd miss if they suddenly went away. Qorvo, for instance, supplies key components for Apple's iPhone.
The company isn't overly reliant on just one customer, however. In fact, it's riding a wave that's much bigger than any one industry. As CEO Robert Bruggeworth explained during the company's most recent earnings call, "The deployment of 5G base stations and the upgrade to 5G smartphones are expected to span multiple years." He went on to rightfully note that the sheer complexity of 5G phones means "the vast majority of 5G phones are continuing to use fully integrated solutions" that one supplier offers.
Translation: It would be difficult for any phone maker to simply stop using Qorvo's one-stop solution, particularly now that commitments to 5G infrastructure and standards have already been made.
The analyst community currently expects 2020's sales-growth pace of more than 18% to cool to 10% in 2021, matched by a similar slowdown in earnings growth. As was the case with Adobe, though, Qorvo is in the habit of exceeding expectations. It hasn't failed to top profit estimates in any quarter over the past three years, with most of them being sizable beats.
Data source: Thomson Reuters. Chart by author.
