The Federal Reserve is likely to proceed with a smaller rate hike next week to stabilize the financial sector. So it might be wise to buy Salesforce (CRM), Extreme Networks (EXTR), and Cars.com (CARS), which are basically strong growth stocks. read more….
The Federal Reserve is set to announce a smaller rate hike next week as the financial sector is reeling from the pressure of recent bank failures. However, with inflation continuing to rise and the job market remaining strong, we expect the Fed to resume rate hikes soon.
The stock market is expected to continue to come under pressure this year, but best-in-class growth stock Salesforce, Inc. (CRM), Extreme Networks, Inc. (EXTR), and Cars.com Inc. (car) might be wise.
Before we discuss what can help these growth stocks avoid economic challenges and deliver solid returns, let’s take a look at what’s currently influencing investor sentiment.
Earlier this week, the February inflation report was released along with the Consumer Price Index (CPI). 0.4% month-on-month, up 6% year-on-year, in line with market expectations. This marked the slowest annual increase in consumer prices since September 2021. However, monthly core inflation rose higher than expected.
The job market remains strong as inflation rises.Salaries in the non-farm sector increased by 311,000 in February, 225,000 higher than analyst estimates. This strong set of macroeconomic data is expected to put the Federal Reserve on track to hit its 2% inflation target by aggressively raising interest rates.
Street expected a 50 basis point rate hike before Silicon Valley Bank collapsed last week. However, the Fed is widely expected to make a smaller rate hike next week to restore stability in financial markets.
While economic uncertainty is expected to continue to put pressure on stock markets, some growth stocks have the potential to weather the challenge and emerge as long-term winners.
Investor interest in growth stocks is fueled by the Vanguard Growth ETF (VUG) 9.5% are profitable year-to-date. This is why CRM, EXTR and CARS are well positioned to deliver returns that beat the market.
Sales Force Inc. (CRM)
CRM is a customer relationship management technology provider. The company’s Customer 360 platform enables customers to work together to deliver connected experiences.
On January 12, 2023, Walmart Commerce Technologies announced a partnership with CRM to provide retailers with technology and services that enable frictionless local pickup and delivery for shoppers everywhere. Tyler Prince, Executive Vice President of CRM Alliances & Channels, said:
“Through this partnership with Salesforce, Walmart will be able to grow its business in new ways by bringing proven retail processes into production. It allows us to create experiences.”
CRM revenue grew at a CAGR of 22.4% over the past three years. Net profit grew at a CAGR of 18.2% over the last three years. Moreover, EBIT grew at a CAGR of 58.9% over the same time frame.
CRM’s 73.34% 12-month gross margin is 49.8% higher than the industry average of 48.97%. Similarly, his EBITDA margin after 12 months of 17.34% is 54.6% above the industry average of 11.22%. Additionally, the stock’s trailing 12-month leveraged FCF margin of 32.60% is 394.9% higher than the industry average of 6.59%.
In the fourth quarter ended January 31, 2023, CRM total revenue increased 14.4% year-over-year to $8.38 billion. Non-GAAP operating income increased 123.3% year-over-year to $2.45 billion. The company’s non-GAAP net income increased 96.4% year-over-year to $1.66 billion. Additionally, non-GAAP EPS was $1.68, representing 100% year-over-year growth.
Analysts expect CRM EPS and revenue to grow 64.5% and 10.2% year-over-year to $1.61 and $8.17 billion, respectively, for the quarter ending April 30, 2023. Exceeded Street EPS estimates in each of the subsequent four quarters. The stock is up 38% year-to-date and closed its last trading session at $182.91.
CRM’s POWR rating It reflects its solid outlook. The stock has an overall rating of B, which is equivalent to a buy in our proprietary rating system. POWR ratings evaluate stocks on 118 different factors, each with its own weighting.
It has an A rating for growth and emotion, and a B for quality. CRM ranks 19th out of 134 stocks. software application industry. click here See other CRM ratings for value, momentum, and stability.
Extreme Networks, Inc. (EXTR)
EXTR provides software-driven networking solutions worldwide. We design, develop and manufacture wired and wireless network infrastructure equipment. We also develop software for network management, policy, analytics, security and access control.
EXTR revenue increased at a CAGR of 8.9% over the last five years. EBITDA grew at a CAGR of 34.5% over the last three years.
In terms of gross margin over the last 12 months, EXTR’s 56.28% is 14.9% higher than the industry average of 48.97%. The company’s 4.13% last 12-month net profit margin is 41.7% above the industry average of 2.92%. Similarly, the asset turnover ratio of 1.14x over the last 12 months is 88.3% higher than the industry average of 0.60x.
For the second quarter of the fiscal year ended December 31, 2022, EXTR’s total net revenues increased 13.3% year-over-year to $318.35 million. The company’s non-GAAP operating income increased 28.9% from the year-ago quarter to $47.34 million. Non-GAAP net income was $36.48 billion, up 28.3% from the prior year. Additionally, its non-GAAP EPS was $0.27, up 28.6% year-over-year.
Analysts expect EXTR’s EPS and revenue to increase 23.1% and 11.9% year-over-year to $0.26 and $319.47 million, respectively, for the quarter ending March 31, 2023. It has had a surprising history of impressive earnings and has beaten consensus EPS estimates in each of its four subsequent quarters. Over the past nine months, the stock has risen 81.8% to close its last trading session at $16.98. I was.
EXTR’s POWR Rating reflects a solid outlook. The overall rating is A, which corresponds to a strong buy in our own rating system.
There is an A grade for growth and quality and a B grade for momentum. in B rank Technology – Communications/Networking The industry ranks #2 out of 50 stocks. To see other EXTR ratings for value, stability, and sentiment, click here.
Carscom Co., Ltd. (car)
CARS operates as a digital marketplace and offers solutions for the automotive industry. Its platform connects car buyers and sellers. The company showcases dealer inventory, enhances and expands dealer and automaker brands, connects sellers with ready-to-buy audiences, and provides shoppers with the resources and information they need to make vehicle-buying decisions. make it possible.
CARS EBITDA grew at a CAGR of 12.6% over the last three years. Leveraged FCF grew at a CAGR of 16.8% over the last three years. Moreover, EBIT grew at a CAGR of 63.5% over the same time frame.
CARS’ 68.81% 12-month gross margin is 38.6% higher than the industry average of 49.63%. Similarly, his EBITDA margin after 12 months of 24.73% is 31.7% above the industry average of 18.78%. Additionally, the stock’s trailing 12-month leveraged FCF margin of 18.32% is 140.7% higher than the industry average of 7.61%.
For the fourth quarter ended December 31, 2022, CARS total revenue was $168.2 million, up 6.3% year-over-year. Adjusted EBITDA was $49.52 million, up 5.8% year-over-year.
The company’s free cash flow increased 55.9% year-on-year to $31.91 million. That net profit came to $10.26 million, compared to his net loss of $2.88 million in the same period last year. Additionally, EPS was $0.15 and his loss per share was $0.04 in the same period last year.
Analysts expect CARS revenue to grow 5.5% year-over-year to $166.91 million for the quarter ending March 31, 2023. EPS for the quarter ending June 30, 2023 is expected to increase 14.2% year-over-year to $0.47. Over the past nine months, the stock has gained 73.2% and closed its last trading session at $16.47.
CARS’ POWR Rating reflects this positive outlook. CARS has an overall rating of B, which equates to a purchase on their own rating system.
It has an A grade for growth. CARS ranks 5th out of 21 stocks. Auto Dealer & Rental industry. click here To see CARS’ additional ratings for Value, Momentum, Stability, Sentiment, and Quality.
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CRM shares fell $0.20 (-0.11%) in pre-market trading on Thursday. Year-to-date, CRM is up 38.10% of him, while the S&P 500 Index is up 1.61% of him over the same period.
About the author: Dipanjan Benture
Dipanjan has been interested in the stock market since elementary school. This earned him a master’s degree in Finance and Accounting. Today, Dipanjan works as an investment analyst and financial journalist with a keen interest in reading and analyzing emerging trends in financial markets.
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