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The unloved technology stocks that were decimated last year have come roaring back to life in 2023, as lower valuations along with renewed uptrends have seen buying pressure accumulate in growth names. The more aggressive pockets of the market, including the technology and consumer discretionary sectors, typically lead new bull markets.
Ongoing strength in these areas speak to higher probabilities of bullish outcomes as we continue to trend higher into the new year. Dating back to 1927, the technology and consumer discretionary sectors have outperformed the S&P 500 70% of the time in a President’s third year. After a brutal midterm year last year, this is the type of statistic that has bulls cheering.
Adding to the bullish sentiment, inflation measures have been steadily coming down since the middle of last year. Just this morning, we learned that U.S. producer prices dropped in December by the most since the onset of the pandemic, allowing an aggressive Fed to step off the gas in terms of interest rate hikes. The producer price index for final demand fell -0.5% last month, well below the -0.1% estimate. Year-over-year, producer prices rose 6.2%, again below the 6.8% projection.
All this is to say that the bulls are back, and it’s time to build out a watchlist of stocks that are set to outperform. Our proprietary Zacks systems and indicators are continually detecting leading stocks. Our Zacks Rank system is backing up the data, as leading growth stocks have recently hit our Zacks Rank #1 (Strong Buy) list.
Positive earnings estimate revisions are at the heart of the Zacks Rank. Our research shows that rising earnings estimates are the most powerful force impacting stock prices. Only the top 20% of all stocks that are experiencing the most substantial revisions are ranked as either a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy).
Stocks with rising estimates have significantly outperformed the S&P 500. In fact, based on a recent 34-year study, a portfolio of Zacks Rank #1 (Strong Buy) stocks beat the market with an average annual return of over 25% per year – more than double that of the S&P’s 11.1%.
That’s why it is so crucial to keep an eye on which stocks are ranked favorably. Let’s take a look at a leading growth stock that has recently joined the top tier of the Zacks Rank. This company is part of the Zacks Internet – Services industry, which ranks in the top 35% out of approximately 250 industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months. Also note the favorable characteristics for this industry below:
Image Source: Zacks Investment Research
Quantitative research studies suggest about half of a stock’s future price appreciation is due to its industry grouping. By targeting stocks contained within leading industry groups, we can dramatically improve our odds of success.
Etsy is a global provider of two-sided online marketplaces that connect buyers and sellers. Its primary marketplace, Etsy.com, connects artisans and entrepreneurs with various consumers. The company also offers Reverb, a musical instrument marketplace; Depop, a fashion resale space; Etsy Payments, a payment processing service; and Etsy Ads, an advertising platform.
ETSY has surpassed earnings estimates in each of the past four quarters. The online marketplace provider most recently posted Q3 EPS back in November of $0.58/share, a 56.76% surprise over the $0.37 consensus estimate. ETSY has delivered a trailing four-quarter average earnings surprise of 37.55%.
Since bottoming back in June of last year, ETSY has staged a new uptrend, rallying more than 90% in that timeframe. The bullish trend may be just beginning as the stock continues to make a series of higher highs.
Image Source: Zacks Investment Research
The year ahead appears favorable, as analysts have raised their 2023 EPS estimates by 4.07% in the past 60 days. The Zacks Consensus Estimate now stands at $2.81/share, reflecting growth of 152.75% versus last year. Sales are expected to climb 9.64% to $2.75 billion.
Image Source: Zacks Investment Research
With growth names coming back to the forefront, make sure to keep an eye on stocks that are rated highly by our Zacks Rank like ETSY.
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Top Growth Stocks Hit Zacks 'Strong Buy' List
The unloved technology stocks that were decimated last year have come roaring back to life in 2023, as lower valuations along with renewed uptrends have seen buying pressure accumulate in growth names. The more aggressive pockets of the market, including the technology and consumer discretionary sectors, typically lead new bull markets.
Ongoing strength in these areas speak to higher probabilities of bullish outcomes as we continue to trend higher into the new year. Dating back to 1927, the technology and consumer discretionary sectors have outperformed the S&P 500 70% of the time in a President’s third year. After a brutal midterm year last year, this is the type of statistic that has bulls cheering.
Adding to the bullish sentiment, inflation measures have been steadily coming down since the middle of last year. Just this morning, we learned that U.S. producer prices dropped in December by the most since the onset of the pandemic, allowing an aggressive Fed to step off the gas in terms of interest rate hikes. The producer price index for final demand fell -0.5% last month, well below the -0.1% estimate. Year-over-year, producer prices rose 6.2%, again below the 6.8% projection.
All this is to say that the bulls are back, and it’s time to build out a watchlist of stocks that are set to outperform. Our proprietary Zacks systems and indicators are continually detecting leading stocks. Our Zacks Rank system is backing up the data, as leading growth stocks have recently hit our Zacks Rank #1 (Strong Buy) list.
Positive earnings estimate revisions are at the heart of the Zacks Rank. Our research shows that rising earnings estimates are the most powerful force impacting stock prices. Only the top 20% of all stocks that are experiencing the most substantial revisions are ranked as either a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy).
Stocks with rising estimates have significantly outperformed the S&P 500. In fact, based on a recent 34-year study, a portfolio of Zacks Rank #1 (Strong Buy) stocks beat the market with an average annual return of over 25% per year – more than double that of the S&P’s 11.1%.
That’s why it is so crucial to keep an eye on which stocks are ranked favorably. Let’s take a look at a leading growth stock that has recently joined the top tier of the Zacks Rank. This company is part of the Zacks Internet – Services industry, which ranks in the top 35% out of approximately 250 industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months. Also note the favorable characteristics for this industry below:
Image Source: Zacks Investment Research
Quantitative research studies suggest about half of a stock’s future price appreciation is due to its industry grouping. By targeting stocks contained within leading industry groups, we can dramatically improve our odds of success.
Etsy, Inc. (ETSY - Free Report)
Etsy is a global provider of two-sided online marketplaces that connect buyers and sellers. Its primary marketplace, Etsy.com, connects artisans and entrepreneurs with various consumers. The company also offers Reverb, a musical instrument marketplace; Depop, a fashion resale space; Etsy Payments, a payment processing service; and Etsy Ads, an advertising platform.
ETSY has surpassed earnings estimates in each of the past four quarters. The online marketplace provider most recently posted Q3 EPS back in November of $0.58/share, a 56.76% surprise over the $0.37 consensus estimate. ETSY has delivered a trailing four-quarter average earnings surprise of 37.55%.
Since bottoming back in June of last year, ETSY has staged a new uptrend, rallying more than 90% in that timeframe. The bullish trend may be just beginning as the stock continues to make a series of higher highs.
Image Source: Zacks Investment Research
The year ahead appears favorable, as analysts have raised their 2023 EPS estimates by 4.07% in the past 60 days. The Zacks Consensus Estimate now stands at $2.81/share, reflecting growth of 152.75% versus last year. Sales are expected to climb 9.64% to $2.75 billion.
Image Source: Zacks Investment Research
With growth names coming back to the forefront, make sure to keep an eye on stocks that are rated highly by our Zacks Rank like ETSY.