Chronicle Journal: Finance

3 Growth Stocks Expected to Keep Outperforming in 2021: Tesla, Chewy, and Roku

Growth stocks delivered stellar performance in 2020 thanks to coronavirus-pandemic-led changes in consumer and business behavior. Because most of the trends that supported the exceptional growth of certain companies are expected to continue this year despite the global economy’s gradual return to normality, we think it could be wise to bet now on the winners from last year. Tesla (TSLA), Chewy (CHWY), and Roku (ROKU) delivered triple-digit gains last year and may still have plenty of upside.

Growth stocks, primarily in the technology sector, for the most part drove the stock market’s unprecedented rally last year after a correction in March. Changes in consumer and enterprise behavior necessitated by the pandemic drove an exceptional increase in demand for the sector’s products and services, which translated into solid growth in revenue and earnings by these stocks.

The solid performance of growth stocks is evident from the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 31% gains in 2020. The SPDR S&P 500 ETF Trust (SPY), a broader market indicator, generated 16% returns over the same time frame.

As most pandemic-driven trends are expected to continue this year even if the economy gradually returns to normal with the vaccine rollout as expected,  we think companies that witnessed solid growth in 2020 will keep growing this year. We expect their stocks to continue outperforming the rest of the market.

Tesla, Inc. (TSLA), Chewy, Inc. (CHWY), and Roku, Inc. (ROKU) are three companies that have unique offerings and their products and services are in high demand. After delivering solid returns in 2020, these stocks are likely to do well in 2021 also.

Tesla, Inc. (TSLA)

TSLA needs no introduction. In addition to electric vehicles, the company is involved in producing stationary energy storage systems and powertrain components. TSLA has operations in the U.S., Norway, China, and internationally. TSLA’s stock gained 696.4% in 2020.

TSLA recently built a production facility in China. The company is also plans to construct  new facilities in Brandenburg, Germany and Austin, Texas. The company recently announced that it will  begin  operations in India, which could be a major market for the company.

For the last three years, TSLA’s revenue has grown at a CAGR of 37.8%. The company’s EBITDA has grown at a CAGR of 165.6% during the same period.

TSLA’s revenue is expected to grow 59.9% year-over-year for the quarter ended March 31, 2021 and 46.4% in 2021. The company’s EPS is expected to grow 69.3% in 2021 and at a rate of 396.7% per annum over the next five years.

How does TSLA stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Peer Grade

A for Industry Rank

A for Overall POWR Rating

The stock is ranked #1 of 39 stocks in the Auto & Vehicle Manufacturers industry.

Chewy, Inc. (CHWY)

CHWY operates an online platform that sells pet food and related products. The company has operations in the United States. CHWY’s stock rose 206.4% in 2020.

CHWY recently announced that it will expand its pharmaceutical offerings to include compounded medications that are tailor-made for different pets. The company has also launched a new “Connect with a Vet'' service that allows pet owners to consult a veterinarian.

CHWY’s revenue is estimated to increase 44.4% year-over-year for the quarter ended January 31, 2021 and 45.7% in 2021. The company’s EPS is expected to rise 39.7% in 2021 and 132.1% per year over the next five years.

CHWY’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” for Trade Grade. It is ranked #9 of 52 stocks in the Consumer Goods industry.

Roku, Inc. (ROKU)

ROKU is involved in the production and marketing of streaming entertainment devices that can be used with televisions. The company also helps content creators stream their content through its platform. ROKU’s stock price increased 141.5% in 2020.

ROKU recently surpassed 50 million active accounts. The company has launched its StreamBar product in the U.K. which adds cinematic sounds and 4K HDR to any TV. ROKU  has also recently launched the Roku Channel in the U.K.

Over the last three years, ROKU’s revenue has grown at a CAGR of 48.3%. Its  revenue is expected to grow 43.4% year-over-year for the quarter ended March 31, 2021 and 39% in 2021. The company’s EPS growth is expected to be 34.2% in 2021.

It is no surprise that ROKU is rated “Strong Buy” in our POWR Ratings systems with a grade of “A” in Trade Grade, Buy & Hold Grade, and Industry Rank. In the 43-stock Technology – Hardware industry, ROKU is ranked #13.

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TSLA shares were trading at $796.65 per share on Thursday morning, up $40.67 (+5.38%). Year-to-date, TSLA has gained 12.89%, versus a 1.47% rise in the benchmark S&P 500 index during the same period.



About the Author: Aaryaman Aashind

Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks.

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