While the S&P 500 up about 14% year-to-date, there have been some standout performers. Including the newly added Tesla, nine of the index's components have at least doubled so far this year. Some may have peaked for the moment, but others appear to have plenty more room to run. Here we review some of 2020's highflyers—and consider why they may keep soaring in 2021.
What is Driving Growth at Paypal?
PayPal (NASDAQ:PYPL) stock has risen 125% year-to-date and trails only Etsy and new-kid-on-the block Tesla among S&P 500 constituents. The digital payments platform has become increasingly popular during the pandemic as merchants big and small have scrambled to build-out their online sales capabilities.
Analysts are expecting a bit slower growth in 2021 but investors need not fret. Paypal's top and bottom lines are both forecast to grow around 18% next year compared to the 23% earnings growth slated for this year. But this kind of growth is nothing to sneeze at—and we could very well see these estimates get upwardly revised as the new year progresses. Management's guidance may be overly conservative given the hard to predict consumer spending outlook amid a weakening jobs picture and stimulus uncertainty.
Yet consumers' affinity for online shopping is showing little signs of slowing down and will likely remain elevated even as vaccines are widely distributed later in 2021. People are increasingly accepting e-commerce as a new part of homebound life. Many comfortable e-shoppers probably won't revert to traditional retail especially after establishing all sorts of new accounts with various online retailers.
Meanwhile, Paypal's addition of cryptocurrency payment options should open the company to a whole new growth opportunity as consumers and merchants alike continue to embrace the technology. This should all add up to strong payment volumes for PayPal and more big gains for shareholders.
Is Albemarle a Good EV Battery Play?
Albemarle (NYSE:ALB) stock is up 108% in 2020. This has been one of the less publicized winners of the year perhaps because it is a member of the less dynamic materials sector. But despite this perception, the specialty chemicals maker looks to be well positioned for some explosive growth in 2021 and beyond.
It has been most considered a play on electric vehicle (EV) batteries because of its emergence as a leading global lithium manufacturer. Demand for lithium is only likely to pick up steam as electric vehicles become more affordable and mainstream. The successful implementation of the Biden administration's clean energy policies stands to further energize the EV and lithium stocks. And keep in mind Albemarle's lithium division also supplies non-EV customers such as consumer electronics manufacturers and glassmakers.
Beyond lithium, Albemarle has growth opportunities in other products such as bromine. The chemical is used as a catalyst in oil refining as well as for fire safety solutions. A potential 2021 recovery in the oil market would be a major boost to the company's growth prospects and make it a more diversified growth story. Improved pandemic conditions leading to pent-up air and auto travel (and therefore increased fuel demand) makes Albemarle a unique play on both gasoline demand and the emergence of electric vehicles.
Will ServiceNow Keep Growing in the Future?
Rounding out the list of stellar outperformers is software maker ServiceNow (NYSE:NOW) which has climbed 101% this year. The company's cloud-based software-as-a-service (SaaS) offerings help enterprises automate and track a range of workflows. This allows them to manage their IT services more efficiently and lower costs.
Given the prevalence of businesses working remotely this year, its easy to see why this stock has taken off. ServiceNow sells its software to a broad set of customers in the consumer, financial, healthcare, and technology sectors both in the U.S. and overseas. As enterprises have shifted to away-from-office operations, ServiceNow software has been in high demand. This shift has accelerated an already surging trend in enterprises and governments moving their IT infrastructure to the cloud.
ServiceNow is on track to post 30% revenue growth this year. This will be despite having significant exposure to struggling industries like hospitality, transportation, and energy. Imagine once these business return to health. The Street's projections for 25% top-line growth in 2021 could get lifted in a hurry.
As with other SaaS companies the main attraction from an investment standpoint (aside from the growth potential) is the recurring nature of ServiceNow's revenue. It generates more than 80% of sales from software subscriptions which provides good visibility and predictability for investors.
So where does ServiceNow go from here? Well, the effects of the pandemic are likely to be long lasting with many businesses expected to embrace some type of remote work model to accommodate its customers and employees. As enterprises continue to embark on the digital transformation, ServiceNow should be more than just relevant for years to come.
Look for its software lineup and new product innovations to drive new customer wins and add-on business from existing customers. This should lead to solid long-term growth at ServiceNow—and is reason for investors to buy Now before this double becomes a triple.
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