Can These Companies Continue Their Bull Run?
Madhukar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When the stock price of a company increases significantly, investors are curious to know whether it is likely to increase further. High growth in a short time might make investors skeptical about further growth potential of the stock. However, there are some stocks which have further growth potential. Here are three companies that have registered more than 70% YTD growth in their stock prices.
Source: Google Finance
In order to maintain this high-growth trajectory, these companies are releasing new products. Let’s have a look at these products and the growth opportunities for each company.
A company being made to sweat
Hewlett-Packard (NYSE: HPQ) launched Moonshot servers in April 2013 in the U.S. and Canada. This server consumes 89% less energy and is 77% cheaper than a traditional server. The Moonshot server is a part of HP’s commodity server business, or CSB. The company launched these servers to revive its distressed CSB. However, Moonshot failed to have the expected impact on CSB. The company’s CSB segment posted revenue of $3.04 billion in the second-quarter of 2013, a decrease of 12% year-over-year.
HP is also facing severe challenges in its personal computer, or PC, segment. Its PC segment revenue dropped 20% year-over-year in the second-quarter of 2013. Despite being a market leader in the PC segment, it is continuously losing its market share to its competitor, Lenovo. In the second quarter of 2012, Hewlett-Packard had 17.8% market share in the PC business as compared to Lenovo's 13.2%. However, it now has 15.7% market share, and Lenovo occupies 15.3% of the PC market.
A company launching a smartphone
Sony (NYSE: SNE) is expected to launch its latest smartphone Xperia Z Ultra in July 2013. It is believed to be the best smartphone Sony has ever made. The Xperia Z Ultra has a 32,173 point AnTuTu score, and beats its peer, Samsung Galaxy S4, by almost 700 points. AnTuTu score is a benchmark for smartphones.
The Xperia Z Ultra will be carried exclusively by T-Mobile US (NYSE: TMUS) in the U.S. T-Mobile offers a “simple choice plan” to its customers. This plan allows the customers to design their plan based on the number of lines and amount of high-speed data they want. T-Mobile will allow Xperia Z Ultra users to connect to its high-speed 4G network across the U.S. This network is expected to reach 100 million people in June and 200 million people by the end of this year. Therefore, it will increase Sony's addressable market in the U.S. significantly.
Both Sony and Microsoft (NASDAQ: MSFT) revealed their latest gaming consoles in June 2013. Microsoft introduced Xbox One, scheduled to be launched in the market in early November this year. Sony revealed its PlayStation 4, or PS4, that is likely to hit the markets in late November.
PS4 is attractively priced at $399, $100 less than its rival Xbox One. Analysts believe that the PS4 will be a game changer for Sony because of its pro-consumer features as compared to the Xbox One. Amazon.com conducted a poll asking consumers whether they preferred the PS4 or the Xbox One. PS4 won the poll with 38,984 consumers voting for PS4, whereas Xbox One managed a mere 2,162 votes. Sony sold 70 million-75 million units of PS3 in the last few years. If sales remain similar, yearly sales of 12 million PS4 units can be expected. This will help Sony generate yearly revenue of $4.99 billion from PS4.
A pharma giant testing drugs
In February 2013, Vertex Pharmaceuticals (NASDAQ: VRTX) announced plans to conduct phase 3 studies to test its drug VX-809 combined with another drug, Ivacaftor. These two drugs cure cystic fibrosis, or CF. CF is a life-shortening disease that causes lung dysfunction.
Vertex plans to conduct phase 3 studies in two stages of 24 weeks each. On successful completion of the studies, the company will apply for drug approval to the FDA and the European Medicines Agency.
About 70,000 patients suffer from CF worldwide. 65,000 of these patients are in the U.S. and Europe. With this tremendous market potential, Vertex is expected to generate $10 billion in additional annual revenue after approval.
Additionally, Vertex is administering phase 2 testing of another drug, VX-135, for the treatment of hepatitis C. Patients have shown significant reduction of the hepatitis C virus during this stage.
Although medication for hepatitis C is available, the cure rate is only 50%-60%. VX-135 provides patients with simpler and more tolerable treatment regimens. This drug is also expected to provide higher cure rates. With about 170 million Hepatitis C patients worldwide, the successful testing of the drug will be a significant revenue driver for Vertex.
Hewlett-Packard launched the Moonshot server, but it has failed to generate the kind of response that the company expected. The company is also continuously losing ground in the PC business, where it is the market leader. For the time being, I recommend a hold on this stock.
Sony’s new smartphone, and its contract with T-Mobile, is expected to expand its customer base significantly. PS4 provides the company with an opportunity to control the gaming console market. I recommend a buy on this stock.
Vertex is conducting trials for its drugs VX-809, Ivacaftor and VX-135. The successful completion of these trials will provide an enormous growth potential to the company. I recommend a buy on the stock.
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Madhu Dube has no position in any stocks mentioned. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!