You want to put some more money in the market, but Wall Street’s giving you a lot of tempting choices these days. Do you go with the hot stocks that have been thriving in the new normal? Do you turn your attention to some of the out-of-favor names that can bounce back in a major way heading into the holidays? Do you take a stab at some of the bubbling trends that will kick things up to a higher level at the other end of the pandemic in 2021?
Thankfully you don’t have to buy a single stock or ride a single theme. If you’ve got $1,000 to invest I think splitting that up between 2U (NASDAQ:TWOU), Target (NYSE:TGT), and Match Group (NASDAQ:MTCH) will serve you and your portfolio well. Let’s take a closer look at all three market calls.
We’re now two summers removed from the day when 2U surrendered nearly two-thirds of its value. The provider of online graduate degree programs for universities as well as shorter virtual boot camps and professional certifications plunged 65% in a single day when it announced that it would be slowing its roll. Threatened by what it was calling the “mainstreaming of online education” the digital curriculum builder slashed its enrollment expectations.
2U would be scaling back on the number of new graduate programs it would be launching, going for bunt singles that would be easier to bankroll and manage. A stock would have to nearly triple to make back a 65% slide — cruel math, I know — but 2U is almost at the point where it has clawed its way back to where it was at the end of July last year.
The biggest surprise here is that 2U never had to give up on the growth it thought it would be abandoning. This will still be its ninth consecutive year of growing its top line by at least 30%. A couple of acquisitions helped, but in its latest quarter the 31% uptick in revenue was 100% organic. The past 16 months may have been a round-trip to nowhere for investors, but 2U is clearly moving in the right direction now.
You won’t find too many brick-and-mortar chains killing it the way Target is right now. This week it posted a 20.7% spike in comparable-store sales. The growing popularity of e-commerce, curbside pick-up, and online ordering for in-store pick-up is helping, but there’s more to this story than the blistering 155% pop in digital sales.
Folks are back in Target stores physically shopping again. Comparable in-store traffic has risen 4.5% — and this is compared to last year’s pre-pandemic mindset — and the average transaction is 15.6% higher as we spend more per outing. Investors don’t typically see Target as a high-growth story, but adjusted earnings more than doubled in its latest quarter.
The “cheap chic” retailer has become an all-weather winner, and it provides a little dividend income to boot. It has naturally appealed to shoppers when the economy’s humming along nicely, but now that we’re navigating through a pandemic and a recession, we’re seeing how Target can rise above when so many other chains are struggling.
When it comes to online dating, Match Group has put a ring on it. Match Group operates dozens of dating sites and apps including Tinder, Match.com, and Meetic. An internal study last year found that 60% of all relationships that started on a dating site or app started on a Match Group platform.
Match Group has 10.8 million paying subscribers across its sites, and average revenue per user is inching higher. It’s a global matchmaker, with international users accounting for a little more than half of its premium members.
In recent years Tinder has emerged as the lead horse. It now accounts for roughly 6.5 million of those 10.8 million paying subscribers. However, its other sites are starting to romance the top line. Direct revenue from its non-Tinder brands rose 23% in its latest quarter, besting the still impressive 15% burst at Tinder. If double-digit growth is the norm now, while we’re in a pandemic, one can only expect more explosive growth for Match Group at the other end of the COVID-19 pandemic when folks are more comfortable socializing in person.