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concerning growth

‘What’s concerning is that the pace of jobs growth is slowing down’ — economists react to August jobs report – MarketWatch

Economic Report

‘Unemployment breaking the 10% barrier so decisively is a big psychological lift,’ says another economist

An employee earlier this year gets keys to open a restaurant that’s hiring in Arlington, Va.


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The August jobs report on Friday showed the coronavirus-battered U.S. economy recovered 1.4 million jobs last month, with the unemployment rate falling to 8.4% from 10.2%.

Economists polled by MarketWatch had expected a gain of 1.2 million jobs and an unemployment rate of 9.8%.

See:U.S. regains 1.4 million jobs in August, unemployment falls to 8.4%

Below are some initial reactions from analysts and economists, as the main U.S. stock gauges
SPX,
-1.53%

DJIA,
-1.13%

COMP,
-2.44%

recently traded mostly lower in Friday’s session following the data on nonfarm payrolls.

• “Yes we’ve added large numbers the last few months, but still digging out of a very big hole.” — Martha Gimbel, economist at Schmidt Futures

•“Unemployment breaking the 10% barrier so decisively is a big psychological lift … . The hiring of Census workers significantly added to jobs, but there were other key gains in the hard-hit retailing sector. Unfortunately, the easier jobs gains are over, and now we’ll be battling permanent layoffs once thought to be temporary, bankruptcies, secondary layoffs and maybe major layoffs in the airline industry. Expect that starting this month we’ll struggle to drop the unemployment rate as much, and possibly see break-even jobs months and even backsliding.” — Robert Frick, corporate economist at Navy Federal Credit Union

• “What’s concerning is that the pace of jobs growth is slowing down. If we had nothing but months like Aug going forward, it’d take another 8 months to get back to Feb levels, and longer to get back to our pre-COVID trajectory.” — Ernie Tedeschi, economist at Evercore ISI

• “More people with more jobs is something to celebrate, but we need to be concerned about how sustainable these gains will be. The labor market is clearly losing momentum, and the foundations appear fragile. With federal stimulus programs still lapsed and the threat of a second wave of the virus this fall, it’s not clear the labor market can keep improving on its own.” — Nick Bunker, economic research director at jobs website Indeed

• “One big concern in the report is that the number of reported permanent layoffs jumped by 534,000 to 3.4 million, which is up 2.1 million since February. Clearly some industries, notably restaurants and bars facing renewed restrictions in the face of higher infections, are struggling.” — Sal Guatieri, senior economist at BMO

• “This is a strong employment report. August payrolls rose 1,371k, essentially spot on the consensus but much better than the whisper number and much better than the ADP data suggested. The household survey found even faster job growth. Census hiring boosted payrolls by about 240k, but the private sector added 1,027k jobs, which is not bad.” — Chris Low, chief economist at FHN Financial

• “After 2 months of decent gains, the loss of momentum that began in July clearly extended into Aug. How much is related to renewed shutdowns/slow re-openings vs. a more lasting stall is unclear. We know that Congress needs to act.” — Steven Rattner, who ran the Obama administration’s auto task force

• “Note that about a quarter of the gain came in government jobs, largely due to temporary census worker hiring. … Overall, this was brighter than some of the high frequency numbers that showed a larger deceleration in August, but essentially in line with expectations for the headline hiring gain.” — Avery Shenfeld, chief economist at CIBC.

• “The big drop in the unemployment rate was driven by a huge 3,756,000 rise in the household measure of employment and came despite an increase in the labor force of nearly one million. … Employment growth is still set to lag the recovery in broader economic activity over the coming months given its greater exposure to the services sectors worst affected by the pandemic. Nevertheless, the August data illustrate that, despite the earlier surge in virus cases and more recent fading of fiscal support, the recovery continues to plough on.” — Andrew Hunter, senior U.S. economist at Capital Economics

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growth stocks

4 Growth Stocks Worth Buying After Last Week’s Sell-Off – Motley Fool

All of these companies are seeing surging revenue growth — even during the pandemic.

Last week proved to be a difficult one for growth stocks. Many of the market’s fastest-growing technology darlings were slammed, particularly during the second half of the week. The pullback was likely primarily a function of some profit-taking after many of these stocks soared since the bottom of the coronavirus market crash in March.

Sure, many of these stocks were due for a correction. After all, stocks can’t trend sharply upward forever. Eventually, they become overvalued. A pullback in these stocks, therefore, was largely merited. But the decline may have also led to some stocks getting oversold.

Three great growth stocks that look like good buying opportunities after last week’s sell-off are cloud database company MongoDB (NASDAQ:MDB), monitoring and analytics platform provider Datadog (NASDAQ:DDOG), and telehealth and virtual care companies Teladoc Health (NYSE:TDOC) and Livongo Health (NASDAQ:LVGO).

A chalkboard sketch of bar charts and a trend line highlighting an upward trend

Image source: Getty Images.

MongoDB: Down 18%

After this week’s sell-off, shares of MongoDB are now down 18% from an all-time high, giving today’s investors a much better entry point than many other investors have been paying for the stock this summer.

MongoDB has been able to continue growing its business rapidly — even through the pandemic. The company’s revenue for the quarter ending on April 30, 2020 (MongoDB’s first quarter of fiscal 2021), rose 46% year over year. This was notably an acceleration from 44% growth in the prior quarter. The company even lifted the low end of its full-year fiscal 2021 revenue outlook by $10 million, guiding for fiscal 2021 revenue to be between $520 million and $530 million.

“While the impact from COVID-19 will be longer than we originally expected at the beginning of this fiscal year, we are seeing clear signs that the current environment is reinforcing the long-term trends toward digital transformation and cloud migration,” said MongoDB CEO Dev Ittycheria in the company’s fiscal first-quarter earnings release. “MongoDB is a clear beneficiary of these trends and we will continue making investments to fully capitalize on this market opportunity.”

Datadog: Down 23%

Shares of Datadog are down 23% since touching a high of $98.99 earlier this month. Yet Datadog’s underlying business is booming. While second-quarter revenue growth decelerated from a growth rate of 87% in Q1, it was still up a strong 68% year over year.

The company’s customers with contracts boasting annual recurring revenue of $100,000 or more as of the end of Datadog’s second quarter were notably up 71% year over year, at 1,015.

Looking ahead, the company provided a full-year outlook for $566 million to $572 million in revenue. Analysts were expecting 2020 revenue of $564 million.

Livongo Health and Teladoc: Down 19% and 23%, respectively

Finally, there’s Livongo Health and Teladoc — two companies whose stocks fell sharply last week after they announced that they planned to cozy up and merge their businesses — a move that would make them the unquestionable leader in telehealth and virtual care.

The two companies estimate the combination will drive $100 million in revenue synergies by the end of the second year following the close of the merger. In addition, they forecast $500 million of revenue synergies on a run-rate basis by 2025. Considering the two companies generate just $923 million in annual revenue together today, this is quite a projection.

Investors who buy into these telehealth tech companies are taking a stake in an incredible growth story. Livongo Health, a company specializing in virtual care solutions for people with chronic conditions, saw second-quarter revenue surge 125% year over year to $91.9 million. Telehealth platform provider Teladoc saw its second-quarter revenue soar 85% year over year.

Of course, there’s always a risk that the merger doesn’t close. But even as individual entities, both Livongo Health and Teladoc Health have excellent competitive positioning — and their shares are down 19% and 23%, respectively, from all-time highs.

Expect more volatility ahead

While these stocks look attractive today, that doesn’t mean the prices they saw on Friday will be the lowest they trade from now on. Growth stocks can be very volatile as investors constantly try to reevaluate the present value of share today based on wild forecasts for future growth. Small changes in the sentiment for these companies’ growth trajectories can trigger significant swings in their prices.

Looking out five years and beyond, however, these fast-growing tech companies will likely continue winning market share and enhancing their offering for their customers, making them critical technologies of the future and ultimately rewarding investors. More importantly, their scalable business models will likely generate substantial profits over the long haul. But investors will need to exercise patience because these companies are still investing heavily in the big growth opportunities in front of them.


Daniel Sparks owns shares of Livongo Health Inc. The Motley Fool owns shares of and recommends Datadog, Livongo Health Inc, MongoDB, and Teladoc Health. The Motley Fool has a disclosure policy.

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growth stocks

3 Top Growth Stocks to Buy Right Now – Motley Fool

These stocks all grew by more than 40% in their most recent quarters.

David Jagielski

Investing in growth stocks can enhance your portfolio. These stocks tend to be more popular than plain old dividend stocks because growing businesses also tend to rise in value. Plus, the capital appreciation you can gain from investing in a top growth stock can often be much more than the recurring income you’ll earn from a dividend stock.

But picking a growth stock that can consistently deliver strong results is no easy task. Below are three companies that have produced impressive results of late and that still have lots of potential. 

1. Valens

Valens (OTC:VLNCF) may not be one of the big pot stocks in the industry just yet, but it’s taken every step to get on investors’ radars. In each of its last three quarters, Valens not only recorded a profit, but also generated strong growth.

Bar chart showing numbers going up.

Image source: Getty Images.

On April 14, the company released its first-quarter results of fiscal 2020. Sales of $32 million Canadian dollars were up from just CA$2.2 million in the prior-year period. The top line was a 4.4% improvement from the fourth quarter, and 94% higher than the third. This represents 263% growth the CA$8.8 million that Valens brought in during the second quarter.

Valens is still in its early growth stages, so the high percentages may be a little misleading. That shouldn’t take away from the impressive numbers the company has generated of late. That Valens is still getting more products out into the market is particularly exciting, as that means it’s likely to drive even more revenue growth this year.

The British Columbia-based company noted in its quarterly release that there are 25 SKUs in its pipeline across five product lines. They include vape pens, concentrates, edibles, beverages, topicals, tinctures, and capsules. With many different products hitting the markets this year, Valens’ numbers could look even better.

This cannabis stock could quickly grow — which is why it would be smart to buy it before it gets big.

2. Snap

Snap (NYSE:SNAP) could soon become much more popular with ad buyers thanks to Facebook, which is coming under fire from fed-up clients. Critics say the company isn’t doing enough to keep hate and disinformation off its platforms.

The end result may be that some of Facebook’s customers end up spending their advertising dollars elsewhere. That’s where Santa Monica-based Snap comes in. Snap is a camera company. While it may not be a Facebook replacement, it’s still an oft-used platform for young people to communicate and share stories. Its popularity and youthful audience carry a lot of value with ad buyers.

It also helps that Snap’s been growing its user base consistently in recent quarters, making it more appealing to advertisers. In the company’s first-quarter results, released April 21, it reported average daily active users of 229 million. That was up 5% from Q4, and represented a 20% increase from the prior-year period.

Sales in Q1 also grew by an impressive 44% year over year, reaching $462 million. Over the trailing 12 months, the company’s top line totaled $1.9 billion, up 46% over the same period a year ago. The bottom line has been a bit underwhelming for investors, however, as Snap has posted a loss every year.

3. Square

Square (NYSE:SQ) is another high-growth stock that investors should consider adding to their portfolios. In its first-quarter results May 6, Square reported net revenue of $1.4 billion — a year-over-year increase of 44%. In 2019, Square reported revenue of $4.7 billion, or a 43% increase from the year prior and more than double the $2.2 billion the company recorded in 2017. This past year was also the first time Square posted a profit, with a net income of $375 million.

What’s most exciting about Square, however, is that the company’s business is evolving to become more diverse and versatile. In Q1, Bitcoin revenue of $306 million accounted for 22.2% of the company’s net revenue. A year ago, that percentage was just 6.8%. Transactions make up 54.9% of Square sales, while subscriptions and services represent 21.4% of the top line. Hardware sales are about a modest 1.5% of revenue.

The company’s future growth won’t come without challenges. In an update from March 24, Square acknowledged that gross processing volume in its seller ecosystem was beginning to slow amid the COVID-19 pandemic. Still, with many paths forward and various revenue streams contributing to its top line, the company is in good shape to continue growing despite this adversity.

Which stock is the best buy today?

Let’s take a quick look at how these stocks have performed so far in 2020:

VLNCF Chart

VLNCF data by YCharts

Only Valens’ stock isn’t beating the S&P 500 this year. But even with a worse performance, the pot stock may be a better buy given its more modest price-to-sales valuation:

VLNCF PS Ratio Chart

VLNCF PS Ratio data by YCharts

Investors are paying much larger premiums for both Snap and Square today. Valens is a bit of an underrated buy, but with strong growth, profits in three straight quarters, and a cheaper valuation, the cannabis company is the better choice of the three.


David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Square. The Motley Fool recommends Valens GroWorks and recommends the following options: short September 2020 $70 puts

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growth Record

Record U.S. job growth expected in June, but masks labor market weakness – Reuters

WASHINGTON (Reuters) – The U.S. economy likely created jobs at a record clip in June as more restaurants and bars resumed operations, which would offer further evidence that the COVID-19 recession was probably over, though a surge in cases of the coronavirus threatens the fledgling recovery.

FILE PHOTO: People line up outside Kentucky Career Center prior to its opening to find assistance with their unemployment claims in Frankfort, Kentucky, U.S. June 18, 2020. REUTERS/Bryan Woolston

The Labor Department’s closely watched monthly employment report on Thursday would add to a stream of data, including consumer spending, showing a sharp rebound in activity.

But the reopening of businesses after being shuttered in mid-March has unleashed a wave of coronavirus infections in large parts of the country, including the populous California, Florida and Texas.

Several states have been scaling back or pausing reopenings since late June and sent some workers home. The impact of these decisions will not show up in the employment data as the government surveyed businesses in the middle of the month.

Federal Reserve Chair Jerome Powell this week acknowledged the rebound in activity, saying the economy had “entered an important new phase and (had) done so sooner than expected.” But he cautioned the outlook “is extraordinarily uncertain” and would depend on “our success in containing the virus.”

“As the economy is reopening a lot of the jobs lost have come back and activity is coming back as well,” said Steven Blitz, chief U.S. economist at TS Lombard in New York. “The problem is the virus still has a big say in determining the trajectory of the recovery.”

According to a Reuters survey of economists, nonfarm payrolls likely increased by 3 million jobs in June, which would be the most since the government started keeping records in 1939. Payrolls rebounded 2.5 million in May after plunging by a historic 20.687 million in April.

Despite two straight months of eye-popping gains, employment would still be about 16.6 million jobs below its pre-pandemic level. The unemployment rate is forecast dipping to 12.3% from 13.3% in May.

Employment is increasing largely as companies rehire workers laid off when non-essential businesses like restaurants, bars, gyms and dental offices among others were closed to slow the spread of COVID-19.

Economists have attributed the burst in job gains to the government’s Paycheck Protection Program, giving businesses loans that can be partially forgiven if used for wages. Those funds are drying up.

LAYOFFS STILL ELEVATED

In an economy that had already fallen into recession as of February, many companies, including some not initially impacted by lockdown measures, are struggling with weak demand.

Economists and industry watchers say this, together with the exhaustion of the PPP loans, has triggered a new wave of layoffs that is keeping weekly new applications for unemployment benefits extraordinarily high.

A separate report from the Labor Department on Thursday is expected to show initial claims for state unemployment benefits likely totaled a seasonally adjusted 1.355 million for the week ended June 27 down from 1.48 million in the prior week, according to another Reuters survey of economists.

“Job losses are starting to bleed to other sectors of the economy, income groups and different skill sets,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania.

The claims report is also expected to show the number of people receiving benefits after an initial week of aid likely fell to 19 million in the week ending June 20 from 19.5 million the week before. These so-called continued claims, which are reported with a one-week lag, have dropped from a record 24.912 million in early May.

For a more accurate picture of the labor market, economists recommend focusing on continuing claims and data on the total number of unemployment checks recipients. About 30.6 million people were collecting unemployment checks in the first week of June.

The jobless rate, which is the more standard measure of unemployment, has been biased down since March by people incorrectly misclassifying themselves as “employed but absent from work.” The Labor Department’s Bureau of Labor Statistics has been working with the Census Bureau to rectify this.

Without the misclassification issue, the unemployment rate would have been 16.3% in May instead of 13.3% and would have peaked at about 19.7% in April.

Job gains last month were likely concentrated in the typically low paying leisure and hospitality industry. The return of these workers is expected to have further depressed average wages in June. Some companies are cutting wages and reducing hours. Average hourly earnings are forecast declining 0.7% after dropping 1.0% in May. The average workweek is expected to dropped to 34.5 hours from 34.7 hours.

States and local governments likely laid off more workers as they confront reduced revenues and stressed budgets caused by the pandemic.

“A federal government failure to aid state and local governments and avoid income cliffs over the summer would further jeopardize the recovery,” said Lydia Boussour, a senior U.S. economist at Oxford Economics in New York.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama

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