Growth stocks were the major drivers of the stock market performance following the mid-March crash. For many technology stocks, the pandemic led to a surge in growth and demand. For many companies, their software was more important to their operations than actual offices. 

The SPDR Portfolio S&P 500 Growth ETF (SPYG), which tracks the performance of growth stocks, has gained 18% so far this year. In comparison, the broader S&P 500 has gained 2.5% over this period. This momentum may well go into November and beyond, especially given the fact that there is a strong prediction of the second wave of coronavirus. 

Overall, the ability to scale operations is much higher and quicker in the technology sector, leading to higher growth rates. Apart from technology, businesses that are providing essential services are also poised to keep growing.

Twilio, Inc. (TWLO - Get Rating), Zillow Group, Inc. (Z - Get Rating), and Five Below, Inc. (FIVE - Get Rating) have witnessed significant momentum this year because of their offerings and strength in their business models. They are expected to keep gaining in November as consumer spending increases on their products and services.

Twilio, Inc. (TWLO - Get Rating)

TWLO operates a cloud communications platform that allows developers to build and scale communications within software applications. They provide this as a pay-as-you-go service to customers in the United States and around the globe. TWLO’s stock has gained 193.6% so far this year.

TWLO has recently agreed to acquire Segment, a leading customer data platform, for a consideration of $3.2 billion. This move is meant to help TWLO become the world’s leading customer engagement platform. The company has also recently launched Microvisor, which is an IoT connectivity and device management platform that helps with the development of IoT connected devices.

For the third quarter ended September 2020, the company’s total revenue increased 52% year-over-year. The company’s active user accounts also increased by 21% year-over-year.

TWLO’s trailing-twelve-month revenue has grown at a CAGR of 61.6% over the last three years. The company’s forward EBITDA has grown 54.9% compared to the sector average of 7.1%. TWLO is expected to witness revenue growth of 37.1% for the quarter ending December 2020, and 31.5% in 2021. The company’s EPS is estimated to grow at a rate of 20.5% per annum over the next five years.

How does TWLO stack up for the POWR Ratings?

B for Trade Grade

A for Peer Grade

B for Overall POWR Rating

The stock is also ranked #1 out of 11 stocks in the Software – SAAS industry.

Zillow Group, Inc. (Z - Get Rating)

Z operates a real estate and home-information-related marketplace through smartphones and on the web. The company’s platform includes premier agents, new construction, and rentals marketplaces. Z’s stock has gained 100.3% so far this year.

The company has recently made multifamily advertising easier through four-tiered rent packages which consolidate several different marketing solutions. The new solution has been launched after a successful pilot operation in 12 states. From January 2021, the company will be expanding the scope of services available through its Zillow Offers platform allowing customers to work directly with licensed employees of Zillow Homes.

During the second quarter ended June 2020, the company’s consolidated revenue grew 28% year-over-year. The traffic to Z’s mobile platforms and websites increased by 12% year-over-year.

Z’s trailing-twelve-month revenue has grown at a CAGR of 54.9% over the last three years. The company’s working capital has grown 117.7% year-over-year compared to the sector average of 19.6%. Z is expected to witness revenue growth of 15.4% in 2020 and 43.5% in 2021. The company’s EPS is estimated to grow 25.9% this year and 80% next year.

In our POWR Ratings system, Z has a grade of “A” in Industry Rank. In the 58-stock Internet industry, it is ranked #21.

Five Below, Inc. (FIVE - Get Rating)

FIVE operates as a specialty retailer that sells merchandise for pre-teen and teen customers. The company’s products are all priced at five dollars or below. FIVE’s stock has gained 4.9% so far this year.

The company has recently opened 63 new stores across the United States and currently operates 982 stores across 38 states. The company has also launched a new gaming product line in collaboration with Fortnite.

During the second quarter ended August 1st, 2020, the company’s net sales increased by 2.1% despite the stores remaining closed in compliance with lockdown rules. The company’s net income increased by approximately 2.8% compared to the same period last year.

FIVE’s trailing-twelve-month revenue has grown at a CAGR of 15.3% over the last three years. The company’s trailing-twelve-month EPS has grown at a three-year CAGR of 7.1%. FIVE is expected to witness revenue growth of 1.3% in 2021 and 31.1% in 2022. The company’s EPS is estimated to grow at a rate of 14.7% per annum over the next five years.

It’s no surprise that FIVE is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. In the 34-stock Specialty Retailers industry, it is ranked #1.

TWLO shares were trading at $278.56 per share on Friday afternoon, down $10.02 (-3.47%). Year-to-date, TWLO has gained 183.44%, versus a 2.46% rise in the benchmark S&P 500 index during the same period.