It’s been a great year for Wall Street and investors. Since hitting their respective all-time highs between mid-November and the first week of January, the timeless Dow Jones Industrial Averagebroad based S&P 500and focused on growth Nasdaq Composite (^IXIC 0.00%) they have lost up to 19%, 24% and 34% of their values. You will notice from the magnitude of these declines that the S&P 500 and the Nasdaq have both fallen firmly in bear market territory.
There is no way around it: bear markets can be scary. They are known for testing investors’ resolve due to the unpredictability and speed of downside moves. But this is only one side of the coin.
While bear markets can be worrisome in the short term, they are a surefire opportunity for patient investors to pounce on high-quality companies at a discount. “High-quality” stocks come in many varieties, and can certainly include growth stocks which have been hit the hardest during the Nasdaq bear market.
What follows are three supercharged growth stocks that have the innovative strength and competitive advantages to potentially double your money by 2025.
The first defeated growth stock to offer triple-digit growth percentage over the next three years is headquartered in China. electric vehicle (EV) manufacturer child (LITTLE BOY 0.40%).
The beauty of the electric vehicle industry is that it offers sustainable growth for decades to come. Most major countries have committed to reducing their carbon emissions by mid-century. One of the easiest ways to do this is to adopt cleaner forms of transportation at the business and consumer levels. Although Nio should have access to numerous markets, its home market of China happens to be No. 1 in the world in terms of annual car sales. That’s not a bad place to start building a share of the electric vehicle market.
Despite semiconductor chips and general supply shortages related to the COVID-19 pandemic hampering production, Nio has turned heads with its ability to ramp up production of electric vehicles. In June, the company delivered an all-time high of 12,961 EVs and produced another month of more than 10,000 deliveries in July. Based on previous comments from management, the removal of supply restrictions should allow Nio to ramp up to 50,000 EVs delivered per month over a span of about a year.
Aside from the sheer opportunity for production and expansion, Nio has really impressed with its innovation. The company appears to be introducing a minimum of one new vehicle each year. The ET7 and ET5 sedans are particularly intriguing in that they take direct aim at TeslaNio’s flagship Model 3 and luxury Model S. The best battery options for Nio sedans can produce an astounding range of 621 miles.
The company is also showcasing out-of-the-box innovation. During the pandemic, Nio introduced its Battery as a Service (BaaS) subscription, which is designed to enable electric vehicle buyers to charge, swap and upgrade their batteries. Plus, buyers receive a discount on the purchase price of their EV. In exchange for giving up some low-margin short-term sales, Nio generates high-margin recurring subscription revenue and keeps early buyers loyal to the brand.
By 2024, Nio is expected to generate more than $2 a share in earnings, according to the Wall Street consensus. This makes a doubling of the company’s stock price by 2025 quite feasible.
A second supercharged growth stock that looks poised to double in value to patient shareholders by mid-decade is biotech action Novavax (NVAX -6.19%).
A quick glance at Novavax’s stock chart since the pandemic began shows what a rollercoaster ride it has been. The company went from relative obscurity to a share price of more than $300, and is now back in the mid-$30s.
The biggest blow against Novavax has been the execution of its management team. The company’s leading COVID-19 vaccine, NVX-CoV2373, faced numerous delays in filing in high-value markets. In addition, the production of the vaccine was slow from the beginning. These factors, along with its competitors getting the proverbial low-hanging fruit in developed markets, have knocked nearly 90% off Novavax’s share price since the pandemic high. However, there are still plenty of reasons to be optimistic.
For starters, the Novavax COVID-19 vaccine works. Two clinical studies from 2021 showed a vaccine efficacy (VE) of approximately 90%. A separate study in adolescents found a VE of 80% when the delta variant was dominant. Only a small handful of vaccine developers have reached the elusive 90% EV mark, and Novavax is one of them. With COVID-19 seemingly here to stay, Novavax suddenly has a recurring income opportunity right around the corner.
Perhaps the most important conclusion is that Novavax’s drug development platform works. The company should be able to use its data to develop variant-specific vaccines as well as combination vaccines. Investors are likely to take a look at top-line data from the company’s omicron-specific variant test in September, with a combined late-stage COVID-19/influenza test scheduled to begin next year.
Another reason to be hopeful for a big rally is Novavax’s balance sheet. The company ended June 2022 with $1.38 billion in cash and cash equivalents. That’s more than enough capital to fund ongoing research. It’s also worth noting that cash and cash equivalents now make up half of Novavax’s market cap. This has all the makings of a screaming bargain for long-term investors.
The third supercharged growth stock that may double in value by 2025, despite the Nasdaq bear market, is social media actions pinterest (PAWS 4.92%).
The clear concern for Pinterest and the reason why it is shared have lost about three quarters of their value since reaching an all-time high in 2021, is the weakening of the US economy. After consecutive quarters of gross domestic product declines, there are clear signs that companies are cutting their advertising budgets. Pinterest is an ad-driven platform and therefore subject to weakness during economic downturns.
However, Pinterest has time on its side. Even though ad revenue is weak right now, the US and global economy spend much more time expanding than contracting. This implies that, over time, Pinterest’s ad revenue should expand.
A longer-term view is also suggested by examining the company’s monthly active user (MAU) count. As COVID-19 vaccination rates increased and life returned to a semblance of normalcy, Pinterest’s MAU count fell from a high of 478 million in late March 2021 to 433 million as of June 30. five-year term, MAUs have been on a fairly consistent uptrend.
To build on this point, short-term MAU declines have not affected Pinterest’s ability to monetize its users. Despite 21 million fewer MAUs than in the prior year period, average revenue per user (ARPU) increased 17% globally in the quarter ending June. What this tells investors is that marketers are more than willing to pay a premium, even in a challenging economic environment, to get their message across to Pinterest’s 433 million MAUs.
If you need one more good reason to buy Pinterest, consider that its operating model is designed for users to voluntarily share the things, places, and services they like. In an era where big tech is clamping down on data tracking software, Pinterest users are serving critical information to merchants on a silver platter… free!
Pinterest is well capitalized ($2.65 billion in cash, cash equivalents and marketable securities) and profitable on a recurring basis. In other words, it is crying out for opportunistic investors to buy it.