For years, growth actions led the broader market higher. But in 2022, they were the driving force behind the decline of the bear market. The growth center Nasdaq Composite has been hit especially hard, with the index losing a third of its value last year.
However, 2022 is ancient history in the eyes of Wall Street analysts. Since the main US stock indexes tend to increase in value over time, most analysts have optimistic outlooks for the trading companies they cover.
But there’s a big difference between expecting a stock to rise over the next 12 months and believing it will. For the following three growth stocks, selected Wall Street analysts predict gains in 2023 that could range from 139% to as low as 365%.
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Tesla: an implied upside of 142%
The first fast-paced stock capable of delivering triple-digit returns, at least in the eyes of a Wall Street analyst, is electric vehicle (EV) manufacturer Tesla (TSLA -0.94%). Despite a price cut announced less than two weeks ago, analyst William Stein of Truist Financial predicts a price target of $299 in Tesla’s future. Based on where the stock closed on January 12, this could result in 142% this year.
Tesla seemed to have both macro and company-specific factors working in its favor. From a macro perspective, most developed countries aim to reduce their respective carbon footprints. Probably the easiest way to do this is to promote alternative energy transport. The growth of EVs should lead to sustainable double-digit growth for the auto industry.
More specific to Tesla, it benefits from its gigafactories in Berlin, Germany, and Austin, Texas, come online last year. The added output from these gigafactories helped push production and deliveries past 1.3 million in 2022, and should allow Tesla to land between 1.5 million and 2 million EVs produced in 2023 (assuming that supply chains global cooperate).
Tesla has also been profitable on a recurring basis, without the assistance of renewable energy credits, over the past two years. That’s not something most legacy automakers can say about their EV divisions.
But even with its first-mover advantage, Tesla will have a virtually impossible time reaching Truist’s $299 price tag in the new year.
To begin with, investors have come to the realization Tesla cannot escape the headwinds versus the rest of the auto industry. Tesla has slashed the price of its flagship Model 3 sedan and Model Y SUV in China and the United States to cope with rising inventory levels, and like its peers has struggled with rising costs and supply chain disruptions.
The biggest problem for Tesla, and the key reason it is unlikely to reach Stein’s high price, is CEO Elon Musk. Despite being a visionary, Musk left a mountain of unfulfilled promises. The delayed launch of the Cybertruck, no robotaxis on the roads, and the persistent push for level 5 full self-driving at a later date are all examples of promises baked into Tesla’s valuation that have not come to fruition.
Lovesac: Implied upside of 139%
The second growth stock that has the potential to deliver incredible upside in 2023, based on a Wall Street analyst’s 12-month high price, is a furniture stock. Lovesac (LOVE -0.52%). According to DA Davidson analyst Thomas Forte, Lovesac may make a run to $64 this year. If Forte’s price estimate proves accurate, this would represent 139% upside from where the stock closed on January 12, 2023.
Like almost all retailers, Lovesac was stymied by a confluence of macroeconomic factors. Historically high inflation has increased the company’s production costs and shipping expenses, while supply chain problems have weighed on production and demand. These factors help explain why Lovesac fell from a peak of more than $90 per share in 2021 to $26 and changed its closing last Thursday.
However, unlike Tesla, Lovesac’s competitive advantages are starting to shine and could very well lead to a triple-digit return in 2023 for its patient shareholders.
One of Lovesac’s biggest differentiators is its furniture. Instead of buying products from the same group of wholesalers that most furniture retailers use, Lovesac designs their own products. About 90% of the company’s net sales come from sofas, which are modular sofas that can be rearranged to fit most living spaces. As I have extolled before, the sactionals offer functionality, optionality (there are more than 200 different cover options), and eco-friendly. The yarn used in the sectional covers is made with recycled plastic water bottles.
Lovesac products are trending too aimed at middle and high income consumers. People with higher incomes are less likely to change their consumption habits if inflation is high or if the US economy weakens a bit. This provides added stability and predictability to Lovesac’s sales and operating cash flow.
But most importantly, Lovesac The omnichannel sales platform makes the difference. Direct-to-consumer sales, pop-up showrooms and brand partnerships were powerful tools to increase margins during the pandemic. With lower overhead costs than traditional furniture retailers, Lovesac can deliver juicier margins and profits.
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Plug Power: Implied upside of 365%
A third growth stock with mammoth growth potential in 2023, based on a Wall Street analyst’s price target, is Hydrogen fuel cell solutions company Plug Power (PLUG -1.79%). Longtime Plug Power bull Amit Dayal of HC Wainwright predicts the stock will reach $78 this year. If he is right, shareholders will benefit from a 365% gain.
Plug Power benefits from the same macro dynamics as Tesla. As countries look for ways to reduce their carbon emissions, moving to different forms of alternative energy transportation will become more attractive. In addition to its GenDrive units that are used in industrial settings for forklifts, Plug Power can have an impact by providing fuel cell solutions for vehicles, as well as helping the development of refueling / refueling infrastructure. hydrogen.
According to the company, its addressable opportunity is massive. In 2021, Plug Power reported $502 million in sales. In 2025, management expected $3 billion in annual sales. By 2030, the company believes it will produce $20 billion in annual revenue.
Aside from macro factors, the main catalyst for Plug Power has been its affinity for brand partnerships and joint ventures. Two years ago, the company announced a joint venture (now known as Hyvia) with Renault which would target the light commercial vehicle market in Europe. At the same time, SK Group and Plug formed a joint venture to supply hydrogen fuel systems, refueling stations and electrolyzers to the Korean market and other Asian countries. Having deep-pocketed brand partners isn’t bad.
But the staggering sales growth aside, the big shot against Plug Power it was the company’s lack of profits. A vast hydrogen ecosystem sounds good on paper, but it has yet to translate into Plug’s bottom line. While the company’s next-generation GenDrive systems should help reduce production and maintenance costs, it’s still unclear whether Plug Power will be profitable soon. Without that boost to profitability, $78 per share is a tough ask in a bear market.