Over the long run, there's arguably no greater wealth creator on the planet than the stock market. For the past 41 years, through the dot-com bubble, Great Recession, and now, coronavirus crash, the broad-based S&P 500 has averaged an annual total return, including dividends, of more than 10%. Put another way, investors in S&P 500 tracking indexes are doubling their money about every seven years, inclusive of reinvestment.
It doesn't matter whether the market is in the midst of a sell-off or is hitting new all-time highs. There are always bargains to be found, at least according to Wall Street.
Right now, there are three hypergrowth stocks -- an arbitrary term I'm using to signify companies growing at a very fast rate -- based on Wall Street's one-year price targets, offering upside ranging between 44% and 80%.
Zoom Video Communications: Implied upside of 44%
Perhaps the most exciting hypergrowth stock of this trio is the one that Wall Street believes has the lowest perceived upside at 44%: cloud-based web conferencing service Zoom Video Communications (ZM 0.78%). If analysts are accurate, Zoom could rocket to $476 a share over the next year.
Zoom is what you might call a no-brainer beneficiary in the pandemic environment. With the coronavirus disease 2019 (COVID-19) shuttering offices and forcing employees to work from home, Zoom's Web conferencing platform became the default winner. Last year, Zoom recorded $2.65 billion in sales, which was up 326% year over year, and it effectively tripled the company's full-year forecast offered just weeks before the pandemic really took shape.
The great thing about Zoom is that its technology isn't going to fade into the background when the pandemic ends. Zoom has been able to lure businesses in with its freemium model, and many choose to upgrade to a paid subscription when they see the value that point-and-click connection can offer.
In particular, it's done a bang-up job of attracting smaller businesses. In fiscal 2021 (ended Jan. 31, 2021), the number of subscribing businesses with at least 10 employees jumped 470% to 467,100.
Zoom is also the clear share leader among U.S. web conferencing services. According to business information site Datanyze, Zoom controls nearly 40% of U.S. conferencing share, which is nearly double its next closest competitor.
Lastly, CEO and founder Eric Yuan still owns more than 25 million shares of Zoom stock. When founders and insiders have large stakes that align their interests with those of their shareholders, we often see good things happen over the long run.
Trulieve Cannabis: Implied upside of 80%
Another exceptionally fast-growing company with serious upside potential is U.S. marijuana stock Trulieve Cannabis (TCNNF 2.03%). The company has a price target north of $70, and Wall Street believes it offers up to 80% upside over the next 12 months.
To start with the obvious, the U.S. is a massive marijuana opportunity, relative to other markets. According to New Frontier Data, the U.S. pot industry should grow by an average of 21% annually between 2019 and 2025, ultimately hitting $41.5 billion in annual sales by mid-decade. By comparison, cannabis-focused analytics company BDSA is only looking for Canada to have topped $6 billion in annual sales by 2026. The U.S. is where the green is going to be made.
What makes Trulieve Cannabis such an intriguing investment opportunity is the company's strategy, which has primarily focused on building out its presence in one state, Florida. Of its 84 operational dispensaries, 79 are currently located in the medical-marijuana-legal Sunshine State.
Note that this figure doesn't take into account a handful of recently announced small acquisitions in other states. By focusing its attention in one state, Trulieve has been able to effectively build up a loyal following without breaking the bank with marketing costs. Not surprisingly, it's also been profitable for 12 consecutive quarters.
Just how dominant is Trulieve? According to the company, it controlled 53% of the Sunshine State's dried cannabis flower market in 2020, along with 49% of its higher-margin oils market.
Wall Street is expecting the company to grow its sales by more than 60% in 2021, then top $1.1 billion in revenue the following year. If it can duplicate its success in other states, Trulieve could be one of the best cannabis stocks to own.
NIO: Implied upside of 53%
A third hypergrowth stock that Wall Street professionals believe could soar over the next year is China-based electric vehicle (EV) manufacturer NIO (NIO -0.85%). Following the company's recent swoon, the Street is forecasting upside of as much as 53%.
The "Why NIO?" question is pretty simple to answer: EVs are the future of the auto industry, and China is the largest auto market in the world. By 2035, the Society of Automotive Engineers of China has predicted that half of all auto sales will be new-energy vehicles, with roughly 95% of those being EVs. The Chinese EV market is ripe for the picking, which should allow NIO to secure a piece of a really large pie.
NIO has been successfully ramping up its production, as well. After delivering a little over 20,500 EVs in all of 2019, the company increased deliveries to 43,728 in 2020. If not for chip shortages, which are hampering the entire automotive industry at the moment, NIO would probably be delivering 9,000 to 10,000 vehicles a month at the moment. Even with the chip issues, NIO's revenue is expected to more than double its sales to $5.2 billion this year.
The company also deserves serious credit for its battery-as-a-service (BaaS) operating model, which should be a long-term operating margin and loyalty driver. Buyers who sign up for the program can receive replacement or upgraded batteries in the future. In turn, they pay a monthly fee to NIO and receive an upfront discount on their vehicle. NIO is effectively trading away some near-term margin for considerably higher BaaS margins and loyalty over the long run.
Then again, a $59 billion valuation for a company that's delivered 95,701 vehicles since its inception seems a bit excessive. Although it's done well with its early stage ramp up and has laid to bed any funding concerns, next-big-thing technologies like EVs won't be without hiccups. Between increasing competition and a steep learning curve, a wait-and-see approach might be prudent, even with Wall Street's aggressive price target.