For more than a decade, growth stocks have proved unstoppable. A perfect storm of historically low lending rates, ongoing bond purchases by the nation's central bank, and now big spending from Washington, has allowed fast-growing companies to thrive.
And yet, even with many of the broader market indexes hitting new all-time highs, Wall Street still foresees ample upside for a number of high-profile growth stocks. Based on the highest price target estimate for each of the following five growth stocks, Wall Street sees upside ranging from 62% to as much a 144% over the coming year.
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NIO: Implied upside of 104%
The first supercharged growth stock Wall Street sees driving away from its competition is electric-vehicle manufacturer NIO (NIO 5.26%). Even though NIO is getting near the mean consensus price target, the high-water mark among analysts calls for the company to hit $92 a share. That implies a more than doubling in NIO's shares, based on where it closed this past weekend.
The bullishness surrounding NIO likely has to do with the company's location and its ability to scale production. Concerning the former, China is the largest auto market in the world. By 2035, the projection is that half of all vehicles sold will be powered by some form of alternative energy, 95% of which are EVs. Since the EV market is still nascent in China, the door is wide open for NIO to become a major player.
NIO has also done an excellent job of ramping up production over the past year. Even though output is currently constrained by a global chip shortage, it's on track to deliver between 21,000 and 22,000 EVs in the second quarter. For some context, it delivered only 20,565 vehicles in the entirety of 2019.
With NIO sitting on a mammoth cash pile and introducing a high-margin battery subscription service last year, this lofty price target may one day be achievable -- but probably not in 12 months.
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Teladoc Health: Implied upside of 82%
Leading telehealth platform Teladoc Health (TDOC 2.46%) offers abundant upside, if the most aggressive price target on Wall Street proves accurate. According to BTIG analyst David Larsen, Teladoc is a buy with a $300 one-year price target. This implies up to an 82% increase in its shares.
Some folks might think Teladoc's 2020 was a bit fluky given the coronavirus pandemic. After all, with physicians wanting to keep high-risk and potentially infected people out of their offices, virtual visits skyrocketed to almost 10.6 million from 4.14 million in 2019. But the fact remains that Teladoc grew sales by an annual average of 74% in the six years leading up to the pandemic. This demonstrates that telemedicine was catching on long before the pandemic struck.
While telehealth can't always replace in-office visits, virtual appointments are substantially more convenient for patients, and they should allow physicians to better keep track of key health metrics for chronically ill patients. In short, telehealth is a ticket to improved health outcomes, which insurers should appreciate (since it'll mean less money out of their pockets).
Also don't overlook that Teladoc acquired applied health signals company Livongo Health in the fourth quarter of 2020. Livongo leans on artificial intelligence to send tips and nudges to chronically ill patients to help them lead healthier lives. It's already signed up 658,000 diabetes members.
In other words, this price target might be lofty, but it may be reachable.
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Skillz: Implied upside of 66%
Another big-time growth stock with significant implied upside is gaming and Esports platform Skillz (SKLZ 0.33%). If Wall Street's high price target of $34 comes to fruition, Skillz would deliver gains of 66% to its shareholders.
With the understanding that the gaming industry is highly competitive, Skillz chose not to take on the deep-pocketed developers. Instead, it's built a platform that allows gamers to compete for cash prizes. In turn, Skillz and the game developers in question get to keep a cut of the cash prizes. By putting the ball in the court of gaming developers, Skillz reduced the operating risk of its platform while pumping its gross margin up to 95%.
Even though costs are moving higher as headcount and marketing increase, the future looks intriguing. In particular, Skillz signed a multiyear agreement with the National Football League (NFL) in early February. Football is the most-popular sport in the U.S. by a longshot. This agreement should allow NFL-themed games to hit its platform by no later than 2022.
Skillz already notes that 17% of its monthly active users are paying to play, which is over eight times higher than the industry average. If this continues, sales could triple by 2024. This makes a $34 price target seem potentially achievable in the next 12 months.
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Sarepta Therapeutics: Implied upside of 144%
Specialty biotech stock Sarepta Therapeutics (SRPT 1.16%) has a chance to be one of the biggest winners over the coming year, but a lot will depend on its pipeline. Based on the loftiest Wall Street price target of $196, Sarepta could see up to 144% upside over the next 12 months.
Sarepta's success is tied to its trio of U.S. Food and Drug Administration-approved drugs to treat Duchenne muscular dystrophy (DMD) -- a disease diagnosed in children that's characterized by the degradation of muscle tissue over time. Each of its approved therapies targets a specific exon-skipping mutation of the dystrophin gene.
The big question for Sarepta is whether experimental drug candidate SRP-9001 becomes a savior or curse. SRP-9001 utilizes an adeno-associated virus to deliver a gene directly to muscle tissue to encourage the production of micro-dystrophin. Most importantly, SRP-9001 moves beyond the gene-specific nature of Sarepta's therapies and would be applicable to a greater number of DMD patients.
In January, Sarepta's share price nosedived after Part 1 of Study 102 showed SRP-9001 led to improved North Star Ambulatory Assessment total scores, but this improvement wasn't statistically significant. It then partially redeemed itself in May with positive early trial results from the open-label Endeavor study. For the time being, taking a wait-and-see approach might be the smartest thing for investors to do.
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Amazon: Implied upside of 62%
Last, but not least, we have a company a few of you might have heard of before: Amazon (AMZN 1.49%). According to the Wall Street-high price target of $5,500 from Susquehanna, the king of e-commerce could deliver up to a 62% gain over the next year. For some added context, this would add about $1.06 trillion to Amazon's already large $1.72 trillion market cap.
One reason for optimism is Amazon's virtually insurmountable market share advantage in U.S. online retail sales. In 2021, it'll control an estimated $0.40 of every $1 spent online, based on a report from eMarketer. That's more than five times higher than its next-closest competitor. This dominance has helped the company sign up over 200 million Prime members worldwide.
However, the bigger growth driver looks to be Amazon Web Services (AWS). AWS holds about a third of infrastructure cloud services market share. Despite accounting for only an eighth of Amazon's total sales, the higher margins associated with cloud services have AWS generating around 60% of its operating income. Between 2020 and 2025, we could see Amazon's operating cash flow nearly triple as a result of AWS.
Recently, I made a case for Amazon to hit $10,000 a share by 2025. Suffice it to say, I believe $5,500 may be a realistic one-year target for this absolutely dominant company.
