Patience pays off when investing on Wall Street. Despite navigating its way through the quickest 30% decline in its storied history during the first quarter of 2020, the benchmark S&P 500 has since doubled in value.
But even with this widely followed index regularly knocking on the door of all-time highs this year, bargains still abound -- at least according to Wall Street. Based on analyst's highest published price target for each of the following ultra-popular stocks, upside of 120% to as much as 190% may await.
Nio: Implied upside of 160%
One high-growth stock getting a lot of attention from investors that could drive higher is electric vehicle (EV) manufacturer Nio (NIO -4.99%). With a high price target of almost $92, the implication is Nio could return approximately 160% over the next 12 months.
The company certainly finds itself in the right place at the right time. In an effort to combat climate change and reduce the global reliance on fossil fuels, many developed and developing countries are turning to EVs. This should create a multi-decade opportunity for auto stocks to benefit from consumer and enterprise vehicle replacements.
Nio is based in China, which happens to be the largest auto market in the world. According to the Society of Automotive Engineers of China, roughly half of all new vehicle sales by 2035 could be powered by alternative energy, which would probably result in annual sales of 10 million-plus EVs. With China's EV market still nascent, market share is ripe for the picking.
Although semiconductor chip supply issues are constraining Nio's EV output for the time being, the company looks well on its way to eventually hitting an annual run-rate of 150,000 EVs once the chip shortages are resolved. While 160% upside in 12 months is probably asking a bit much, we're seeing production and vehicle margins rise, which is a good sign.
Bionano Genomics: Implied upside of 155%
Among small-cap stocks, genome-analysis company Bionano Genomics (BNGO -1.85%) is creating a lot of buzz. With a peak price target of $14, the implication is it could gallop higher by as much as 155% over the next year.
What makes Bionano so exciting is the company's optical genome mapping (OGM) system known as Saphyr. In January, Saphyr demonstrated its potential use by identifying three risk genes for autism spectrum disorder (ASD). ASD is one of many difficult-to-treat ailments. The potential here is that drugmakers could utilize Saphyr to identity certain genetic biomarkers that'll help them develop treatments to fight otherwise hard-to-treat diseases.
A month prior, in December 2020, Saphyr also outperformed Pacific Biosciences OGM technology. Saphyr had considerably better success in identifying large structural genome variations, compared to Pacific Biosciences' OGM system.
However, and this is a pretty big "however," Saphyr is a long way away from getting approval from the U.S. Food and Drug Administration (FDA). This means the company's ability to generate revenue from licensing will be dicey at best. It's the perfect example of a company that may have game-changing potential in the healthcare space, but is still many years away from demonstrating that potential to the FDA.
Skillz: Implied upside of 120%
Another company with significant upside, according to analysts, is mobile gaming platform provider Skillz (SKLZ -3.73%). The high-water estimate on Wall Street of $25 suggests Skillz could return up to 120% over the next year.
The gaming industry is incredibly competitive, capital intensive, and there are no guarantees that a developed game will be a hit with users. That's why Skillz avoided the development side of the equation in its entirety and is focused on being a competitive medium. Skillz provides a platform where mobile gamers can compete for cash prizes, with the company and game developers keeping a portion of the cash prize for themselves. It's a lot easier and cost-effective to maintain a gaming platform than it is to develop the next hit game.
What's been particularly impressive about Skillz is the company's pay-to-play conversion rate. Whereas the average conversion rate in the industry is around 2%, the company noted at the end of the first quarter that 17% of its monthly active users (MAU) were paying to play on its platform. With the company still in its early stages of its growth and marketing, this is a fantastic MAU monetization ratio.
Although higher-than-anticipated near-term costs will likely keep Skillz from getting anywhere near Wall Street's loftiest target over the next 12 months, it shouldn't have any issue surpassing $25 over the long run.
Viatris: Implied upside of 162%
It's not just growth stocks that Wall Street believes will soar. Drug stock Viatris (VTRS -0.27%) has a Street-high target of $35, which equates to as much as 162% upside, based on where it closed this past week.
Viatris is a fairly new entity, which was formed by combining generic-drug company Mylan with Pfizer's established drug unit, Upjohn. The expectation is this combination will have more operating clout than each company would have had separately.
Viatris' management team has laid out a number of goals over the company's first three years. The belief is that by 2023 Viatris will realize over $1 billion in annual cost synergies, and that a quarter of its debt ($6.5 billion of an initial $26 billion) will be paid off. With improved financial flexibility, the company may be able to repurchase its own stock, lift its dividend, or kick start its internal drug development program. With the ability to generate well over $2 billion in annual operating cash flow, Viatris has choices.
The company should also benefit immensely from the growing usage of generics. Though generics get a bad rap for their substantially lower margin, relative to brand-name drugs, rapidly rising prices for novel therapeutics will undoubtedly coerce patients, physicians, and insurers to lean on generics moving forward.
A $35 price target over 12 months is highly unlikely given the pace of Viatris' transformation. However, an eventual rise to $35 appears reasonable given how profitable the company is.
Canopy Growth: Implied upside of 190%
Last, but not least, Canadian marijuana stock Canopy Growth (CGC -10.25%) is projected to have budding upside, at least according to MKM Partners, which has a Street-high target of $51 Canadian ($40.28 U.S.). If this price target proves accurate, Canopy Growth could nearly triple over the coming year.
Canopy Growth has long been a favorite of investors because of its premier cash position. Spirits giant Constellation Brands has made four direct and indirect equity investment in Canopy, which has supplied the company with billions of dollars in working capital. The expectation has long been that this cash would help the company acquire earnings-accretive businesses and allow it to dominate the Canadian pot market.
The unfortunate reality is that Canada's cannabis market has been plagued by oversupply and supply chain issues. Even though nationwide legal weed sales are climbing, Canopy Growth's operating losses aren't shrinking fast enough, and it's burned through many of its billions in available cash. To boot, federal reform has stalled in the U.S., meaning Canopy Growth hasn't been able to enter the world's most lucrative weed market.
Although it's the clear market share leader in Canada, a CA$51 price target makes no sense for a company that registered a CA$187.7 million operating loss in the June-ended quarter. Of the five stocks on this list of ultra-popular companies, Canopy Growth is the one worth avoiding.