In just a few days we'll close the book on what's been another great year for the broad-market indexes. Through the holiday-shortened week, the benchmark S&P 500 had hit 68 record-closing highs for the year and was up by 26%.
Yet, in spite of this above-average performance, select Wall Street analysts and investment banks still see incredible value from a quartet of growth stocks. Based on the high-water price target on Wall Street for each respective company, these four stocks are expected to skyrocket between 107% and 240% in 2022.
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Teladoc Health: Implied upside of 126%
It's been a wild ride for telehealth kingpin Teladoc Health (TDOC -2.91%). After more than doubling in 2020 amid the coronavirus pandemic, the virtual visit platform has been more than halved this year. But if analyst Sean Dodge of RBC Capital proves accurate in his estimate, Teladoc could rocket 126% higher to a price target of $215 in 2022.
While critics would argue that Teladoc's sales growth in 2020 was a flash in the pan, the company's growth prior to the pandemic suggests otherwise. In the six years leading up to the pandemic, it grew sales by an annual average of 74%.
The fact is that Teladoc is changing the face of personalized care. Its virtual visit platform is more convenient for patients and can allow physicians to keep closer tabs on chronically ill people. This should ultimately result in improved patient outcomes and lower costs for health insurers. This latter is particularly important since it means insurers will promote the use of telemedicine, when applicable.
Teladoc's supercharged growth also comes on the heels of its acquisition of leading applied health signals company Livongo Health a year ago. Livongo uses artificial intelligence to send tips and nudges to its enrolled members with chronic illnesses, such as diabetes and hypertension. The ability for Teladoc and Livongo to cross-sell should help the company maintain jaw-dropping growth potential.
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Trulieve Cannabis: Implied upside of 169%
If there's an industry where Wall Street's price targets are consistently well above where the underlying stocks are currently trading, it's cannabis -- specifically U.S. cannabis. If the prognostication of Cantor Fitzgerald analyst Pablo Zuanic proves correct, marijuana stock Trulieve Cannabis (TCNNF -6.26%) could hit $72 in 2022. That represents upside of 169%, relative to where shares closed last week.
Like most multi-state operators (MSO), Trulieve is letting its retail operations do most of the work. But Trulieve took a different path to growth than most MSOs. Instead of trying to plant its proverbial flag in as many legalized states as possible, Trulieve focused most of its attention on saturating medical marijuana-legal Florida. Less than a week ago, it opened its 112th dispensary in the Sunshine State, which compares to 47 outside of Florida.
Focusing on a single high-dollar market has its perks. Since Trulieve controls well over a quarter of all statewide dispensaries in Florida, it doesn't have to spend much on marketing. Not having to budget a lot of money to build up its brands has resulted in three consecutive years of profitability for the company.
The next exciting step for Trulieve is inorganic growth. In October, it closed the biggest deal in U.S. cannabis history by purchasing MSO Harvest Health & Recreation. Harvest has a dominant presence in its home market of Arizona, which legalized adult-use weed in November 2020. With a huge presence in Florida and now other high-dollar markets, Trulieve's shares do appear inexpensive.
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Root: Implied upside of 240%
Small-cap stocks are expected to get in on the action, too. Following an abysmal year that's seen shares of insurance company Root (ROOT 4.40%) decline by 79%, at least one investment bank is expecting a big rebound. Based on Wall Street's high price target of $11, Root offers upside of 240% in 2022.
For decades, the auto insurance industry has used an assortment of metrics, such as credit scores, age, and marital status, to determine how much their members should pay each month. Unfortunately, these figures don't actually tell insurance companies how well or poor of a driver someone is. Root is aiming to disrupt this stodgy industry by relying on telematics.
In simple terms, Root is using highly sensitive equipment found in smartphones to detect G-forces while a driver brakes, accelerates, and turns. Utilizing true driving data, as well as driving trends within a state or region, should allow the company to accurately price policies up front for new members.
On the downside, Root is a relatively new player, which means it's going to have to spend aggressively to build up its brand (i.e., expect sizable losses to continue). However, initial accident loss ratios have been mostly encouraging. With gross accident period loss ratios coming in below 100% for much of the past two years -- a figure below 100% implies a profitably written policy -- the data suggests a telematics-based approach can be successful.
Root is a very risky investment, but it does offer incredible reward potential.
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Sea Limited: Implied upside of 107%
Wall Street also sees big things happening for Singapore-based company Sea Limited (SE -0.69%), which has been in a precipitous downtrend over the past two months. If the $460 price target from Goldman Sachs analyst Piyush Mubayi is correct, megacap stock Sea could more than double in value next year.
The lure of Sea Limited is that it has a trio of rapidly growing and diversified operating segments.
For the moment, the company's digital entertainment division is the only one of the three generating positive earnings before interest, taxes, depreciation, and amortization (EBITDA). Sea's mobile game, Free Fire, continues to be a worldwide hit. In the September-ended quarter, 12.8% of its 729 million gamers were paying to play. That's a pay-to-play conversion ratio that's many multiples higher than the industry average.
Secondly, Sea's nascent digital financial services segment is gaining traction. There are now more than 39 million people using the company's digital wallet services, with payment volume hitting $4.6 billion in the third quarter.
The third fast-growing segment, and arguably what has investors so excited about Sea, is e-commerce platform Shopee. Shopee is consistently the most-downloaded shopping app in Southeastern Asia, and it's gained plenty of appeal in Brazil. Since it's primarily targeting emerging market countries with burgeoning middle classes, growth is off the scale. The $16.8 billion in gross merchandise value (GMV) on Shopee in Q3 2021 is more than the $10 billion in GMV for all of 2018, just to give you an idea of how quickly this segment is growing.
While $460 in 2022 might be asking a bit much, upside does seem warranted.
