Historically, the stock market has averaged a high single-digit return for investors. But in 2021, the benchmark S&P 500 doled out a 27% gain and set nearly six dozen all-time closing highs.
Yet in spite of these big gains, select Wall Street analysts and investment banks still foresee significant upside in a number of growth stocks. Based on the high-water 12-month price targets from Wall Street, the following five growth stocks offer upside ranging from 119% to as much as 409% in 2022.
Image source: Getty Images.
Nio: Implied upside of 159%
Think electric vehicle (EV) stocks have soared? According to one investment bank, which has a currency-converted price target of $86.75 on China-based Nio (NIO -4.00%), the good times are just getting started. If this price target were to come to fruition, Nio shares could rally close to 160% in 2022.
Although shares of the company looked very expensive at this time last year, management has done an excellent job of ramping up production, even with persistent supply chain issues plaguing the auto industry. In November and December, Nio delivered nearly 10,900 EVs and 10,500 EVs, respectively, putting it on track for an annual run rate of 130,000 EVs. Thanks to organic growth and the expected introduction of three new vehicles, the expectation is for the company to be producing at an annual run rate of 600,000 EVs by year's end.
Nio's battery-as-a-service (BaaS) program is also genius. Introduced in August 2020, the BaaS program allows buyers to charge, swap, and upgrade their batteries, as well as receive a discount on the initial purchase price of their EV. In return, buyers pay a monthly fee to Nio. The company is effectively forgoing a little short-term, low-margin revenue for higher-margin long-term cash flow and improved customer loyalty.
I never thought I'd say these words... but I'm excited about an EV stock.
Image source: Pinterest.
Pinterest: Implied upside of 129%
Another highly popular growth stock with the potential to more than double in 2022 is social media platform Pinterest (PINS -1.41%). Wall Street's loftiest price target foresees shares heading to $83 in 12 months, which would imply upside of almost 130%.
Last year, Pinterest's shares took it on the chin after the second and third quarters showed sequential declines in the company's monthly active user (MAU) count. Superficially, this might sound concerning, but it represents nothing more than a reversion to historic MAU growth with coronavirus vaccination rates ticking higher.
What's far more important to recognize is that Pinterest is successfully monetizing its users. Despite slower MAU growth, the company's average revenue per user (ARPU) globally surged 37% in the third quarter, with international ARPU up more than twice that amount (81%) from the prior-year period. The takeaway here is simple: Advertisers are willing to pay more to get their message in front of Pinterest's 444 million potentially motivated shoppers.
As a Pinterest shareholder, I also appreciate how perfect the operating model is for advertisers. There's no guesswork involved. The premise of the platform is for users to share what things, services, and places interest them. This makes it easy for Pinterest to connect users with merchants that can cater to their interests. There's a good reason I picked this stock to double in 2022.
Image source: Block.
Block: Implied upside of 119%
Pandemic darling Block (SQ -1.19%), the company formerly known as Square, is another growth stock with significant upside, at least according to Wall Street's price targets. With a Street-high prognostication of $360 from Sean Horgan at Rosenblatt Securities, Block could offer 119% upside this year.
For more than a decade, Block has relied on its seller ecosystem to do most of its heavy lifting. This is the operating segment that provides point-of-sale devices, loans, and analytics to help merchants grow their business. In 2012, gross payment volume (GPV) on Block's network totaled $6.5 billion. But as of the third quarter, run rate GPV was $167 billion.
The really interesting aspect of the seller ecosystem is that it's no longer just a haven for small businesses. Two-thirds of the company's third-quarter GPV originated from businesses with at least $125,000 in annualized revenue. That was up about 10 percentage points from the comparable quarter two years ago. Since this is a predominantly fee-based segment, bigger merchants will yield higher gross profit.
But what really has investors chirping is digital peer-to-peer payment platform Cash App. As of mid-2021, Cash App was generating $55 in gross profit per monthly transacting active customer and only spending around $5 to acquire each new user. The number of MAUs also more than quintupled to 36 million by the end of 2020, compared to where they sat at the end of 2017. While a doubling in shares in 2022 might be asking a bit much, "up" does seem to be the direction Block is headed.
Image source: Getty Images.
Columbia Care: Implied upside of 409%
A fourth fast-paced company with incredible upside, per Wall Street, is marijuana stock Columbia Care (CCHWF -3.89%). Based on the Street-high price target of 19 Canadian dollars ($14.90) from PI Financial, Columbia Care has the potential to more than quintuple investors' money in 2022.
To address an important concern, cannabis investors should understand that federal legalization isn't a requirement for pot stocks to be successful. While federal legalization would reduce a handful of operating inefficiencies, companies like Columbia Care are primed for success as long as individual states are allowed to regulate their own weed industries.
Columbia Care has a two-pronged strategy for success in the cannabis space. First, it's an aggressive acquirer. Making modestly sized acquisitions has helped the company broaden its reach and grow its existing presence in high-dollar legalized markets. For instance, the $240 million Green Leaf Medical buyout expanded the company's reach in the mid-Atlantic, while its $42 million Medicine Man purchase bolstered its presence in Colorado, the nation's No. 2 pot market by annual sales.
The other key for Columbia Care is focusing on limited-license markets, such as Ohio, Virginia, and Pennsylvania. Limited-license markets cap how many retail licenses are issued in total, as well as to a single business, thereby allowing smaller and/or newer players an opportunity to build up their brand(s).
Though I believe 409% upside is asking a bit much, Columbia Care should have a much better 2022 -- especially if the company pushes toward recurring profitability.
Image source: Getty Images.
Plug Power: Implied upside of 171%
A fifth and final growth stock with serious upside in 2022, according to Wall Street, is hydrogen fuel-cell solutions provider Plug Power (PLUG -2.11%). If analyst Amit Dayal of H.C. Wainwright is accurate, shares of Plug Power could climb more than 170% to $78 over the next 12 months.
Plug finds itself at the center of a renewable energy revolution. Pretty much all developed countries worldwide are fighting back against climate change and planning to lean on multiple forms of renewable energy sources. This includes the hydrogen fuel cells for vehicles as well as hydrogen refilling stations. In other words, the company has multiple paths to revenue (new vehicles and infrastructure).
Last year, the buzz about Plug Power really amounted to two early-year partnerships the company landed. SK Group took a 10% equity stake in the company, with the duo aiming to bring fuel-cell solutions to vehicles and refilling stations throughout South Korea. Meanwhile, a joint venture with French automaker Renault, known as Hyvia, will see Plug and Renault target Europe's light commercial vehicle market.
Although the company's sales and backlog have been growing quickly, so has its market cap. At a valuation north of $16 billion, and still a few years away from profitability, I'd be hard-pressed to see how Plug Power reaches $78 without blowing Wall Street's bottom-line expectations out of the water in 2022.
