Patient investors have been rewarded with an historic rally since the pandemic-induced bear-market low was set in March 2020. It took less than 17 months for the widely followed S&P 500 to more than double in value. Comparatively, the benchmark index has averaged an annual total return, including dividends, of close to 11% since the beginning of 1980.
But according to select analysts and investment banks, there are still big gains to come for certain fast-growing companies. Based on the highest price target published by Wall Street, each of the following growth stocks offers 93% to 222% upside over the next 12 months.
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Moderna: Implied upside of 202%
Would you like the opportunity to triple your initial investment over the next year? If so, Brookline Capital Markets and analyst Leah Cann believe you should put your money to work in biotech stock Moderna (MRNA -1.22%). Recently, Brookline Capital upped its price target on Moderna from $475 to $506, which implies upside of 202%, based on where it closed on Jan. 20.
The "Why Moderna?" argument is pretty straightforward: It's a fixture in preventing COVID-19 infection and/or reducing infection severity.
While there are more than a dozen drug developers working on COVID-19 vaccines or oral solutions, Moderna has unquestionably been one of the most successful. Its vaccine, mRNA-1273, is one of only three to have generated a vaccine efficacy (VE) of at least 90% in clinical studies.
The company's November 2020 trial that led to mRNA-1273's emergency-use authorization in the U.S. featured an impressive 94.1% VE. While VE represents just one of a handful of important clinical-trial figures, it's the headline number that's encouraged people to choose a Moderna vaccine or booster shot over most other available options.
Also working in Moderna's favor is the mutability of the SARS-CoV-2 virus that causes COVID-19. While ongoing mutations are bad news for the world, it suggests that Moderna will benefit from a recurring need for booster shots. These boosters may be based on the initial COVID-19 strain targeted in the November 2020 clinical trial or be reformulated for a specific variant. The point is that Moderna now has a recurring revenue stream at its disposal.
However, investors should be aware that Moderna's $68 billion market cap is almost entirely reliant on a single therapy (mRNA-1273). Even with the company successfully riding the coattails of its Nov. 2020 clinical results, competition is increasing. The potential development of competing oral treatments or reformulated/combination vaccines could make a $500+ price target unfeasible.
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First Majestic Silver: Implied upside of 93%
When you think of fast-growing companies, silver-mining stocks are at the top of the list, right? Yeah, didn't think so. But that's not stopping H.C. Wainwright analyst Heiko Ihle from maintaining a buy rating on First Majestic Silver (AG -0.40%) and calling for the company's shares to surge 93% to $22.50 over the next year.
The bull thesis for First Majestic Silver has macro and company-specific catalysts. In terms of broad-based positives, silver looks to have a lustrous future.
While investors don't pile into silver as an inflationary safe haven like gold, it does benefit from simple supply-and-demand economics. Silver is a key component used in multiple aspects of electric vehicles and in solar panels. As the U.S. and world go green, demand for silver should steadily increase.
On a more company-specific basis, First Majestic Silver is benefiting from improved operating efficiency at its existing mines and is getting a lift from a recent acquisition. As I stated last month, the San Dimas silver-and-gold mine continues to be this company's shining asset.
Production costs have remained low, with gold and silver ore grades rising in the most-recent quarter. In 2022, the median all-in sustaining cost forecast at San Dimas is only $12.20 per silver equivalent ounce (SEO).
Meanwhile, First Majestic acquired the Jerritt Canyon gold mine at the end of April 2021. This fourth producing asset gives the company exposure to a low-cost gold mine that's capable of 200,000 ounces of annual output by 2024.
After delivering a 32% increase in SEO production to 26.9 million SEO in 2021, First Majestic is forecasting between 32.2 million SEO and 35.8 million SEO in 2022. While this rapid production increase may warrant a higher share price, even I, as a shareholder, don't see the company reaching $22.50 in 2022.
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Shopify: Implied upside of 222%
The cream of the crop of upside opportunity -- at least pertaining to this list of growth stocks -- belongs to cloud-based e-commerce platform Shopify (SHOP -2.04%). Over the summer, Rocco Strauss of equity research company Arete Research set a lofty target of $3,300 on the company. If this price target were hit, Shopify would offer shareholders 222% upside.
The beauty of Shopify's operating model is that consumer and enterprise spending is steadily shifting online. Shopify is a company that's just scratching the surface with regard to the many ways it can help entrepreneurs, small businesses, and larger brands succeed. In less than two years, the company's total addressable market for small businesses (i.e., its bread and butter) has grown from $78 billion to an estimated $153 billion.
What's truly remarkable is that Shopify's momentum hasn't slowed, despite it hitting megcap status. According to the company, it took 15 years for its merchants to have $200 billion in aggregate gross merchandise value (GMV) transacted across its platform. It subsequently took just 16 months for Shopify's merchants to produce the next cumulative $200 billion in GMV. That's how quickly this company is growing.
Maybe the best aspect of Shopify is that 86% of its third-quarter sales were either Shopify Core or Shopify Plus monthly recurring plans. This means the company's sales and cash flow are highly predictable -- and Wall Street loves predictability.
The biggest hurdle is likely to be the company's premium valuation. With the Federal Reserve set to raise rates in 2022, it's not unexpected for high-multiple stocks to contract. Even with Shopify pulling back by nearly 40% in two months, it's still valued at 17 times consensus sales for 2022 and nearly 120 times consensus earnings per share. Although Shopify has proved it's worth a premium, $3,300 is almost certainly out of the question.
