Stock prices for highly innovative businesses are a mess right now. The benchmark iShares S&P 500 Growth ETF is down about 14% this year and many of the high-growth stocks that outperformed in the early days of the pandemic have fallen a lot further.
Shares of Nvidia (NVDA 2.95%), DigitalOcean (DOCN -0.46%), and Moderna (MRNA 0.02%) have been beaten down this year, but the investment bank analysts who follow these stocks think they are seriously underappreciated.
In fact, the average analyst following these stocks thinks they can climb by 60% or better. Here's why the pros think they can put up some big gains.
Nvidia shares soared last year but the good times didn't last long. Shares of the chipmaker are down by around 38% from a peak they reached last November.
Wall Street's expecting Nvidia to bounce right back and keep on climbing higher. The consensus price target on the stock at the moment represents a 60% gain.
This former high-flyer has struggled to get off the ground this year because investors are still worried about canceled orders for consumer graphics processing units (GPUs) that occurred late last year. In addition to supply chain headaches, there probably won't be many GPUs going out to Russia or Ukraine for the foreseeable future. The hole in global demand for semiconductors that started in February could put a lot of pressure on Nvidia's quarterly results this year.
Growth could hit a speed bump in 2022 that will hardly register on a long-term timeline. Back in 2006, Nvidia introduced CUDA, a proprietary platform millions of developers use to build applications that really make the most of a GPU's parallel processing capability. New artificial intelligence applications are nearly always built to run on Nvidia GPUs because developers that demand a lot of processing power are accustomed to CUDA. Even if AMD and Intel launch a GPU with better specs than equally priced options from Nvidia, it's still hard to find developers willing to work with them.
During Nvidia's fiscal fourth quarter, which ended Jan. 30, data center revenue soared 71% year over year to $3.3 billion. With an unstoppable competitive advantage, investors can reasonably expect this stock to outperform over the long run.
DigitalOcean delivered some enormous gains in 2021 before the bottom fell out from under the stock late last year. Shares of this cloud computing platform as a service provider are down by about 65% since they hit a peak last November.
Analysts up and down Wall Street think DigitalOcean can recover a lot of its recent losses. The average analyst following the company set a target that's 67% above its price at the moment.
DigitalOcean is a cloud service provider increasingly popular among individual developers and small to medium-sized businesses that don't have large enough operations to justify going to Amazon Web Services, Microsoft Azure, or Alphabet's Google Cloud Platform. The average DigitalOcean customer spent 25% more in 2021 than in 2020, but it still worked out to a little less than $60 per client in 2021.
The war in Ukraine will pressure DigitalOcean's performance but it isn't anything the geographically diversified company can't overcome. DigitalOcean finished 2021 with around 609,000 customers in over 185 countries.
Shares of Moderna spiked last December, but the gains didn't last long. The biotech stock has tumbled by about 70% from its peak last year.
The average Wall Street analyst who follows Moderna thinks the biotech stock is seriously underappreciated right now. The average price target on the company suggests a 66% gain could be in store for its shareholders.
Wall Street is enthusiastic about Moderna's future, and even though the company has just one drug, SpikeVax, more could be on the way. The company has plowed massive cash flows generated by its COVID-19 vaccine into a giant development pipeline.
The last time Moderna reported quarterly results it had 41 vaccine candidates in development, several of which are aimed at omicron and other variants. The company is also expanding into non-COVID diseases like respiratory syncytial virus (RSV), which currently lacks an effective vaccine.