It's been quite the year for Wall Street and investors. Since hitting their respective all-time highs between mid-November and the first week of January, the timeless Dow Jones Industrial Average, broad-based S&P 500, and growth-centric Nasdaq Composite (^IXIC 1.14%) have shed as much as 19%, 24%, and 34% of their values. You'll note by the magnitude of these declines that the S&P 500 and Nasdaq have firmly fallen into bear market territory.
There's no two ways about it: Bear markets can be scary. They're known for testing the resolve of investors due to the unpredictability and velocity of downside moves. But this is just one side of the coin.
Though bear markets can be worrisome in the short run, they're a surefire opportunity for patient investors to pounce on high-quality companies at a discount. "High-quality" stocks come in many varieties, and certainly can include the growth stocks that have been pummeled the hardest during the Nasdaq bear market.
What follows are three supercharged growth stocks that have the innovative capacity and competitive advantages necessary to potentially double your money by 2025.
The beauty of the EV industry is that it offers sustainable growth for decades to come. Most major countries have pledged to reduce their carbon emissions by the midpoint of the century. One of the easiest ways to do this is to adopt cleaner forms of transportation at the enterprise and consumer level. Although Nio should have access to numerous markets, its home market of China happens to be No. 1 in the world, in terms of annual auto sales. That's not a bad place to start building EV market share.
Despite semiconductor chip and general supply shortages tied to the COVID-19 pandemic hampering production, Nio has raised eyebrows with its ability to ramp up EV output. In June, the company delivered an all-time high 12,961 EVs and produced yet another 10,000-plus-delivery month in July. Based on previous comments from management, removing supply constraints should allow Nio to ramp up to as much as 50,000 EVs delivered per month within about a one-year span.
Aside from sheer production and expansion opportunity, Nio has really impressed with its innovation. The company appears to be introducing a minimum of one new vehicle each year. The ET7 and ET5 sedans are particularly intriguing in the sense that they take direct aim at Tesla's flagship Model 3 and luxury Model S. The top battery options for Nio's sedans can produce a jaw-dropping range of 621 miles.
The company's showing out-of-the-box innovation, too. During the pandemic, Nio introduced its battery-as-a-service (BaaS) subscription, which is designed to allow EV buyers to charge, swap, and upgrade their batteries. Additionally, buyers receive a discount on the purchase price of their EV. In return for giving up some lower-margin near-term sales, Nio generates high-margin recurring subscription revenue and keeps early buyers loyal to the brand.
By 2024, Nio is expected to bring in north of $2 per share in earnings, according to Wall Street's consensus. This makes a doubling in the company's share price by 2025 quite feasible.
A quick glance at Novavax's stock chart since the pandemic began shows what a roller-coaster ride it's been. The company went from relative obscurity to a share price of more than $300, and has now come all the way back to the mid-$30s.
The biggest knock against Novavax has been the execution of its management team. The company's lead COVID-19 vaccine, NVX-CoV2373, faced numerous filing delays in high-dollar markets. Additionally, production of the vaccine was slow out of the gate. These factors, coupled with its competitors landing the proverbial low-hanging fruit in developed markets, lopped nearly 90% off of Novavax's share price from the pandemic high. Yet there are still plenty of reasons to be optimistic.
For starters, the Novavax COVID-19 vaccine works. Two clinical studies from 2021 showed a vaccine efficacy (VE) of roughly 90%. A separate study in adolescents yielded an 80% VE when the delta variant was dominant. Only a small handful of vaccine developers have hit the elusive 90% VE mark, and Novavax is one of them. With COVID-19 seemingly here to stay, Novavax suddenly has a recurring revenue opportunity at its doorstep.
Perhaps the more important takeaway is that Novavax's drug development platform works. The company should be able to utilize its data to develop variant-specific vaccines, as well as combination vaccines. Investors will likely get a look at top-line data from the company's omicron-specific variant trial in September, with a late-stage COVID-19/influenza combo trial set to begin next year.
Another reason to be hopeful for a big rebound is Novavax's balance sheet. The company ended June 2022 with $1.38 billion in cash and cash equivalents. That's more than enough capital to fund ongoing research. It's also worth noting that cash and cash equivalents now account for half of Novavax's market cap. This has all the hallmarks of a screaming bargain for long-term investors.
The clear concern for Pinterest, and the reason its shares have lost close to three-quarters of their value since hitting an all-time high in 2021, is the weakening U.S. economy. Following back-to-back quarters of gross domestic product declines, there are clear signs that businesses are paring back their advertising budgets. Pinterest is an ad-driven platform, and therefore subject to weakness during economic downturns.
However, Pinterest has time on its side. Even though ad revenue is weak at the moment, the U.S. and global economy spend a substantially longer amount of time expanding than contracting. This implies that, over time, Pinterest's ad revenue should expand.
A longer-term view is also suggested when examining the company's monthly active user (MAU) count. As COVID-19 vaccination rates have ticked up and life has returned to some semblance of normal, Pinterest's MAU count has fallen from a peak of 478 million at the end of March 2021 to 433 million as of June 30. But when looked at over a five-year period, MAUs have been on a fairly steady uptrend.
To build on this point, short-term MAU declines haven't hurt Pinterest's ability to monetize its users. Despite 21 million fewer MAUs from the prior-year period, average revenue per user (ARPU) increased by 17% globally in the June-ended quarter. What this tells investors is that merchants are more than willing to pay a premium, even in a challenged economic environment, to get their message in front of Pinterest's 433 million MAUs.
If you need one more good reason to buy Pinterest, consider that its operating model is designed to have users willingly share the things, places, and services they like. In an era when big tech is clamping down on data-tracking software, Pinterest's users are serving up critical information to merchants on a silver platter... for free!
Pinterest is well capitalized ($2.65 billion in cash, cash equivalents, and marketable securities) and profitable on a recurring basis. In other words, it's begging to be bought by opportunistic investors.