Investing in 2022 has been an adventure, to say the least. With just a few days to go before we welcome in a new year, it's a near certainty that this'll be the worst year for the broad-based S&P 500 and growth-dependent Nasdaq Composite since 2008.
However, this weakness hasn't fazed Wall Street one bit. Despite contending with a bear market, analysts remain decidedly optimistic about the long-term prospects for equities and the broader market. That's why the vast majority of institutional price targets imply upside.
But not all price targets are created equally. As we ready to move into 2023, Wall Street expects four growth stocks to have a stellar year, with implied upside ranging from 192% to 532%.
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Nio: Implied upside in 2023 of 192%
The first supercharged growth stock with incredible upside potential in the new year, at least according to one Wall Street analyst, is China-based electric vehicle (EV) manufacturer Nio (NIO 3.49%). UBS analyst Paul Gong believes Nio could reach $32, which would represent a near-tripling in its share price from where it closed last week.
Gong's thesis is simple: Innovation should drive strong sales volume. Nio has introduced more than a half-dozen EVs since its inception but has seen a rapid uptick in production since its ET7 and ET5 sedan deliveries began in late March and September, respectively. The company's record deliveries of more than 14,100 EVs in November was (pardon the pun) fueled by these two sedans, which accounted for roughly 44% of all deliveries.
Nio has also done a good job of ensuring that many early buyers remain loyal to the brand. During the pandemic in 2020, the company introduced its battery-as-a-service (BaaS) subscription. With BaaS, buyers receive an upfront discount on the purchase price of their vehicle and can upgrade their batteries at a later date. In return, Nio is generating high-margin subscription revenue and locking buyers into the Nio brand.
Although Nio is one of the more intriguing names in the EV space and does look like a bargain, a nearly 200% gain in 2023 could be asking a bit much. Until there's clarity on China's COVID-19 mitigation plans, supply chain disruptions could still constrain Nio's full potential.
Sea Limited: Implied upside in 2023 of 219%
A second high-octane growth stock Wall Street believes could soar in 2023 is Singapore-based Sea Limited (SE 2.03%). Goldman Sachs analyst Pang Vittayaamnuaykoon foresees shares hitting $159, which would imply upside of 219%.
Sea's sustained double-digit growth rate is powered by its three unique operating segments. The only one generating positive earnings before interest, taxes, depreciation, and amortization (EBITDA) at the moment is Garena, the company's gaming division. Sea's popular mobile game Free Fire has benefited from having 9.1% of its 568.2 million quarterly active users paying to play. The industry pay-to-play rate for mobile games is considerably lower.
There's also the company's digital financial services segment, which is powered by its mobile wallet solutions. Sea operates in a number of chronically underbanked emerging markets where mobile wallets can improve access to basic financial services.
But the segment driving the most investor interest for Sea is e-commerce platform Shopee. During the third quarter, Shopee processed 2 billion orders and over $19 billion in gross merchandise volume (GMV). Its annual GMV run-rate of more than $76 billion is up over 660% from 2018.
Though Sea's growth is intriguing, the company's losses have been unsightly. Even with cost-cutting measures put in place for 2023, I wouldn't expect shares to approach $159 anytime soon.
Tilray Brands: Implied upside in 2023 of 223%
A third growth stock with the potential to skyrocket in the new year, according to one Wall Street analyst, is Canadian marijuana stock Tilray Brands (TLRY). Longtime cannabis bull Vivien Azer of Cowen believes Tilray is worth $9 per share, which would lead to a more than tripling in its shares.
Azer's optimism is a reflection of both the growth potential of marijuana globally as well as Tilray's improving operating performance. Though estimates vary, the global weed market could be worth $57 billion by 2026, according to BDSA, up from $30 billion in 2021.
In terms of Tilray's operating performance, the company has delivered 14 consecutive quarters of positive adjusted EBITDA and has reduced its expenses enough to make a run at reaching positive free-cash flow (FCF) in its current fiscal year. Most Canadian licensed producers are losing money, so pushing to positive FCF would be an important stepping stone for Tilray.
It's also worth adding that, despite trimming its operating expenses, Tilray has stood its ground with regard to pricing its cannabis products. Even though consumers have gravitated toward value-based products, Tilray's unwillingness to cut its prices much, if at all, has resulted in margin expansion in recent quarters.
Nevertheless, without a path to enter the highly lucrative U.S. market, and with the company still producing quarterly losses, reaching $9 looks next to impossible in the upcoming year.
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Plug Power: Implied upside in 2023 of 532%
The fourth and final growth stock expected to skyrocket in 2023 is hydrogen fuel-cell solutions company Plug Power (PLUG -6.95%). If analyst Amit Dayal of H.C. Wainwright is correct, Plug Power can reach $78 in 2023, which would represent upside of a jaw-dropping 532% from where shares ended last week.
Dayal cited a laundry list of factors that supported this aggressive price target earlier this year. This included the introduction of more efficient next-generation GenDrive units, the opening of a fuel-cell gigafactory (which occurred in November), and the expected margin expansion derived from scaled revenue and GenDrive units that'd be less costly to build and service.
Opportunities for Plug Power to significantly expand its green-hydrogen network abound. The company has forged more than a handful of brand-name partnerships, including the formation of a joint venture (Hyvia) with Renault that's targeting Europe's light commercial vehicle market. Two months ago, Hyvia unveiled its first fuel-cell prototype, the Renault Master Van H2-Tech, with over 12 cubic meters of storage space and north of 300 miles of range. Hyvia anticipates unveiling an even larger van and an urban minibus in the future.
Plug Power is certainly not struggling in the growth department given that crude oil and natural gas are well above their historic norms. The company has forecast $3 billion in sales by 2025, which would represent a roughly 500% improvement over its total sales in 2021.
But to keep with the theme of this list, Wall Street's high-water price target for 2023 appears farfetched. Though Plug Power has plenty of momentum in its sails, the company hasn't yet demonstrated that it can scale its operations or generate a profit. Until it does, expecting a greater than 500% return is wishful thinking.
