Are you looking for growth stocks that can outperform in the year ahead? If so, investment bank analysts on Wall Street can think of a few they'd like you to consider.
Right now, the 12-month price targets on these stocks suggest they can deliver market-beating gains. Of course, these analysts have nothing but their reputations to lose if their predictions fail to materialize.
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Before risking any of your own hard-earned money on these stocks, let's look at why their price targets are so elevated.
fuboTV
Shares of FuboTV (FUBO 1.46%), a streaming service for sports fans, have collapsed from the peaks they reached in late 2021. Wall Street expects a big comeback. The average price target on the stock suggests it can rise 56% over the next 12 months.
Wall Street's bullish for FuboTV because the way Americans watch local sports is changing fast. Traditionally, sports teams sell local viewing rights to regional sports networks like Sinclair Broadcast Group. Those rights are then licensed to cable and satellite TV providers that spread the cost to all of their subscribers.
Back when everyone had cable, those fees worked out to a few dollars a month. Now that there are far fewer subscribers, those fees are so high that cable companies have started refusing to license rights to air local sports. FuboTV, though, is more than happy to make the deals cable companies are increasingly unable to afford.
Streaming services are famous for spending lavishly on content that may or may not attract long-term subscribers. Licensing local sports is a more straightforward venture that is pushing FuboTV's bottom line into profitability. First-quarter revenue soared 34% year over year, while operating expenses climbed just 11%.
FuboTV's recent market cap of just $586 million seems far too low for a streaming service provider likely to dominate the market for local sports. Investors want to keep an eye on the bottom line in the quarters ahead. For now, though, it looks like the analysts are right to pound the table on this stock.
CRISPR Therapeutics
CRISPR Therapeutics (CRSP 0.34%) stock is up 33% this year. The analysts who follow the company think it can climb a lot higher. The average price target for this clinical-stage drugmaker implies a 55% gain over the next 12 months.
In June, the U.S. Food and Drug Administration (FDA) began reviewing applications for exa-cel. This is an experimental gene therapy CRISPR Therapeutics is developing in partnership with Vertex Pharmaceuticals for patients with severe sickle cell disease and transfusion-dependent beta-thalassemia. Both of these diseases result from a lack of functional hemoglobin, the protein that transports oxygen and carbon dioxide around your body.
In clinical trials supporting its applications, a single treatment with exa-cel helped patients with these diseases reduce their dependency on blood transfusions. Unfortunately, treatment with exa-cel involves harvesting stem cells and modifying their genetic information before returning those cells to a patient's bone marrow. This isn't a deal-breaker, but investors should understand that it isn't easy to sell complicated cellular therapies that need to be manufactured in batches of one.
At the moment, CRISPR Therapeutics sports a $4.3 billion market cap even though it still has no recurring source of revenue. It's probably best to make sure exa-cel is viable as a commercial product before risking your hard-earned money on this stock.
Sea Limited
Shares of Sea Limited (SE 0.05%) were hammered following the company's latest earnings call, and the stock is still 85% below the peak it reached in 2021. Analysts think it can start to bounce back. The average target for this e-commerce, video game, and financial-services conglomerate suggests a 71% gain could be around the corner.
Sea Limited's biggest source of revenue, its digital entertainment division, is generating a lot less revenue since India banned access to the game Free Fire last February. First-quarter revenue from the segment fell 43% year over year to $540 million.
Luckily, Sea Limited had already invested several years of Free Fire profit into two new operating segments that are offsetting losses from its gaming division. The company's e-commerce operation reported first-quarter revenue that soared 36% year over year, and sales from its financial services business rocketed 75% higher. Increasing contributions from its e-commerce and financial services segments allowed total revenue to climb 5% year over year.
Sea Limited had been bleeding money, but recent expense-slashing efforts are working. Instead of the deep losses it suffered in 2022, the company earned $87 million in the first quarter.
Shares of Sea Limited are trading for just 19.4 times forward-looking earnings estimates. This is a sensible valuation for a stock growing earnings at a single-digit percentage, but Sea Limited could report an earnings explosion now that gaming revenue has stabilized. Putting some shares of this stock in a diversified portfolio right now looks like the right decision.
