Although it's been an adventurous couple of years for investors, 2023 turned out to be a phenomenal year for the bulls. The Dow Jones Industrial Average climbed to a fresh all-time high, while the S&P 500 and Nasdaq Composite respectively surged 24% and 43%.
The driving force behind 2023's outperformance was growth stocks. Investors flocked to innovative businesses of all sizes that offered outsized future-growth potential.
Keeping in mind that not all growth stocks are going to be worth buying, what follows are three of the fastest-growing stocks on the planet in 2024.
The Lucid Air sedan is attempting to gobble up share of the luxury electric vehicle market. Image source: Lucid Group.
Lucid Group: Estimated sales growth of 112% in 2024
The first supercharged growth stock expected to deliver a jaw-dropping increase in revenue in the new year is electric vehicle (EV) manufacturer Lucid Group (LCID 0.41%). Based on Wall Street's consensus estimate, sales are forecast to surge by 112% in 2024 to $1.34 billion.
Seeing EV stocks on a list of the fastest-growing companies in any given year isn't a surprise. There's a tangible opportunity for multiple EV makers to gobble up market share as developed countries lean on clean energy sources. Promoting EVs and other clean forms of transportation is an easy way for some of the world's largest economies to reduce their respective carbon footprints.
However, the driving forces for Lucid Group in the current year are expected to be its unique niche and an increase in production.
With regard to the former, Lucid's lineup is targeting affluent buyers. Inclusive of tax credits, its vehicles range from around $75,000 to roughly a quarter of a million for the Lucid Air Sapphire, which puts out an equivalent of more than 1,200 horsepower. The beauty of targeting high-income EV buyers is that they're unlikely to alter their buying habits because of modest ebbs and flows with the U.S. or global economy.
Lucid Group can also meaningfully increase its production. Early in 2023, management anticipated the company would produce between 10,000 and 14,000 EVs. This figure was reduced to a range of 8,000 to 8,500 EVs to "prudently align with deliveries," in the company's own words, with Lucid ultimately announcing 8,428 EVs produced for the year. Doubling this production base isn't out of the question in 2024.
On the other hand, Lucid doesn't have the best track record of meeting production expectations. It fell well short of Wall Street's early-year predictions in 2022 and 2023.
To make matters worse, the company is now contending with higher interest rates. A collective 525-basis-point increase in the federal funds rate since March 2022 has made financing new vehicles costlier, which has clearly had a negative impact on EV buyers.
But what's most concerning about Lucid Group is its operating performance. A sizable inventory buildup with modestly increased production widened the company's operating loss through the first nine months of 2023 by roughly $480 million to $2.36 billion.
Though Lucid claims to have enough of a cash runway to last into 2025, it's burning through its capital at an alarming rate. It may be one of the fastest-growing stocks in 2024, but it's not a company worth investing in.
Lexicon Pharmaceuticals: Estimated sales growth of 1,106% in 2024
Biotech stock Lexicon Pharmaceuticals (LXRX 2.60%) is another of the fastest-growing stocks on the planet in 2024. After producing an estimated $3.8 million in sales in 2023, Wall Street analysts collectively believe it'll near $46 million in revenue this year.
The catalyst behind Lexicon's expected surge in sales is heart failure drug Inpefa. Inpefa was approved by the U.S. Food and Drug Administration (FDA) this past May to help reduce the risk of heart failure in patients with the disease, as well as those who have type 2 diabetes, chronic kidney disease, and other cardiovascular risk factors. In other words, this'll be the first full year of having Inpefa on pharmacy shelves, which is the reason Lexicon's revenue is expected to catapult higher.
Inpefa's differentiation can also benefit sales. It's an inhibitor of SGLT1 and SGLT2. There are a number of SGLT2 inhibitors already on pharmacy shelves, which work by blocking glucose absorption in the kidneys. The addition of SGLT1 further reduces glucose absorption in the intestines. While sotagliflozin (the scientific name of Inpefa) failed in a type 1 diabetes trial, its approval as a treatment to reduce the risk of heart failure signals the potential for this dual-inhibitor class of drugs.
Excitement is also building over LX9211, the company's late-stage experimental therapy targeting patients with diabetic peripheral neuropathic pain. If LX9211 is successful in late-stage trials, it sets the stage to become the first non-opioid neuropathic pain treatment in more than two decades.
The flipside for Lexicon is that it's still losing quite a bit of money. Having its first therapy approved by the FDA is exciting, but it also means that marketing expenses will ramp up. The company's operating loss in 2024 could widen even with a slight decline in net loss per share due to more shares outstanding.
Investors will want to keep a close eye on Lexicon's cash pile, too. Though the company wisely raised capital in 2023, it's not yet clear if the roughly $218.4 million it closed the third quarter with will be sufficient to reach positive operating cash flow.
For what it's worth, I see Lexicon as an intriguing bounce-back candidate in 2024, albeit with palpable downside risk.
Production of the Nikola Tre battery electric truck is currently paused. Image source: Nikola.
Nikola: Estimated sales growth of 601% in 2024
Rounding out the list of three of the fastest-growing stocks on the planet in 2024 is battery electric vehicle (BEV) and hydrogen fuel cell electric vehicle (FCEV) manufacturer Nikola (NKLA 7.23%). According to the consensus from Wall Street analysts, Nikola should see its sales catapult by around 600% in the new year (from about $39.5 million to north of $276 million).
Nikola's rapid sales ramp in 2024 should be the result of two factors. The first would be an expected increase in production. In its Q3 earnings release, the company pointed out that it's received 277 non-binding orders from 35 customers for FCEVs, as well as netted an order for 47 BEVs during the September-ended quarter.
The other catalyst for Nikola involves moving past a voluntary recall of 209 of its Tre BEV trucks. Nikola estimates that replacing battery packs on these trucks will cost nearly $62 million. Because of recalls and returns, the company actually reported negative net revenue during the September-ended quarter. That'll make for some easy year-over-year comparisons in the current year.
However, the latter isn't a growth catalyst that automakers want to have. In addition to BEV truck production being paused, Nikola also fell short of its own production guidance in 2022. Management hasn't yet demonstrated that it can successfully ramp up production or generate consistent cash flow.
To add to the above, Nikola's cash situation is dicey, at best. The company has been diluting shareholders by issuing stock and has also sold convertible debt, which can increase the company's outstanding share count over time. Despite winning $165 million in damages via arbitration from former CEO Trevor Milton, it's fair to question if Nikola has sufficient capital to ramp up production at this point.
Investors shouldn't overlook the overhanging gray clouds from disgraced former CEO Trevor Milton, either. Even though Milton no longer has anything to do with Nikola, he damaged the brand with his deception, which I'd opine has undoubtedly hurt demand for the company's products.
Though there could be some big-time winners in the EV space, Nikola is a dart throw worth avoiding.
