Shares of electric vehicle (EV) maker Tesla (NASDAQ:TSLA) have received all the hype and attention lately because the stock has been on a torrid run, wherein shares have more than tripled over the past six months. That’s a jaw-dropping gain, and many investors can’t believe it. After all, over that same stretch, the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite are all up less than 20%.
But — and not to take anything away from this record rally in Tesla sock, which has been very impressive — such huge rallies in growth stocks happen quite often.
Shares of ecommerce solutions provider Shopify (NYSE:SHOP) nearly tripled from $120 to $360 during the first half of 2019. Also in the first half of 2019, streaming device maker Roku (NASDAQ:ROKU) saw its stock more than triple, as did social media company Snap (NYSE:SNAP). Shares of programmatic advertising leader The Trade Desk (NASDAQ:TTD) saw its stock triple from $50 to $150 during a six month stretch in 2018. MongoDB (NASDAQ:MDB), Beyond Meat (NASDAQ:BYND), Canopy Growth (NYSE:CGC) and Advanced Micro Devices (NASDAQ:AMD) have all had stretches over the past few years where they’ve tripled in a six month span.
In other words, while the record rally in Tesla stock is impressive, it’s not unprecedented. There are a handful of growth stocks that have done it before. And, there are handful of growth stocks that have been just as hot as Tesla over the past six months.
Without further ado, let’s take a deeper look at those red-hot growth stocks.
Growth Stocks That Are as Hot as Tesla: Hovnanian Enterprises (HOV)
Gain in past 6 months: 325%
At the top of this list, we have a big surprise. Homebuilders aren’t normally considered growth companies. Nor are homebuilder stocks often big gainers. But, shares of U.S. residential homebuilder Hovnanian Enterprises (NYSE:HOV) are up a whopping 325% over the past six months, making Hovnanian stock one of the hottest stocks in the market over that stretch.
How did a U.S. residential homebuilder get so hot? By replacing bankruptcy fears with promising growth potential.
Long story short, many investors thought that Hovnanian was on the verge of bankruptcy earlier this year. The homebuilder hadn’t reported a positive revenue growth quarter since 2016, and was sitting on a heavy debt load that did not look serviceable in the face of declining demand trends. Hovnanian’s stock price, which sat at $5 in August 2019, reflected this dour reality.
Then, Hovnanian reported third-quarter results, which included a 5.5% rise in revenues. The U.S. homebuilder followed that up with 16% revenue growth in the fourth quarter, amid aggressive community count expansion. At the same time, management successfully refinanced a bunch of debt and eliminated all debt maturities until 2022. With revenue growth back in the picture and bankruptcy concerns moving into the background, Hovnanian stock took off like a rocket ship.
Can the big rally continue? Probably. Hovnanian stock remains pretty cheap relative to other homebuilders. The U.S. housing market should continue to move higher in 2020, supported by low rates and strong labor market conditions. Although the best of this rally is over, there is likely more upside left.
Gain in past 6 months: 201%
One technology growth stock that has tripled alongside Tesla over the past six months is that of payment card analytics company Cardlytics (NASDAQ:CDLX), and with good reason.
Cardlytics employs a pretty genius business model. They leverage credit and debit card data to pair marketers with consumers and power relevant and strong bank loyalty and rewards programs. In so doing, they are creating an ecosystem where consumers win (through relevant promotions), marketers win (through increased brand awareness) and banks win (through increased card spend and engagement).
This business model is pretty new. But it’s starting to take off, mostly thanks to its multi-faceted benefits. Over the past few years, Cardlytics has gone from one major bank partner — Bank of America (NYSE:BAC) — and 50 million active users, to three major bank partners — adding JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) — and nearly 150 million active users.
That’s a lot of growth, and in sum, it has powered huge gains in Cardlytics stock, including a 200%-plus gain over the past six months.
Can the huge rally continue? Yes. Valuation friction is a problem. Cardlytics stock is not cheap. But, now that Cardlytics has partnerships in place with most major U.S. banks, they can easily leverage those partnerships to build out their portfolio of marketers, which will in turn increase how much consumers spend through the banking rewards programs, and push Cardlytics revenues and profits way higher. So long as those keep moving higher, so will Cardlytics stock.
FuelCell Energy (FCEL)
Gain in past 6 months: 400%
Once a penny stock trading just north of 10 cents per share, FuelCell Energy (NASDAQ:FCEL) stock has surged 400% over the past six months on two big catalysts.
First, the fuel cell power company signed a new, expanded joint development agreement with Exxon Mobil (NYSE:XOM), worth up to $60 million. Second, FuelCell started commercial operations of its 2.8 MW fuel cell project at wastewater treatment facility in Tulare, California. Strung together, these two major product catalysts pushed FuelCell stock from 25 cents in early November 2019 to nearly $3 by late January 2020.
However, shares have taken a big step back since late January. FuelCell reported sub-par fourth-quarter numbers, in which revenues dropped significantly year-over-year, gross margins eroded, losses widened and what was supposed to be a $2 billion order backlog, came in at just $1.3 billion.
Where does FuelCell stock go from here? It’s tough to say. The company landed a few big contracts. But the numbers remain pretty ugly. If those numbers get better, then the stock will rebound. If they don’t, shares will remain under pressure. As such, the best thing to do here is wait to see how next quarter’s numbers come in. If they’re good, buy into the rebound rally. If they’re bad, stay on the sidelines.
Gain in past 6 months: 180%
Much like Tesla, online insurance marketplace operator EverQuote (NASDAQ:EVER) has delivered monstrous growth numbers over the past few quarters. And, much like Tesla stock, EverQuote stock has essentially tripled over the past six months on the back of these strong growth numbers.
The growth narrative at EverQuote is pretty simple. You have an online insurance marketplace, which leverages consumer data to optimally match insurance buyers with insurance sellers, based on coverage options, pricing, location, etc. Theoretically, the more consumer data EverQuote has, the smarter its insurance matching algorithms get, and the better outcomes the EverQuote marketplace produces for both insurance buyers and sellers. Consequently, EverQuote’s huge consumer data growth this year (quote requests rose over 80% last quarter) lays the groundwork for scalable growth over the next few years.
As good as that bull thesis sounds, investors should tread carefully with EverQuote stock, mostly because there is a lot of controversy surrounding this company. That controversy includes: 1) a ton of negative consumer reviews across various sites claiming that all the company really does is sell “leads;” 2) some contradictory web traffic data from SimilarWeb; 3) a huge short interest and 4) a ton of insider selling. Further, even if you ignore those red flags, EverQuote stock is still very richly valued, and further upside looks limited even if everything goes right.
As such, while EverQuote stock has been one of the hottest stocks on the market for the past six months, I doubt it will remain so for the next six months, too.
Applied Therapeutics (APLT)
Gain in past 6 months: 513%
Last, but certainly not least, on this list of growth stocks that have been as hot as Tesla over the past six months is clinical-stage bio-pharmaceutical company Applied Therapeutics (NASDAQ:APLT).
Applied Therapeutics has two main pipeline drugs, AT-001 and AT-007. From an investment perspective, AT-007 is the “less” important of the two, but still very critical to the company’s growth narrative and almost entirely responsible for the stock’s huge gain over the past few months. AT-007 treats galactosemia, a rare genetic metabolic disease caused by an inability to break down galactose. Because it’s so rare, the opportunity here isn’t large (only about 2,800 patients in America). But, it’s still sizable, with Cowen estimating that peak sales of AT-007 could be $500 million.
That’s why, when Applied Therapeutics reported positive Phase 2 clinical trial results for AT-007 in January, the stock jumped. Indeed, most of this stock’s 500%-plus trailing six month gain happened on the heels of the positive Phase 2 results for AT-007.
What’s exciting, however, is that the best may still be coming. AT-001 is the potential blockbuster hit, as it treats diabetic cardiomyopathy, a fairly common disorder impacting about 20% of diabetics, or around 77 million patients globally. At present, there is no approved therapy for diabetic cardiomyopathy. AT-001 has posted positive Phase 1 and Phase 2 clinical trial results and Phase 3 clinical trial results are due in 2021. If positive, that will provide a huge boost for this stock, since estimated peak U.S. sales for the drug are about $950 million.
Big picture — Applied Therapeutics is a red-hot biopharma company with two pipeline drugs, both of which have tremendous clinical momentum at present. If they sustain this momentum, Applied Therapeutics stock will keep marching higher.
As of this writing, Luke Lango was long SNAP, TTD, BYND and CGC.