Tesla (NASDAQ:TSLA) has been a great success story in the stock markets. From the depths of the pandemic stock market crash, TSLA has risen by 705%. Back in late January, at the height of electric vehicle mania, that share price increase was even greater. The point here is that Tesla’s meteoric rise is proof that certain growth stocks can rocket upward with the right catalysts.
For Tesla, those catalysts were broad acceptance of electric vehicles and its position as a pioneering force in the industry. No doubt about it, Tesla is a great American success story.
The broader take-aways from Tesla’s rise is that investors are now keen to identify the next stocks that could take off. This list will inherently be full of risky stocks, but stocks with hopefully the right position to bring strong returns to those who establish a position soon.
- JD.com (NASDAQ:JD)
- Hydrofarm Holdings (NASDAQ:HYFM)
- Alibaba (NYSE:BABA)
- Nio (NYSE:NIO)
- BYD (OTCMKTS:BYDDF)
- C3.ai (NYSE:AI)
- MindMed (OTCMKTS:MNMD)
Growth Stocks: JD.com (JD)
Even with everything that’s occurring in the markets these days, JD.com makes complete sense as a growth stock. Given its geography and the industry in which it competes, there’s an abundance of reasons to believe it can multiply in value.
First, let’s mention one of the most salient issues JD.com faces right now: It is a tech giant in China. In the wake of the massive fine the Chinese government levied against Alibaba, it is abundantly clear that Beijing isn’t bluffing. Just as a reminder, in mid-April the regime rendered its judgment in levying a $2.8 billion fine against the one-time Chinese Communist Party darling. The anti-competitive behavior Jack Ma’s company exerted was against JD.com specifically but that’s hardly the only message being sent.
All of this might seem to be the antithesis of a growth narrative, but it isn’t. JD.com operates within China, which is a tough environment now. However, it is still China, and China is, frankly, a retailer’s paradise.
Annual retail growth in China is pegged at 8.1% in 2021. As a leading e-commerce platform, JD.com is still in the right place at the right time. That’s why I’d suggest investors eschew all of the negative headline hype and get in on JD stock now.
In 2020, JD.com recorded $114.3 billion in revenues. Amazon (NASDAQ:AMZN) recorded $386 billion. While that’s a little bit more than three times as much in revenue, a share of AMZN costs 45x as much as a share of JD. There are other factors to consider, sure. But if you’re looking for a stock that could make a 10x move like Tesla did in 2020, JD.com just might be it.
Hydrofarm Holdings (HYFM)
I’ll start off by saying that Hydrofarm Holdings probably won’t be the next Tesla. At least not from the perspective that it can 10x in price as Tesla has. Frankly, that seems unlikely given that HYFM stock trades at $65 currently.
However, the manufacturer and distributor of controlled environment farming equipment certainly has a chance to multiply in price. Interest in certain niches within agriculture are rife with potential. In fact, many are already on a growth path, Hydrofarms Holdings included.
The company’s 2020 fiscal year saw revenues rise 45% to $346.6 million. Hydrofarms doesn’t believe that growth was a fluke either. The company recently issued guidance that it anticipates 20 to 25% overall net sales growth in 2021.
The company turned 2019’s EBITDA loss of $9.5 million into a positive $21.1 million in 2020. EBITDA in 2021 is expected to end up between $28 million and $31 million.
The company is trending in the right direction and while it may not skyrocket as Tesla has, it should almost certainly appreciate quickly.
I’ve already hinted at how I feel about Chinese tech stocks. I think the negative narratives are overblown. Ultimately it’s going to be revenues and profits that drive Chinese stocks, and not worries that the Chinese government will stifle its own economic success stories.
Alibaba is no slouch from a revenue perspective. In 2020 the company recorded $72 billion worth of revenues. I’d reiterate by making the same comparison I made between the price of Amazon and JD.com with the price between Alibaba and Amazon.
Amazon recorded roughly 5x as much revenue as Alibaba did in 2020, yet AMZN stock is nearly 15x as expensive as BABA stock. Now that the CCP fine is behind Alibaba, I’d imagine that BABA shares should climb back toward $300 relatively quickly. China is tightening how tech companies use data in relation to lending and fintech on worries about future negative ramifications.
Alibaba is still an e-commerce company focused on retail and wholesale trade, and an important one in what is arguably the world’s most important economy. To think that it’s growth period is over is foolish.
Next up is a company that could truly be the next Tesla in the purest sense. Nio is of course an EV company, that’s where the comparison begins. Further, Nio is a company that is on its way to defining its industry within its home country as Tesla has.
Nio has brought Chinese EVs to the fore and is simply delivering. And delivering is a big part of the narrative behind NIO stock. Simply put, investors want to know how many vehicles young EV companies are putting drivers into.
For Nio, there’s lots of good news on that front. Per the company’s most recent financial results release:
“Deliveries of vehicles were 20,060 in the first quarter of 2021, including 4,516 ES8s, 8,088 ES6s, and 7,456 EC6s, representing an increase of 422.7% from the first quarter of 2020 and an increase of 15.6% from the fourth quarter of 2020.”
The company anticipates that Q2 deliveries will rise to between 21-22k vehicles. Perhaps even more importantly than the deliveries growth numbers is Nio’s margin thereon. A year ago Nio lost 7.4% on each vehicle it made. In Q1 of 2021, Nio made a positive 21.2% margin on each vehicle sold.
Higher margins and increasing sales are a recipe for success.
Nio is not the only Chinese EV manufacturer to consider when searching for growth. Further, investors should know that the Chinese EV market is far from set in stone. There are several manufacturers that also have massive potential, and thus could become the next Tesla.
BYD is one of them. I could have just as easily mentioned XPeng (NYSE:XPEV) here. I chose not to because it gets its fair share of press. I assume that’s due in part to the fact that XPeng trades on the New York Stock Exchange while BYD stock toils away in the pink sheets.
But investors should really consider BYD. I’m a big fan of deliveries as a great indicator of a given EV stock’s potential. And from that perspective BYD is crushing it.
BYD sold 54,751 EVs in the first quarter. That’s a lot more than Nio sold. In fact, BYD sold more vehicles in March (24,218) than Nio sold in Q1 all together. Pretty impressive. BYD’s March deliveries of 24,218 vehicles weren’t that far behind Tesla which sold 35,478 vehicles in the month.
It’s time to switch gears out of Chinese tech and EVs into another area of growth: artificial intelligence. In fact, AI is pegged to grow at an incredible rate over the coming years. C3.ai stock could see similar growth.
A report by Grand View Research indicates that the overall AI market is set to grow at a compound annual growth rate of 42.2% between 2020 and 2027. That kind of growth will lead to dozens of firms growing at rates comparable to what Tesla has experienced.
As InvestorPlace contributor Chris MacDonald noted regarding C3.ai’s value offering:
“In fact, I think this company’s product offering is one which has tremendous potential to create value across a broad clientele. In this sense, I think a significant amount of growth ought to be expected on the horizon with AI stock. The company’s products are suited toward enterprise businesses without the capabilities of building in-house AI solutions. We’ve seen the value AI solutions have provided across a range of FAANG stocks. In many ways, the AI-related technological breakthroughs we take for granted greatly improve our daily lives.”
The company boasts an impressive client list across the fortune 100 and is trading much lower now than it was a few months ago. There’s a strong bull thesis underpinning AI stock to provide real growth moving forward.
MindMed represents a burgeoning area of the medical market that is a step beyond cannabis. The company is attempting to promote LSD-based therapies through clinical trials and into the commercial arena.
The company focuses on LSD, MDMA, DMT, and psilocybin. These are drugs that would have been unthinkable for commercialization not long ago. Now, following the opening of the cannabis sector, the unthinkable is reality.
The company pegs the cost of productivity losses due to mental health issues at $16 trillion through 2030 in the U.S. Its solutions include both non-hallucinogenic and hallucinogenic doses of psychedelics.
Whether the company succeeds remains to be seen. However, assuming its trials lead to commercially viable drugs for issues like anxiety and ADHD, the price could rise several-fold.
MindMed only recently began trading on the Nasdaq, having previously traded on the over-the-counter markets. It is still technically a penny stock as it trades under $5, at $3.19.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.