One of the best strategies to maintain or increase purchasing power is to have a portfolio that’s diversified between income and growth stocks.
Inflation has been accelerating and it seems very likely that rising prices will remain a concern in 2022. This has significant implications from an investment perspective with bonds yielding negative returns, adjusted for inflation.
In general, growth stocks do not offer dividends. However, there have been dozens of growth stocks in 2021 that have delivered multi-fold returns.
I would not be very greedy at a time when the broad markets still trade at a cyclically adjusted price-to-earnings ratio of 38.3. However, I believe that quality growth stocks can double in the next 6-12 months.
This column will talk about seven growth stocks that are worth holding through 2022. Most of these growth stocks have corrected in the recent past and provide a good entry opportunity for medium to long-term investors.
- Marathon Digital (NASDAQ:MARA)
- Lucid Group (NASDAQ:LCID)
- Roblox Corporation (NYSE:RBLX)
- Nio (NYSE:NIO)
- Tilray (NASDAQ:TLRY)
- Hive Blockchain (NASDAQ:HIVE)
- Sea Limited (NYSE:SE)
Best Growth Stocks to Buy: Marathon Digital (MARA)
With the recent decline in Bitcoin (CCC:BTC-USD), MARA stock has corrected from highs of $83.4. At current levels of $34.5, the stock looks attractive and among the top growth stocks to consider for 2022.
For Q3 2021, Marathon reported revenue of $51.7 million. This would imply an annualized revenue potential of $200 million.
However, Marathon Digital is pursuing an aggressive growth in Bitcoin mining activities in 2022. As of Q3 2021, the company had a hash rate of 2.7EH/s. This is expected to increase to 13.3EH/s by mid-2022.
In terms of revenue impact, the company expects to mine 66 Bitcoins per day after the expansion. Even if Bitcoin price was at $45,000, it would imply monthly revenue potential of $89.9 million.
Clearly, Marathon Digital is positioned for multi-fold growth in revenue in the next eight to ten quarters. The company also expects unit Bitcoin production cost of $6,235. This would imply robust EBITDA margin and cash flows.
With the possibility of a robust increase in cash, Marathon Digital is also positioned for expansion in 2022 and beyond. It seems very likely that the company will diversify in the coming years.
Lucid Group (LCID)
The electric vehicle industry will continue to grow at a robust pace in the coming years. Among the emerging players, Lucid Group looks attractive from a technology and innovation perspective.
LCID stock has corrected after a sharp rally in the recent past. I believe this presents a good accumulation opportunity. Lucid is positioned for significant upside in revenue in 2022 and 2023.
The company’s first EV, Lucid Air, has already received 17,000 bookings as of November 2021. This implies a total revenue backlog of $1.3 billion.
Besides establishing a presence in the United States, Lucid will be expanding into Canada and EMEA in 2022. Further, the company expects to have cars available in China in 2023.
Lucid also plans its second model, which will be an SUV, in 2023. Therefore, regional expansion coupled with two models will drive growth in the next 24 months.
From a financial perspective, Lucid Group reported cash and equivalents of $4.8 billion as of Q3 2021. Recently, the company also raised $2.0 billion in gross proceeds from a convertible senior note offering.
Therefore, there is ample liquidity buffer to pursue aggressive growth and investment in manufacturing expansion.
Best Growth Stocks to Buy: Roblox Corporation (RBLX)
In general, gaming stocks have witnessed some correction in the recent past.
RBLX stock has also declined from highs of $141.6 to current levels of $100. Roblox is on a high-growth trajectory and the correction provides a good entry opportunity.
For Q3 2021, Roblox reported revenue of $509.3 million. On a year-on-year basis, revenue increased by 102%.
Another important point to note is that the company reported free cash flow of $170.6 million for the quarter. Robust FCF will increase the company’s financial flexibility to continue investing in growth.
In terms of sustained growth, the metaverse market was worth $21.91 billion in 2020. The market is expected to grow at a CAGR of 41.7% through 2030.
This provides a big opportunity for Roblox. According to Tao Value newsletter for Q3 2021, Roblox is a better metaverse play than Meta Platforms (NASDAQ:FB).
A key reason is its focus on security and privacy compared to Meta Platforms.
Overall, metaverse is likely to be game-changing over the next decade. Roblox has been in the metaverse space for years.
With robust financial flexibility, growth is likely to accelerate further. RBLX stock is therefore among the top names to consider among growth stocks.
Nio (NIO)
Among electric vehicle companies in China, Nio stock looks attractive and positioned for a big 2022.
The stock has been an under-performer, but it seems very likely that Nio stock is positioned for a strong reversal.
With Nio planning to launch three models in 2022, it’s likely that vehicle deliveries will be strong through the year and into 2023.
Further, Nio has ambitious global expansion plans. Currently, the company has a presence in Norway. Additionally, Nio plans to enter a few more European countries in 2022. This will increase the addressable market and boost vehicle deliveries.
Nio is also well-positioned from a financial perspective. As of Q3 2021, the company reported cash and equivalents of $7.3 billion. The company also raised $2.0 billion through an at-the-market offering In November 2021.
As vehicle deliveries increase, Nio has also witnessed improvement in vehicle margins. For Q3 2021, the company reported a vehicle margin of 18.0% as compared to 14.5% in Q3 2020. Margin expansion is likely to sustain with operating leverage.
Overall, it seems that the worst of the downside is over for Nio stock. The company’s revenue growth is likely to remain robust through 2022.
Best Growth Stocks to Buy: Tilray (TLRY)
TLRY stock has been depressed for an extended period. Current valuations look attractive and I believe that the stock is likely to be among the market performers in 2022.
For Q1 2021, Tilray reported revenue growth of 43%. Further, it was the tenth consecutive quarter of positive EBITDA.
It’s also worth noting that Q1 2022 revenue of $168 million implies an annual top-line potential of $750 to $800 million.
The management has already discussed plans to achieve revenue of $4.0 billion by 2024. Therefore, the next few years are likely to be exciting for the company in terms of growth.
The growth estimates seem realistic. Tilray believes that the global cannabis market size is $200 billion.
The company already has a leadership position in Canada. Further, in Germany, the company is a market leader in medicinal cannabis. With potential Federal level legalization of cannabis in the United States, there is ample scope for growth.
On the flip-side, Tilray reported negative free cash flow of $61 million for Q1 2022. With the expansion, free cash flow is likely to be negative in the foreseeable future.
However, TLRY stock will trend higher if top-line growth accelerates and key margins gradually expand.
Hive Blockchain (HIVE)
HIVE stock is probably among the top penny growth stocks to consider for 2022. The recent meltdown in Bitcoin price has provided a good entry opportunity in mining stocks.
As an overview, Hive Blockchain is involved in Bitcoin and Ethereum (CCC:ETH-USD) mining. With the deployment of new miners, the company is positioned for stellar growth in 2022.
For Q3 2021, Hive reported mining revenue of $13.7 million. For the most recent quarter (Q2 2022), the company’s revenue has increased to $52.6 million. Therefore, the company already has an annualized revenue run-rate in excess of $200 million.
With the further deployment of miners in 2022, HIVE is positioned for growth over the next 24 months.
It’s also worth noting that Hive has acquired a 4.9% stake in DeFi Technologies. As assets locked in decentralized finance swell, the investment is likely to create value in the long term.
Another growth area in the recent past has been non-fungible tokens. Recently, Hive Blockchain announced a strategic investment in Network Media Group. This gives the company exposure to the NFT business.
Overall, Hive is accelerating revenue in the core business of mining. At the same time, the company is spreading its wings. HIVE stock is likely to deliver multi-fold returns if the cryptocurrency industry continues to grow at a healthy pace.
Sea Limited (SE)
Sea Limited has been on a high-growth trajectory. However, after touching highs of $373, SE stock has corrected sharply to current levels of $225.
For Q3 2021, Sea Limited reported group revenue of $2.7 billion, which was higher by 121.8% on a year-over-year basis. However, adjusted EBITDA was negative at $165 million.
The company’s digital entertainment segment has been generating healthy EBITDA. However, the e-commerce segment has been largely responsible for the cash burn.
Having said that, e-commerce revenue growth has been well over 100% in the last few quarters. If this growth trajectory sustains, margins will improve in the foreseeable future.
The company’s digital financial service is also likely to be a long-term value creator. As of Q3 2021, the company’s quarterly paying users were 39.3 million. On a year-over-year basis, user growth was robust at 120%.
Therefore, with multiple segments driving growth, SE stock looks attractive after correction.
Sales and marketing expenses have been a key reason for the cash burn in the e-commerce segment. With wider adoption, these expenses are likely to decline and will boost EBITDA margin.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
