It’s a stock pickers market and adding winners to a portfolio is only getting harder. The new year has seen volatility in stocks intensify as concerns about inflation and interest rate hikes to combat it has investors large and small reconsidering their appetite for risk and seeking out safe havens for their money.
In this environment, the rotation into and out of certain classes of stocks is getting more pronounced and making it harder to achieve sustained gains. However, in this difficult environment, there are a few stocks that are well-positioned to deliver outsized returns to investors who pick them up on the cheap and patiently wait for them to rally higher.
While by no means a sure thing, here are three stocks that could turn investors millionaires in 2022.
Stocks That Could Make You a Millionaire: Planet Labs PBC (PL)
San Francisco-based Planet Labs PBC went public on Dec. 8 via a special purpose acquisition company (SPAC) deal with dMY Technology Group Inc IV. And shares of the Earth imaging company earlier backed by Alphabet’s (NASDAQ:GOOGL) Google did not get off to a good start, falling more than 50% in their first month of trading to a low of $4.95 per share.
However, earlier this month, investment bank Goldman Sachs initiated coverage of the company with a “buy” rating and saying that it expects the company’s share price to nearly double this year and go as high as $11. Goldman said that Planet Labs has a “huge” total addressable market in front of it and has a first mover advantage over competing satellite companies.
If Goldman Sachs is correct, Planet Labs could be a top-performing stock this year, delivering outsized gains to shareholders. And there is a lot to like about the company. It was founded in 2010 by three former NASA scientists and it uses a network of more than 200 satellites in Earth’s orbit to image the planet each day and look for trends.
Governments and companies around the world pay Planet Labs for its data, which they use to monitor climate patterns, predict crop yields for farmers, undertake urban planning in cities, and respond to natural disasters.
Currently, Planet Labs has more than 700 customers and generated $100 million in revenue for fiscal 2021 from its data subscription business. Current clients include governments, defense departments, agriculture companies and emergency response agencies.
Planet Labs has forecast a compound annual growth rate (CAGR) of 44% over the next five years and has said that it expects to turn profitable in late 2023 or early 2024. Investors may want to get in on the ground floor with PL stock.
First thing’s first. Yes, DraftKings stock is a mess right now. DKNG shares have crumbled 60% in the last six months, and at their current price of $19.46 are more than 70% below their all-time high of $74.38 reached last March.
Nothing seems to be able to reverse the steady decline in the stock of the Boston-based online gambling and sportsbook company. So why take a position in a stock that has delivered nothing but pain, regret and humiliation to shareholders?
Because the professional analysts who cover the company see DraftKings share price more than doubling over the next 12 months.
Among the 27 Wall Street analysts who cover DKNG stock, the median price target on the shares is $58, which would be 118% higher than current levels. The consensus view is that the selloff in DraftKings has been overdone and the stock is now woefully undervalued and at fire sale prices as it hovers around $25 per share. This as New York state just approved DraftKings to begin offering its gaming services within its jurisdiction and other states such as Ohio move to legalize sports betting for the first time.
Investors who place a bet on DraftKings stock now when the share price is beaten down could be richly rewarded when they reverse higher.
Stocks That Could Make You a Millionaire: Alibaba (BABA)
Speaking of stocks that have been beaten beyond recognition, how about Chinese e-commerce and technology giant Alibaba?
As recently as 18 months ago, Alibaba was being called the “Amazon of China” and hailed as a best of breed tech stock. But then came the Chinese government’s crackdown on publicly traded companies, a record $2.8 billion antitrust fine, the cancellation of the Ant Group IPO, and several other public humiliations that, together, have pushed BABA stock down 40% over the last 12-months.
At $123, Alibaba’s share price is 55% below its 52-week high of $274.29. Not good. But there is reason for hope. Since the start of the year, the BABA stock price is up 3.74%.
The rebound could be the start of a prolonged recovery and investors who buy BABA shares at their current depressed price could ride the stock to big profits in coming months.
Similar to DraftKings, analysts view Alibaba’s stock as being super cheap right now and see big gains ahead. The median price target on the stock is $188.40, which would be 53% higher than current levels. The low estimate on the shares of $140 is higher than the current price that they’re trading at.
Alibaba’s stock has gotten so cheap that even Charlie Munger, the 98-year-old long-time business partner of Warren Buffett has been buying up shares. Investors who follow suit may make some serious returns.
On the date of publication, Joel Baglole held a long position in BABA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.