The average stock market return has been about 10% for nearly the last century. Of course, these are returns from the S&P 500 index, which mainly has blue-chip stocks. Returns from an index of growth stocks is likely to be higher.
As an example, Tesla (NASDAQ:TSLA) stock has returned just over 1,600% in the last five-year. Similarly, Nvidia (NASDAQ:NVDA) stock has returned over 800% during the same period. On the other hand, a mature industry stock like Walmart (NYSE:WMT) has returned 99% over a five-year period.
This does not imply that investors allocate 100% of their cash to growth stocks. However, depending on the risk profile, exposure to growth stocks will increase the average annual returns from equities. With inflation acceleration, the stock market is a good source of returns that beat inflation and help in preservation of purchasing power.
This column discusses seven growth stocks that are attractive for 2022 and beyond.
- Coinbase Global (NASDAQ:COIN)
- Riot Blockchain (NASDAQ:RIOT)
- XPeng (NYSE:XPEV)
- Skillz (NYSE:SKLZ)
- Tilray (NASDAQ:TLRY)
- Coupang (NYSE:CPNG)
- DraftKings (NASDAQ:DKNG)
Growth Stocks to Buy: Coinbase Global (COIN)
COIN stock has under-performed with Bitcoin (BTC-USD) trending lower. However, the company is on a high-growth trajectory. At a forward price-to-earnings-ratio of 28.7, the stock is a compelling buy.
For the third-quarter 2021, Coinbase reported revenue growth of 330% to $1.2 billion. For the same period, the company reported adjusted EBITDA growth of 402% to $618 million. It’s unrealistic to expect growth to sustain at these levels. However, even with relatively muted growth, COIN stock is among the top growth stocks to consider.
It’s worth noting that crypto users globally swelled to 295 million by December 2021. According to estimates from Crypto.com, the number of crypto users is likely to increase to one billion by December 2022. With wider adoption of cryptocurrencies, Coinbase is positioned to gain.
Another point to note is that Coinbase reported institutional trading volume of $27 billion in Q3 2020. For the most recent quarter, institutional trading volume increased to $234 billion. The adoption of cryptocurrency among institutional investors is another growth catalyst for Coinbase.
Overall, COIN stock is attractive after a meaningful correction since listing. With international expansion on the cards, there is ample headroom for user growth.
Riot Blockchain (RIOT)
With the recent correction in Bitcoin, mining stocks have also declined. I believe that it’s a good opportunity to accumulate some high growth stocks. Marathon Digital (NASDAQ:MARA) is one good investment option to consider.
RIOT stock is another name that looks attractive after a correction of almost 50% in the last six months. The decline in cryptocurrency price is one reason for the correction. Equity dilution is another factor that accelerated the downside. However, it seems that the worst is over and the stock is poised for a strong reversal rally.
From a growth perspective, Riot reported hashing capacity of 3.1EH/s as of January 2022. By the end of the year. Riot expects the hashing capacity to increase to 12.8EH/s. Further, for Q3 2021, the company reported revenue of $64.8 million.
With four-folds growth in hashing capacity, Riot is positioned to deliver quarterly revenue in excess of $250 million from Q1 2023. Therefore, the best part of growth is still to come for Riot Blockchain.
It’s also worth noting that post Q3 2021, Riot completed an at-the-market offering. The company raised funds of $600 million. From a financial perspective, the company seems well positioned to invest in the expansion projects.
Growth Stocks to Buy: XPeng (XPEV)
I believe that XPeng is the most attractive name among electric vehicle companies in China. XPEV stock has corrected by 22% over a 12-month period. With the company on a high-growth trajectory, this correction is a good opportunity for accumulation.
Talking about growth, XPeng delivered 98,155 vehicles in 2021. On a year-on-year basis, vehicle deliveries increased by 263%. It seems very likely that deliveries will remain robust through 2022 and 2023.
The first reason is international expansion. XPeng already has presence in Norway and the company is looking to expand into more European countries.
Another important reason is the launch of new models. In September 2021, the company launched its P5 sedan model. Further, in Q3 2022, G9 is slated for commercial deliveries. The SUV is likely to be focused with features that attract international customers.
It’s also worth noting that for Q3 2021, the company reported vehicle margin of 13.6%. For the prior year comparable period, vehicle margin was 3.2%. With operating leverage, it’s likely that margin improvement will sustain.
Also, XPeng has cash and equivalents of $7 billion as of Q3 2021. There is ample financial flexibility to invest in product development, manufacturing expansion and marketing.
It might surprise investors that I am including SKLZ stock among the growth stocks to consider. There are two primary reasons.
First, SKLZ stock has slumped by 90% in the last 12-months. At current levels, the downside seems to be capped. However, any positive catalyst can result in a sharp reversal rally.
Further, even with depressed sentiments, it’s worth noting that the company reported revenue growth of 70% for Q3 2021. Of course, monthly active user growth has remained subdued. However, there are reasons to believe that MAU growth can possibly accelerate in the coming quarters.
In January 2022, Skillz announced entry into India. It’s very likely that the company will pursue entry into other high-growth markets. Also, as of Q3 2021, the company reported $540.3 million in cash with zero debt in the balance sheet. Recently, Skillz raised $300 million from a senior note offering. The company seems well positioned to pursue aggressive investments for accelerating growth.
In Q3 2021, Skillz completed a strategic investment in Exit Games. The investment will help the company make an entry in the multiplayer synchronous racing, shooting and fighting games. These developments can potentially help in accelerating growth.
I would therefore consider SKLZ stock as a good contrarian bet at current levels. A big exposure can be avoided. However, the stock can deliver multi-fold returns if financials impress in the coming quarters.
Growth Stocks to Buy: Tilray (TLRY)
Similar to Skillz, an exposure to Tilray would be a contrarian pick among growth stocks. TLRY stock has disappointed with a downside of nearly 80% over a 12-month period. However, the stock seems to have stabilized and a reversal rally is likely.
For Q2 2021, Tilray reported revenue growth of 20% to $155 million. Further, for the first six months of 2021, revenue was $323 million. This would imply an annualized revenue potential of $650 million.
The outlook for 2022 was important to mention as Tilray has shared revenue plans for 2025. By the end of this period, the company expects to deliver revenue of $4 billion. If this plan holds good, it’s likely that Tilray will witness significant growth acceleration in the next two years. I would therefore not be surprised if TLRY stock delivers multi-fold returns from current levels.
I also like the fact that Tilray is focused on recreational as well as the medicinal cannabis market. With the company pursuing evidence-backed advancement of cannabis-based medicine, the outlook is bright. The company has plans to build GMP-certified cannabis production facilities in Portugal and Germany.
For the first six months of 2021, Tilray reported cash used in operations of $110 million. However, I believe that cash burn is unlikely to be a concern with the company investing in growth and research. With merger synergies and top-line growth acceleration, cash burn will decline.
Over the last six-months, CPNG stock has declined by 43%. However, it’s worth noting that after making recent lows of $16.6, the stock is higher by 36%. The worst seems to be over for the stock.
For Q3 2021, Coupang reported revenue growth of 48% on a year-on-year basis to $4.6 billion. Active customers also increased by 20% on a y-o-y basis. Another positive metric is a 23% growth in revenue per active customer to $276.
It’s very likely that healthy growth will sustain for Coupang. One reason is international expansion. Coupang possibly provides investors one of the best ways to consider exposure to Asian e-commerce. In particular, when Alibaba (NYSE:BABA) has been impacted by regulatory headwinds. Coupang already has presence in Japan, Taiwan and Singapore.
It’s also worth mentioning here that for Q3 2021, Coupang reported negative adjusted EBITDA of $207 million. EBITDA losses have widened on a y-o-y basis. However, this is not a concern with the company having a cash buffer of $3.9 billion.
There is ample flexibility to pursue aggressive expansion in multiple Asian countries. Also, for Q3 2021, advertising revenue tripled on a y-o-y basis. These investments will have a direct impact on growth in active customers in the coming quarters.
Growth Stocks to Buy: DraftKings (DKNG)
DraftKings is another high-growth company that’s worth considering for a portfolio of growth stocks. In the last six-months, DKNG stock has declined by 55%. Morgan Stanley recently opined that the stock has bottomed out. It seems like a good opportunity to accumulate the high-growth stock.
For Q3 2021, DraftKings reported revenue growth of 60% to $212.8 million. For the same period, the company’s adjusted EBITDA loss widened. That’s however not a concern with DraftKings increasing marketing and sales spend. With healthy growth in average revenue per monthly unique payer, the company is positioned for long-term EBITDA margin expansion.
It’s also worth noting that as more states legalize online gambling and gaming, the company’s revenue potential will increase. According to Goldman Sachs, the online gaming and sports betting industry is likely to be worth $40 billion by 2033. With an expanding addressable market, healthy growth is likely to sustain for DraftKings.
In August 2021, DraftKings also announced the acquisition of Golden Nugget Online Gaming. The acquisition is likely to translate into EBITDA synergies of $300 million at maturity. Acquisition driven growth will help DraftKings in increasing its market share.
Overall, DKNG stock looks attractive and with positive industry tailwinds, robust growth is likely to sustain.
On the date of publication, Faisal Humayun did not hold (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.