- PubMatic (PUBM)-is already growing rapidly and should continue to be boosted by the internet TV revolution.
- EVgo (EVGO)-will enter hypergrowth stocks thanks to its partnership with GM.
- Schrodinger (SDGR)-delivered rapid growth in Q4 and is set to benefit from strong drug discovery revenue this year.
Since the Federal Reserve meeting on March 16 and Fed Chairman Jerome Powell’s subsequent news conference, the market seems to have really internalized the idea that the central bank has no intention of fighting inflation with all its might. Indeed, after Powell said he did not see evidence of a “wage-price spiral” and the central bank signaled that it expects a Fed funds rate of 1.9% at the end of this year,, the S&P 500 has rallied meaningfully. Additionally, the market is no longer uniformly bearish on hypergrowth stocks. Among the hypergrowth tech stocks that have rallied sharply in recent weeks are Tesla (NASDAQ: TSLA) and Snap (NYSE:SNAP).
I’m not saying, however, that we’re in a similar environment as the second half of 2020 and early 2021, when almost every name viewed as a “growth stock” jumped. Instead, we’re in a “stock picker’s market” that will, in the long run, tremendously boost truly successful, hypergrowth stocks. The equities that have been unjustly beaten down over the last year are especially well-positioned for huge gains.
Three names which are in the latter category are:
Hypergrowth Stocks: PubMatic (PUBM)
PubMatic operates a programmatic advertising platform. The company’s fourth-quarter sales jumped 34% year-over-year to a record $75.6 million. Its Q4 earnings per share rose nearly 50% YOY to 50 cents. Meanwhile, PubMatic’s net-dollar based retention for 2021 was a superb 149%. Most impressively, PubMatic’s net cash provided by operating activities soared 230% YOY to $28.5 million.
The company’s sales from connected TV jumped over 600% YOY last quarter. For PubMatic, the continuing rise of streaming TV should be “the gift that keeps giving,” year- after year.
“Revenue from fast-growing advertising formats mobile and omnichannel video, which includes which includes CTV,3 grew 41% year-over-year and represented 67% of total revenue in the fourth quarter,” PubMatic reported. The company’s forward price-earnings ratio, based on analysts’ average 2023 EPS estimate, is a very reasonable 32.
With General Motors (NYSE:GM) piling up very impressive reservation numbers for its upcoming electric vehicles, the shares of EVgo, an EV charger operator that has a partnership with GM, should continue to rally.
On Feb. 1, GM stated that it had obtained over 110,000 orders for the electric version of its Chevrolet Silverado. Meanwhile, there have been over 230,000 “expressions of interest” regarding GM’s electric crossover, the Cadillac Lyriq, and initial orders for the EV sold out in just 19 minutes back in September. GM intends to reopen orders for the EV on May 19. Finally, the company has received more than 65,000 orders for the electric version of its Hummers.
As I noted in a previous column, EVgo has agreed to build 3,250 fast EV chargers for GM., which “plan to offer 30 new EVs globally by 2025.” By the end of the latter year, all of the companies’ EV charging stations are expected to be completed. As of last November, the companies’ chargers were already working in eight states.
Although EVgo did not say that it would be paid by GM based on the usage of its charging stations, I think there’s an excellent chance that such payments have been incorporated into the deal. Consequently, as GM’s EV future brighten, EVgo should enter a hypergrowth stage, further lifting EVGO stock, which had already soared about 25% in the month that ended on April 5.
I’ve long been very bullish on SDGR stock, and the company, whose artificial intelligence is used to develop drugs relatively quickly, finally delivered very strong results in the fourth quarter of 2021. Specifically, its software sales soared 55% year-over-year to $38.6 million. Its total revenue jumped 40% YOY to $46.2 million.
For fiscal 2022, Schrodinger only expects its software sales to increase at an 11%-20% rate. However, given the very string growth of its software sales in Q4, that guidance could very well prove to be conservative.
Excitingly, however, the company expects its drug discovery revenue to soar 42%-82% in FY22 to $35 million to 445 million. That could very well be the beginning f a multi-year explosion of drug discovery sales for Schrodinger, which has made multiple, potentially extremely lucrative product development deals with major pharmaceutical companies.
Schrodinger did note that it expects the lion’s share of its 2022 growth to occur in the second half of the year, so investors have to be patient with SDGR stock.
On the date of publication, Larry Ramer held long positions in PubMatic , Schrodinger, and EVgo.