This year’s rally has seen many growth stocks deliver triple-digit returns, especially ones from the AI sector. Investors are willing to take more risks in 2023, and growth names have strongly trended upwards. However, triple-digit returns are difficult to come across, especially so far into the rally.
Furthermore, monetary policy remains tight, and there are talks of two more rate hikes later this year. I expect that as the economy digests these hikes, many growth names will inevitably see a slowdown next year. But buying into some under-the-radar businesses can indeed produce excellent results once Wall Street realizes the value. Growth stocks that have substantially appreciated this year are also concentrated mostly in the AI sector. Thus, a downturn is unlikely to hurt companies that are already trading at a depressed price.
Naturally, such stocks are hard to find. But AI may be of help. Current AI models are excellent tools for screening and understanding the business models of certain companies. Google Bard has consistently outperformed its peers, and I’ll use it today to find the stocks for triple-digit returns.
Me: “Hi Bard, I am writing an article about “7 Growth Stocks That AI Predicts Will Deliver Triple-Digit Returns in 2023″ Can you give me some ideas?”
aTyr Pharma (LIFE)
Bard: “aTyr Pharma (NASDAQ:LIFE) is a clinical-stage biopharmaceutical company developing targeted protein therapies for the treatment of cancer and other diseases. The company’s lead product candidate, aTyr-192, is a protein that is currently in Phase 1 clinical trials for the treatment of metastatic colorectal cancer. AI predicts that LIFE could deliver triple-digit returns in 2023 if aTyr-192 is successful in its clinical trials and is approved by the FDA.”
As Bard explained, the company does have a lot of upside potential, and I do agree that it could deliver triple-digit returns in 2023. However, let’s clear out some errors. First, the primary product here is efzofitimod (ATYR1923). It is in Phase 3 clinical trials for pulmonary sarcoidosis and finishing Phase 1 for “SSc-ILD,” an immune inflammation disease and other ILD diseases. It also has another candidate called “ATYR2810” for certain cancers and tumors and is still in the pre-clinical stage.
Nonetheless, the candidates are very promising and can serve a big market once they are approved. LIFE stock currently trades at record lows, and the company has more cash than its market capitalization. Revenue is expected to come in at $6.1 million for all of 2023 and is projected to grow fivefold, ending 2025 with $31.25 million in revenue.
Of course, this is a clinical-stage pharmaceutical company and is on the higher end of the risk scale; very hard to say if the company can reach these metrics. But it certainly qualifies as a stock that can deliver triple-digit returns this year. In the past three months, the average Wall Street analyst noted a $20.5 price target for LIFE stock, implying an eye-watering 871.7% upside.
Sea Limited (SE)
Bard: “Sea Limited (NYSE:SE) is a Singapore-based e-commerce company that operates in Southeast Asia. The company’s Shopee platform is the leading e-commerce platform in Southeast Asia. AI predicts that SE could deliver triple-digit returns in 2023 as the e-commerce market in Southeast Asia continues to grow.”
Personally, Sea Limited is a favorite regarding growth stocks, and I have high hopes for this company. I believe it can easily deliver triple-digit returns from these levels if you patiently hold it. The e-commerce company is doing business in the rapidly-growing markets of Southeast Asia. Also, it has its hands on some up-and-coming sectors like gaming and financial services to supplement growth.
Due to global economic headwinds, the stock is down some 84% from its 2021 peak. But I believe that in the long run, this company can become the Amazon (NASDAQ:AMZN) of ASEAN countries. Analysts expect revenue growth at 8% this year and further acceleration above double digits through 2025. EPS growth is also at ~25 for 2024 and 2025, respectively — very attractive at these levels.
Moreover, there is a considerable margin of safety here in both the underlying business and the stock. Sea Limited has $6.6 billion in cash, compared to $4.5 billion in debt. On the other hand, analysts have a $99.35 price target on the stock, implying a 74.3% upside. Even the lowest price target still implies a ~45% upside.
Etsy (ETSY)
Bard: “Etsy (NASDAQ:ETSY) is an online marketplace for handmade and vintage goods. The company has seen rapid growth in recent years, and AI predicts that it could continue to grow in 2023.”
Etsy is another great e-commerce bet as it changes hands near compelling levels. I believe the e-commerce market is overdue for a rebound, and we’ll see strong growth in related stocks such as ETSY. Analysts definitely have some mixed feelings here (still 40% upside on average), but triple-digit returns are not out of the question if you’re in it for the long run. However, I do not see it doubling this year unless the economy eases up substantially.
It is a go-to marketplace for people seeking handicrafts, and the business does very well when consumers are willing to spend more on such discretionary items. This market is projected to grow at a CAGR of 8.9% through 2027 and reach $407 billion in size. As e-commerce becomes more popular, Etsy has a lot more market it can grab. Revenue is expected to comfortably grow at double digits for the next two years after 7.5% year-over-year growth in 2023.
Olaplex Holdings (OLPX)
Bard: “Olaplex Holdings (NASDAQ:OLPX) is a hair care company that develops products that repair damaged hair. The company’s products are sold in over 40 countries and are used by celebrities and professional hair stylists. AI predicts that OLPX could deliver triple-digit returns in 2023 as the demand for its products continues to grow.”
Olaplex is down some 84% from its all-time high but has traded mostly sideways this year. I agree with Bard that this is a very promising candidate for stocks that can deliver triple-digit returns as hair care becomes more important. However, I would not rate this a buy. But first, let’s look into what this company actually is about:
Most shampoos today use paraben and chemicals that can negatively affect your scalp and hair. Olaplex claims that its products are the only ones in the market that can restore hair’s health and integrity rather than just masking the damage. The company also says its products are suitable for all hair types and textures and are vegan, cruelty-free, gluten-free, sulfate-free, paraben-free, and phthalate-free. False or true, Olaplex has built a loyal fan base of consumers and professionals who swear by its products, which is great for marketing.
When it comes to financials, this is where problems start to show up. The company is facing headwinds, and Olaplex’s revenue is expected to decline by some 18% this year before rebounding. EPS could also decline by over 40% this year before stabilizing at 0.32 after a 20% growth next year. Don’t get me wrong, most of this is priced in, and I would still have favorable opinions about the stock. But the nail in the coffin is that this company is undergoing a lawsuit by customers who claim they lost hair after using their products.
CRISPR Therapeutics (CRSP)
Bard: “CRISPR Therapeutics (NASDAQ:CRSP) is a gene editing company that is developing gene-based therapies for a variety of diseases. The company’s lead product candidate, CRISPR-Cas9, is a gene-editing tool that can be used to correct genetic defects. AI predicts that CRSP could deliver triple-digit returns in 2023 if CRISPR-Cas9 is successful in clinical trials and is approved by the FDA.”
Gene editing is still an up-and-coming technology, and I believe it is wise to get in early. The technology here can achieve breakthroughs for various diseases, and the lead product here is actually exa-cel. It is an investigational, autologous, ex vivo CRISPR/Cas9 gene-edited therapy that is being evaluated for patients with TDT or SCD, in which a patient’s own hematopoietic stem cells are edited. The therapy is submitted for regulatory approval in 2023. It is expected to be the first CRISPR therapy for a genetic disease to achieve regulatory approval. There are also many more therapies in its pipeline.
The stock is down nearly 72% from its peak but has been trading sideways since early 2022. Although biotech companies are risky and volatile, I believe Crispr is an outlier here. Wall Street analysts tagged an $85.6 price target for the stock, implying a 52.3% upside.
The limited downside risk is worth taking, considering this tech’s tremendous potential.
Block (SQ)
Bard: “Block (NYSE:SQ) is a financial technology company that provides payment processing and other financial services. The company’s Square platform is used by businesses of all sizes to accept payments and manage their finances. AI predicts that SQ could deliver triple-digit returns in 2023 as the demand for digital payments continues to grow.”
Block is a payment-processing company similar to PayPal (NASDAQ:PYPL). It is still in its growth phase, and profitability is much lower here. However, that is offset by the solid top-line growth and momentum in customer acquisition.
As I’ve noted before, the rebounding e-commerce economy will form tailwinds for companies in related sectors. That includes Block, whose stock still trades around a quarter below its pre-pandemic high while underlying metrics have steadily improved.
Accordingly, Wall Street analysts believe it has a 40% upside potential on average, with an $86.25 price target. Again, triple-digit returns don’t seem likely here in 2023. But if you hold with patience, that is certainly achievable in the long run.
Twilio (TWLO)
Bard: “Twilio (NYSE:TWLO) is a cloud communications platform that enables businesses of all sizes to send and receive text messages, make and receive phone calls, and build video chat applications. The company has seen rapid growth in recent years, and AI predicts that it could continue to grow in 2023.”
This is another company I wouldn’t entirely agree with Bard as one that could provide triple-digit returns this year. Analysts have very mixed feelings here, and there is more hold than buy ratings. But the value here is definitely alluring.
I believe patience will provide fruit in the long term. Twilio’s cons are priced in at this range, trading hands 50% below its pre-pandemic price. Meanwhile, revenue has steadily been increasing, and YOY growth remains above 15% despite slowing down. Analysts believe EPS could almost double by 2025, and revenue growth will re-accelerate to almost 18%. Thus, I expect substantial gains in a multi-year period for TWLO.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
