You need to invest early in a company’s life cycle if you want it to be a tenbagger. That’s a term investing legend Peter Lynch coined to describe a stock that grew 10 times its original value. Companies like that are the best growth stocks to buy.
Amazon (NASDAQ:AMZN) is an amazing company and achieved tremendous returns. A $10,000 investment in the online retailer at its IPO stage would now be worth over $13 million. But the stock is valued at $1.4 trillion today. To expect a tenbagger from here is foolhardy. Yet even mature companies can double or triple in value if you commit to holding them for many years.
Wall Street, though, sees the potential for some stocks to achieve those results in a year’s time. Many will not live up to the hype. Others will break through those ceilings easily. The investor needs to ensure there is more to the company than dramatic short-term gains.
Analysts say the following three stocks will soar between 102% and $121%. Let’s see if they can really pull it off.
Paysafe (PSFE)
Payments platform Paysafe (NASDAQ:PSFE) is off to a good start. After falling to a low of $9.34 per share in May, the stock climbed over 50% since and just rocketed 24% higher the other day. The catalyst for the jump was its second-quarter earnings that beat analyst revenue estimates. The company also raised guidance for the full year.
The payments space is becoming crowded. The burgeoning market is squeezing even the biggest early entrants like PayPal (NASDAQ:PYPL) and Block (NYSE:SQ).
Paysafe distinguishes itself from the competition by targeting the global entertainment niche. That encompasses online sports, casino games, poker and video gaming, as well as the hospitality industry and cryptocurrencies.
Paysafe recently reorganized its business and is gaining traction. Second quarter revenue grew 5% on a constant currency basis to $402 million. Adjusted net profits fell to $0.56 per share from $0.62 per share due to increased interest expenses. However, it produced $95 million in free cash flow, translating to $363 million on a trailing 12-month basis.
While there are risks from its narrow focus, analysts have a consensus one-year price target of $25 per share, an 86% increase from where it currently trades. On the high side, Wall Street even sees Paysafe being nearly a five-bagger from here. The $64 per share target may be wishful thinking, but the payments platform does seem to have greater growth ahead.
Paramount Global (PARA)
Media conglomerate Paramount Global (NASDAQ:PARA) hasn’t faired well since it was formed by the merger of Viacom and CBS in 2019. Shares are down 12% year-to-date and sit 44% below their 52-week high.
Aside from poor earnings, Paramount also slashed its dividend by 79% to conserve money. The payout dropped from $0.24 to $0.05 per share. The company is also cutting 25% of its workforce, shutting down MTV News and just announced it was selling its Simon & Schuster book publishing business. Things aren’t looking particularly bright.
Yet the media giant has friends in high places. Warren Buffett owns over 15% of Paramount in Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), some $1.5 billion worth (he called the dividend cut “not good news”). He hasn’t been a seller of the stock as it fell.
Wall Street also has a hopeful outlook. Where the consensus analyst price target is just $19 per share, a 28% gain from here, the more hopeful among them see it as high as $32 per share, a 116% potential gain.
That seems unreasonable considering the problems confronting the entertainment company. Streaming video is not as profitable as once believed, cable and broadcast TV is stagnant — at best — and movie theaters are having difficulty putting people in seats.
The mid-range price target might be achievable at some point, but even Buffett has to believe Paramount Global wasn’t his most inspired investment.
Plug Power (PLUG)
Hydrogen fuel cell maker Plug Power (NASDAQ:PLUG) can never get its momentum going. While the meme stock buying frenzy of 2021 did cause the stock to soar, management used the opportunity to sell stock three different times.
Massive dilution like that is no surprise to Plug Power investors. The company routinely sells stock to raise cash. While the trio of stock issuances did allow Plug to fill its coffers with funds, it also means it now has almost 600 million shares outstanding. That’s 66% more than it had at the end of 2020.
Plug Power does offer hope for potential growth, however. It counts Amazon, Home Depot (NYSE:HD), and Walmart (NYSE:WMT) as existing significant customers of its hydrogen fuel cell technology. Its relationships with them also are expanding. Plug also maintains it is “laser-focused on executing on the scale-up of [its] business to drive cost-downs and grow margins.”
Yet it is burning through about $1 billion in cash to do so. The company will need to raise about $1 billion in new cash through the second half of the year. It might not come from stock sales, but investors won’t be surprised if some of it does.
Even so, Wall Street sees it more than doubling in value from here to nearly $20 a share. At the lofty end of expectations, $38 per share, or a four-fold increase in value, is supposedly possible.
I’m not quite so hopeful, but Plug Power could energize some new growth. Just don’t make a very big bet on it happening cheaply.
On the date of publication, Rich Duprey did not hold (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.
