Equity investors have experienced a large-scale sell-off in the last three months. Primarily, growth stocks part of the tech sector are wrestling with slowing growth, inflation fears, the threat of interest-rate hikes as well as tax-loss harvesting. Alternatively, valuation multiples are now compressed, following the pullback, offering investors an opportunity to buy the dip.
Let’s look at three growth stocks that can almost double your wealth in the next year, according to Wall Street price target estimates.
Palantir
Enterprises all over the world continue to leverage data to deliver value and improve customer acquisition and retention. However, an IDC report claims that over 80% of enterprise data will be unstructured by 2025, presenting a wide range of challenges to companies.
They will have to spend huge sums of money to build an in-house data analytics solution. But companies such as Palantir Technologies (NYSE: PLTR) provide a flexible, cost-effective solution to this problem.
Palantir’s flagship product is Foundry which is a software platform that analyzes huge data sets efficiently. In Q3 of 2021, Palantir reported revenue of $392 million, an increase of 36% year over year. It aims to end 2021 with over $1.5 billion in sales, an increase of 40% year over year.
In fact, Palantir expects top-line growth to surpass 30% in each of the next four years.
Palantir is trading at a market cap of $26 billion valuing the company at a forward price to 2022 sales multiple of 13x which is quite steep. However, the stock is down 67% from all-time highs and is expected to move higher by 70% in the next 12-months.
Teladoc
A health-tech company valued at a market cap of $11.8 billion, Teladoc Health (NYSE: TDOC) stock is down 76% from all-time highs. Shares of Teladoc Health more than doubled as the company increased sales by 98% to $1.09 billion in 2020. Comparatively, its sales stood at just $418 million in 2018.
The COVID-19 pandemic acted as a massive tailwind for Teladoc that drove the stock to record highs. However, investors were worried about its steep valuation and decelerating growth rates that led to a decline in share prices in the last 15 months.
But investors should note that the shift towards telemedicine is a long-term trend that allowed TDOC to increase sales at an annual rate of 74% for seven years prior to COVID-19. While analysts expect sales to rise by 84.8% to $2 billion in 2021, it might rise by 27% to $2.57 billion in 2022, valuing TDOC at a price to sales multiple of 4.5x which is quite reasonable.
Wall Street also has a price target of $143 for TDOC stock which is 95% above its current trading price.
Coinbase
The final stock on my list is Coinbase (NASDAQ: COIN) that also provides investors exposure to the cryptocurrency segment. Coinbase, one of the largest cryptocurrency exchanges in the world went public last April and is down 48% below all-time highs, valuing the company at a market cap of $51 billion.
However, Coinbase is forecast to increase sales to $7.29 billion in 2021, up from just $533 million in 2019. It also record over $3 billion in net income in the last year, valuing COIN stock at a trailing-price-to-sales multiple of less than 17x.
But, investors should understand revenue and earnings for Coinbase will remain uneven given the volatility surrounding cryptocurrency prices. In Q3 of 2021, Coinbase sales were up 316% year over year as it grew monthly transacting users to 7.4 million, up from 2.1 million in the year-ago period.
Analysts tracking Coinbase expect the stock to touch $383 in the next 12-months which is almost 100% above current trading prices.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
