The 18th-century British banker and politician Baron Rothschild said, “The time to buy is when there’s blood in the streets.”
The timelessness of that wisdom was on display again last year when stocks imploded and the S&P 500 lost more than a quarter of its value over pandemic-related fears. Well-prepared investors, however, were using the opportunity to buy good companies at cheap prices.
In the 15 months since the market bloodbath, the stock index has roughly doubled in value. Many individual stocks have performed even better, and some are expected to continue outperforming the market in the year to come.
For each of the following three hypergrowth stocks, Wall Street is forecasting increases of more than 100% over the next 12 months.
LiveXLive Media: 106% implied upside
Attending a concert during the early stages of the pandemic was impossible because music venues were forced to close, so LiveXLive Media (NASDAQ:LIVX) was able to succeed by bringing live music to the masses virtually. One of its earliest concerts during the pandemic was LiveXLive’s annual global music festival called Music Lives, which featured nonstop streaming music performances for 48 hours. As a result, the company improved its sales by nearly 69% in its fiscal 2021, which ended in March, and its stock has more than tripled since its recent lows in March 2020.
Virtual concerts are perhaps still the safest way to experience music. So in the coming months, LiveXLive is hosting the daytime stage of iHeartRadio’s music festival in September, an electronic-music festival from the Midwest in October, and regular streams each day across many popular-genre channels.
LiveXLive is not profitable yet, though ended its fiscal 2021 with adjusted operating losses of just $0.3 million, compared to losses of $7.9 million the previous year. At the same time, the company has diversified its revenue streams so that subscriptions went from 93% of overall revenue last year to 41% this year, with advertising, merchandising and pay-per-view (PPV) now dominant. Paid subscribers, though, jumped 28% to over 1.1 million, so the company seems healthy.
With the stock trading at less than 5 times sales, today’s price seems a good value for this fast grower. Analysts say LiveXLive showed the strength of its business model by posting the strongest quarter in its history in the most recent quarter, as it was able to monetize ticket sales, PPV events, and sponsorships. With live events coming back, analysts have raised their outlook on the business, with a consensus price target of $8 per share, giving it an implied upside of 106% at Friday morning’s prices.
Village Farms International: 115% implied upside
Producing farm-fresh produce might not seem like a particularly high-growth business, but Village Farms International (NASDAQ:VFF) is one of the largest continuously operated vertically integrated greenhouse growers in North America. It’s also the only publicly traded greenhouse-produce company in Canada. And more importantly for investors, Village Farms is also applying its expertise in veggies to growing marijuana.
Through its Pure Sunfarms subsidiary, which it claims is one of the largest cannabis-growing operations in the world, Village Farms is looking to extend its reach into hemp production and cannabidiol (CBD) products — those compounds that don’t exhibit the psychotropic side effects associated with marijuana.
Pure Sunfarms is already profitable, recording 10 consecutive quarters of positive adjusted profits and outdoing the previous three months’ sales by 20% or more in three straight quarters. It says it was the top-selling brand of dried flower products with the Ontario Cannabis Store (the only legal online retailer of recreational cannabis in Ontario) in both kilograms and dollars.
Analysts are looking at the approval Village Farms recently received for its Delta 2 facility to begin immediate cultivation in the half that has already been converted to production as a significant development. That increases its production capacity by 50%, which ought to allow it to increase sales and market share in dried flower as other growers cut back production.
Village Farms’ stock has more than tripled in value since its pandemic lows of March 2020, but Wall Street has a consensus price target of $20.58 per share, giving the produce and pot grower an implied upside of 115% at Friday morning’s prices.
Golden Nugget Gaming: 112% implied upside
Online casino operator and sportsbook Golden Nugget Online Gaming (NASDAQ:GNOG) went public at the end of December through a reverse merger with Landcadia Holdings II, a special purpose acquisition company (SPAC). Unlike the other two stocks I’ve discussed, this one has struggled lately, losing more than half its value since its late-December peak.
Golden Nugget is the largest player in New Jersey’s internet gambling market, where it generated $319 million in gross gambling revenue in 2020, an 80% gain from the year before. But the big question was whether it would be limited to only its home-state market (it’s affiliated with the Golden Nugget casino in Atlantic City). However, it has since launched internet gambling and sportsbook operations in Michigan (where it signed a deal with the Keweenaw Bay Indian Community) and secured market access in both Colorado and Iowa. First-quarter revenue grew 54% over the prior year.
Even after the pandemic, in-person gambling has been slow to recover, making online casinos a particularly hot growth market while sports betting is expanding rapidly. New Jersey is the sports-wagering capital of the country.
B. Riley Financial analyst David Bain says that if you apply Golden Nugget’s market share and margins in New Jersey to the point of market maturity, it could be generating over $700 million in internet gaming EBITDA (earnings before interest, taxes, depreciation, and amortization). Golden Nugget has a strong, recognizable brand, he said, while offering investors a “more predictable, stickier, and profitable avenue” to participate in the long-term growth of online gaming, which he sees as having more runway than just online sports betting.
Wall Street also sees Golden Nugget’s national expansion plans as beneficial, and has set a $25-per-share consensus price target, giving it an implied upside of 112% from Friday’s prices just under $12.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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