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Luke Lango

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The Fisker Ocean looks like a formidable rival to Tesla’s Model X and Y

When it comes to the burgeoning luxury EV market, Tesla (NASDAQ:TSLA) gets all the love on Wall Street — and reasonably so. Elon Musk and company pioneered the space, dominate the space and continue to make the market’s best and most desirable vehicles. But in this market traditionally dominated by Tesla, it’s time to start throwing some love at an emerging luxury EV automaker by the name of Fisker, which is going public through a reverse merger with Spartan Energy Acquisition Corp (NASDAQ:SPAQ) stock.

The reason to like Fisker — and SPAQ stock — is simple.

The EV maker has enough enough talent and experience — it’s headed by Henrik Fisker, who is a legend when it comes to luxury automobile design — to realistically emerge as a viable competitive threat to Tesla in the burgeoning and soon-to-be-enormous luxury EV space.

Is Fisker a Tesla killer? No. Far from it.

But Tesla won’t run away with the entire luxury EV market by itself. Tesla will be the leader. Fisker will be a solid second-fiddle.

Fisker’s implied market cap today based on the SPAQ stock price? Around $4 billion. Tesla’s market cap? Close to $400 billion.

Needless to say, SPAQ stock has huge long-term upside potential amid the EV boom of the 2020s.

Here’s a deeper look.

EVs Are the Future

There will be no greater disruption in the 2020s than the electrification of automobile transportation.

About 64.3 million new passenger cars were sold globally in 2019. Only 2.3 million of them (or 3.5%) were electric, which is up 97,500 (0.15% penetration_ in 2013.

Clearly, the shift towards EV has already started. It will only accelerate in the 2020s.

Demand is shifting, as over 80% of prospective car buyers today want an EV. Laws are shifting, as California just banned the sale of gas cars post-2035. Technology is improving, with the average range of an EV has increasing by 140% since 2011. Costs are falling, with average EV prices having dropped 70% since 2010. Supply is pivoting, as every auto maker in the world is making an all-out blitz into the EV category.

The future couldn’t be any clearer.

EVs are on the cusp of disrupting the multi-trillion-dollar auto market, and over the next two decades, will become globally ubiquitous.

Where there’s disruption, there’s opportunity.

Sure, all the major auto OEMs are going to launch new EVs and try to keep up with the times. But they’ve been glacially slow in doing so – and in all the time they’ve wasted deciding if EVs are the future, new auto brands committed to a 100% EV future have emerged and are ready to rapidly steal share from these auto market incumbents.

See Tesla, NIO (NYSE:NIO), Workhorse (NASDAQ:WKHS), Xpeng (NYSE:XPEV), so on and so forth.

Right now, you should add Fisker and SPAQ stock to that list.

Fisker Ocean Is the Real Deal

Fisker is not just another up-and-coming EV maker with a bold vision and a small chance of success.

The company is headed up by Henrik Fisker, a man whose reputation in unrivaled in the luxury auto market. He was, after all, the design brain behind many of the luxury automobile world’s most iconic vehicles, such as the Aston Martin DB9, the Aston Martin Vantage, the BMW Z8 and the BMW X5.

Given his experience and track record, when Henrik designs a car, the world pays attention.

Over the past several years, Henrik has spent all his time and effort designing the Fisker Ocean, which — when it launches in fourth quarter of 2022 — will be a legitimate rival to Tesla’s Model X and Y in terms of performance, design and features.

The Fisker Ocean offers best-in-market driving range at up to 300 miles (which is largely consistent with base versions of the Model X and Y).

It also offers four-wheel drive for off-roading, lots of horsepower, a sub 3 second 0-to-60 miles-per-hour get-up, a large digital display screen equipped with a state-of-the-art in-vehicle software platform, and a very aesthetic, futuristic exterior design (all of these features are comparable to the Tesla Model X and Y).

Sure, it’s smaller in terms of cargo space (45 cubic feet with seats down, versus 60+ cubic feet for the X and Y) and seating space (it’s a 5-seater, versus options for 7-seater in the X and Y). But the Ocean makes up for those shortcomings via a built-in solar panel roof (which will allow for auto-recharging while driving, and therefore, result in longer driving ranges) and a fully “vegan” interior (the entire interior is made from recyclable materials).

So, on a technical specs and aesthetics basis, the Ocean is pretty close to rivaling Tesla’s Model X and Model Y.

Yet the Ocean will retail for just $37,500 – well below the $50,000 base price for the Model Y, and $80,000 base price for the Model X. After tax credits, that retail price falls to about $30,000 – putting it on par with most mid-size, gas-powered luxury SUVs out there (and below many of them).

Needless to say, then, if Fisker brings the Ocean to market at this $37,5000 price point, it’ll be a complete game-change for the luxury EV market — and huge upside catalyst for SPAQ stock.

Executional Roadmap Is De-Risked

Of course, that’s a huge “if”. There’s a lot of execution risk when it comes to scaling manufacturing for a new car, especially for a company that has yet to manufacture any cars at scale like Fisker.

Plus, as many know, this is not Henrik Fisker’s first foray into the EV space. His first car – the electric sports car Karma, which counted Justin Bieber and Al Gore as customers – ended up being a flop after the company’s battery supplier went under.

But that’s why Fisker is aiming to outsource all of the manufacturing this time around, through Volkswagen – the world’s largest automobile maker. In so doing, Fisker is significantly reducing execution risk, battery supplier reliance, capital requirements, manufacturing costs and speed-to-market.

Plus, the partnership will allow Fisker to hyper-focus on design and software – two components which will help the company establish and sustain competitive advantages.

Overall, then, while there is still tons of execution risk here, there is also much less risk for Fisker than for most other emerging EV makers — and that makes SPAQ stock especially attractive amid the sea of red-hot EV stocks.

Huge Upside for Fisker Stock

The math to SPAQ stock scoring you huge gains isn’t hard to follow.

Management is targeting 225,000 deliveries, $13.2 billion in revenue, and $2.8 billion adjusted EBITDA by 2025. My modeling suggests those targets are very doable, given that the EV market will likely measure 10+ million global unit sales by then.

Tesla stock, over the past year, has average a forward EV/EBITDA multiple of ~20X. Based on a 20X forward multiple, $2.8 billion in 2025 adjusted EBITDA implies a 2024 enterprise value for Fisker of $56 billion.

The current enterprise value – after backing out ~$1 billion in cash – is $3 billion.

Thus, SPAQ stock does have a semi-visible runway to rise almost 20X over the next five years.

Bottom Line on SPAQ Stock

I can guarantee you that not many stocks are going to rise 20X over the next four years alone.

But Fisker could, amid a surge in luxury EV demand.

For that reason alone, SPAQ stock should absolutely be on your buy radar today.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Author: Luke Lango

Source: Investor Place: Buy Fisker Stock to Own the Next Tesla

NIO stock is a long-term winner with lots of fuel left in the tank

Nio (NYSE:NIO) has been absolutely on fire this year, with NIO stock surging nearly 400% higher on the back of abundant optimism that the company is finally turning into what it was hyped up to be from the start: the Tesla of China.

Image of Nio (NIO) logo branded on the exterior of a corporate building.
Source: Sundry Photography / Shutterstock.com
This optimism is not misplaced. EVs are taking over the world, and NIO does project as the Tesla of China.

To that end, while the rally in Nio’s stock has been jaw-dropping in 2020, this uptrend is here to stay. After all, NIO is still worth just $25 billion. Tesla, by comparison, is worth $400 billion.

Source: InvestorPlace

Over the next several years, China’s auto market will get electrified, NIO will dominate the premium segment of that market and sell a ton of luxury EVs at favorable margins, revenues and profits will surge higher, and NIO will soar toward $40 per share.

On the bottom line, this means you should buy NIO today because its winning streak is far from over.

NIO Stock: Electric Vehicles are the Future

I’ve said it before (many, many times) and I’ll say it again.

Electric vehicles are the future of transportation.

Demand is shifting, as young consumers — who are hyper-aware of the environment and want to “save the planet” — are shunning gas cars in favor of EVs, with a 2018 survey from HPI finding that 91% of millennials are considering buying an electric car for their next vehicle purchase.

Importantly, these young consumers are only acquiring more and more purchasing power, and — by the 2030s — will be the largest driving force in the automobile market.

A the same time, the technology is improving, because the aforementioned demand shift is attracting more and more resources and talent into the EV space — the sum of which is driving huge advancements in EV battery technology, so that these cars are driving farther, recharging faster and getting way, way cheaper (the median sales price of a new EV dropped 70% between 2010 and 2016).

These technological improvements will only accelerate over the next several years alongside accelerating demand, and — by the 2030s — EVs will be able to drive for thousands of miles, will recharge in minutes and will cost far less than your average diesel car.

Thus, by the 2030s, every prospective car buyer will want an EV, and those EVs will be deliver significant performance at affordable prices.

It doesn’t take a rocket scientist to connect those dots.

Between now and 2040, EVs will go from niche to ubiquitous. Alongside that exciting journey, pioneering EV makers — like NIO — will grow by leaps and bounds.

Huge EV Opportunity in China

NIO is an especially attractive play in the EV space because the EV opportunity in China — NIO’s home market — is huge.

It’s no surprise that — with over 1.4 billion people — China is home to the world’s largest auto market. And it’s not even close. About 64 million new passenger cars were sold in 2019. Just under 21.5 million of them were sold in China. So, one out of every three new passenger cars sold in the world in 2019, was sold in China.

Thanks to robust government support, China’s huge auto market is also home to the world’s most mature EV market. One out of every two EVs sold in the world in 2019, was sold in China.

This robust government support isn’t going away anytime soon. China is targeting 25% EV sales penetration by 2025 — versus less than 5% penetration today. If that happens, it means China’s annual EV delivery volumes will reach over 5 million by 2025 — up 4+ million (or ~360%) from 2019 levels.

In other words, the EV opportunity in China is both huge (because of China’s enormous auto market) and has high visibility (because of the Chinese government’s continued strong support of clean energy adoption).

To that end, the biggest and best names in the EV megatrend — ex Tesla — may emerge out of China. In that group of Chinese EV makers, NIO is the best-in-breed when it comes to premium EVs — implying huge long-term upside potential for NIO stock.

Nio Is Killing the Game

Make no mistake about it. NIO is absolutely killing the game in China’s premium EV market.

The company has rattled off five consecutive months of triple-digit deliveries growth, including 104% year-over-year growth in August. And that’s with just two vehicles, the ES6 and ES8. The company just launched a third vehicle, the EC6, which should help spark even bigger growth in the last few months of the year.

Importantly, NIO is doing this while China’s EV market isn’t booming. Thanks to the pandemic, China’s EV volumes are expected to drop 11% this year. NIO’s volumes will likely rise by more than 100%.

So, this isn’t a “rising tide lifting all boats” dynamic. It’s a “speed boat leaving everyone else in the dust” dynamic.

What’s NIO doing so right?

They’ve cultivated strong brand equity and customer loyalty through Tesla-like marketing. They’ve cut out a high-demand and burgeoning niche in the premium market, and have proceeded to dominate that niche with superior performance vehicles. And they’ve continued to lean into a novel battery-swapping model which removes the cost of battery ownership from the driver, and therefore significantly reduces the prices of its EVs.

All in all, NIO is absolutely killing the game in China’s premium EV market. So long as the company continues to do so, Nio’s stock will stay on a winning path.

Big Upside for Nio

In the long run, my model suggests that there’s huge upside potential for NIO.

My long-term model on NIO makes the following assumptions:

  • China’s passenger car market retains huge volumes at 25+ million passenger cars sold every year, thanks to urbanization and population growth.
  • EV penetration in China’s auto market soars to 35% by 2030, thanks to robust government support, rising consumer demand, falling EV prices, improving EV tech and more diverse supply.
  • The premium vertical measures roughly 10% of the Chinese EV market, equivalent with the upper- and upper-middle-income’s population share in China.
  • NIO leverages technology, branding, first-mover and home-turf advantages to control about half of China’s premium EV market, implying ~450,000 deliveries.
  • Average sales prices on the cars hover around $50,000.
  • Gross margins and operating margins rise to long-term targets of roughly 25% and 12%, respectively.
    Earnings per share rise toward $2.25 by 2030.

Under those assumptions, I see NIO stock running to $40 by the end of the decade (using a 17X forward earnings multiple).

Bottom Line on NIO

Nio is a long-term winner that offers investors a high-visibility, big-potential way to play the EV megatrend. To that end, I wouldn’t give up on the stock just because it’s been on such a tear in 2020. Instead, I’d stick with the rally, and check back on the NIO price in a decade.

Spoiler alert: it’ll be much higher than where it sits today.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Author: Luke Lango

Source: Investor Place: 3 Reasons Red-Hot Nio Stock Could Double to $40

WKHS stock is a long-term winner with tons of fuel left in the tank

Workhorse (NASDAQ:WKHS) has been absolutely on fire in 2020, with WKHS stock skyrocketing 825% higher this year on the back of abundant investor optimism with respect to the company’s ability to disrupt the last-mile delivery market with a next-gen electric delivery van.

Source: Photo from WorkHorse.com

This optimism is not misplaced.

All transportation is getting electrified. The last-mile delivery market represents a very big and highly attractive disruption opportunity in this electrification wave. Workhorse is pioneering a best-in-breed solution to lead this disruption.

And, while WKHS has run up a ton in 2020, there’s plenty of upside left in this name over the next few years because the last-mile delivery market is huge (~$18 billion) and Workhorse is still a small company (~$2.7 billion).

So buy WKHS stock and hold it for the long haul.

Here’s a deeper look.

Electrification Is the Future

There’s no doubt about it. The electrification wave has arrived, and over the next decade, it will proliferate across all transportation verticals, from passenger cars to commercial trucks to last mile delivery vans, and everything in between.

There are few trends driving this disruption. All of them are here to stay.

First, consumer demand is shifting.

Young consumers — who were raised to be hyper-aware of the environment and educated on how to reduce carbon emissions — want EVs. A 2018 survey from HPI found that 91% of Millennials are considering buying an electric car for their next vehicle purchase. These young consumers are just now starting to come into jobs and a ton of purchasing power. Over the next decade, they will increasingly drive auto market demand — and if all of them want EVs, then it’s easy to see how EVs take over the passenger car market from a demand perspective in the 2020s.

Second, the technology is getting better.

Because demand is shifting, more and more resources and talent are being thrown into the EV space. This is resulting in huge advancements in EV technology, specifically on the battery front, where companies like Tesla (NASDAQ:TSLA) are increasingly making smaller and better batteries that last longer, charge faster and take up less space — allowing for more efficient vehicles. Such technological advancements will only persist over the next few years, with a potential jump to solid-state batteries being a huge upward catalyst.

Third, the cars are getting cheaper.

Thanks to better technology, more streamlined manufacturing processes and increased scale, the cost to produce EVs is dropping dramatically, resulting in huge drops in EV prices. Since 2013, average EV battery pack prices have fallen 76%, according to Bloomberg New Energy Finance. This is resulting in falling EV list prices (the median sales price of a new EV dropped 70% between 2010 and 2016), to a point where these vehicles are now affordable to many Millennial car buyers.

Fourth, the need is getting bigger.

I live in California. All I have to do right now to be reminded that global warming is getting worse is just look outside, where the sky has been ashy for over a week. The need for us to reduce carbon emissions is only growing every single year, and EVs give everyone a mainstream way to help fix this problem.

All in all, then, the electrification of transportation has started… and it’s only going to get bigger and bigger over the next 10 years. To that end, buying Workhorse and other EV stocks offers investors a great way to play this electrification megatrend.

Last Mile Delivery Represents a Huge Opportunity

The last mile delivery market represents a huge opportunity for electrification disruption over the next 10 years.

Last mile delivery is the last leg of delivering goods via trucks from warehouses to homes. As such, these vans don’t go very far. About 80% of freight in the U.S is transported less than 250 miles, whereas your average EV has about a 300-mile driving range.

So EV technology is already good enough to almost fully replace legacy vans in the last mile delivery market.

Even further, these vans are run by companies — Amazon (NASDAQ:AMZN), UPS (NYSE:UPS), FedEx (NYSE:FDX), so on and so forth — that are feeling increasing sociopolitical pressure to go green. Indeed, all of these companies have made it a priority to cut carbon emissions over the next few years.

Thus, demand is shifting, and the supply is already good enough to be a viable replacement. Connecting the dots, it seems clear as day that by the end of the decade, most of the last mile delivery vans that drive up and down your street will be electric.

That’s a huge deal.

In the U.S. alone, more than 350,000 last-mile delivery vans are sold every year at an average sales price of $50,000, implying an annual addressable market here of $18+ billion.

Workhorse is set to disrupt this $18 billion market, and as the company does, WKHS stock will soar.

Workhorse Is Pioneering a Best-in-Breed Solution

There are lots of EV players out there.

Very few of them are targeting their efforts at the last-mile delivery market.

None of them have a created a last-mile EV delivery solution that is as robust as Workhorse’s solution.

Workhorse’s C-Series electric delivery vans are already more fuel efficient than diesel trucks, with 40 miles per gallon gas-equivalent versus 6 miles per gallon for a traditional UPS truck. They are also already much cheaper, with 65% lower operating costs per mile.

I say “already” because diesel trucks aren’t going to get more efficient or cheaper anytime soon. But Workhorse’s C-Series trucks will, as EV battery technology improves over the next few years. Indeed, over the past few years, Workhorse’s trucks have increased efficiency by 25%, reduced operating costs, increased driving range, reduced charging times and reduced weight.

So, by 2025, Workhorse’s C-Series electric delivery vans will be miles ahead in terms of efficiency, performance and affordability than diesel trucks and other electric vans.

At the same time, Workhorse’s vans are the only medium duty electric van permitted to sell and deliver vehicles in all 50 states. They are also equipped with a wide-reaching distribution deal with Ryder – one of North America’s largest delivery van retailers – and have already scored huge partnership deals with UPS and USPS.

Plus, Workhorse is developing drone delivery technology – dubbed HorseFly – to be integrated with its delivery vans. Once fully fleshed out, this tech should only extend Workhorse’s early leadership in this market.

Overall, Workhorse is pioneering a best-in-breed EV solution in the last mile delivery market which has high visibility to seeing widespread adoption over the next 5 to 10 years.

Huge Upside for Workhorse Stock

To be sure, WKHS has rallied in a huge way in 2020 as investors have bought into the long-term bull thesis.

But there’s still plenty of upside left.

Given that the last-mile delivery market is an oligopoly and that all of the major players will electrify sooner rather than later, it is quite likely that nearly 100% of the 350,000 delivery van market in the U.S. is electric by 2030.

If Workhorse nabs just 10% of that market at $75,000 average prices and 15% operating margins, then my modeling suggests that net profits should round out to ~$300 million by 2030. A 20X multiple on that implies a potential future valuation of $6 billion — more than double today’s market cap of $2.7 billion.

But, let’s say Workhorse nabs 20% market share. Then we are talking $600 million in 2030 net profits, and a future valuation of $12 billion — up more than four-fold from the WKHS stock price today.

Either way, there’s still plenty of fuel in the tank.

Bottom Line on WKHS Stock

Workhorse stock is a long-term winner. Yes, it’s come a long ways it a short time. Don’t blindly chase the rally. But on the next pullback, buy the dip. Because WKHS still has tons of upside potential over the next few years as the last mile delivery market gets electrified.

Author: Luke Lango

Source: Investor Place: Workhorse Stock Is Hot, Hot, Hot!

Most of these turnaround stocks should continue to see success as we head into the new normal

The world changed in 2020. There’s no doubt about it. The novel coronavirus pandemic swept across the globe. It shut down global economies. And it changed our way of life.

As it turns out, this change was a once-in-a-lifetime opportunity to buy turnaround stocks levered to the lifestyle changes that Covid-19 brought with it.

Covid-19 forced people inside. It accelerated the shift toward streaming platforms and online shopping. It boosted global environmental and social awareness, increased delivery platform usage and caused a surge in demand for hand sanitizers, masks and the like.

These changes were hugely beneficial for companies that provide those services. I’m talking streaming service providers, e-commerce platforms, clean energy companies, food-delivery services, so on and so forth.

Many of these companies weren’t doing so well before Covid-19.

Now, they’re absolutely on fire.

Will this recent momentum persist? For most, yes. And so this group of red-hot turnaround stocks that are winning big on the back of Covid-19-inspired lifestyle changes are stocks that you want to buy.

With that in mind, here’s a list of seven red-hot turnaround stocks that have soared high in 2020 as Covid-19 changed the world:

  • NIO (NYSE:NIO)
  • Overstock.com (NASDAQ:OSTK)
  • Cinedigm (NASDAQ:CIDM)
  • Arcimoto (NASDAQ:FUV)
  • Blue Apron (NYSE:APRN)
  • Waitr (NASDAQ:WTRH)
  • Etsy (NASDAQ:ETSY)

Here’s a closer look at what makes each stand out in the “new normal.”

Turnaround Stocks Soaring High in 2020: NIO (NIO)

Year-to-Date Gain: +190%

First up on this list of turnaround stocks that are flying high in 2020 is premium Chinese electric vehicle maker NIO.

Coming into 2020, NIO was doing quite poorly. China’s auto market was struggling thanks to elevated U.S.-China trade tensions and pressure on China’s manufacturing economy. The electric vehicle market was struggling doubly because the Chinese government reduced EV subsidies in 2019. Against that backdrop, NIO struggled to sell many cars.

Delivery volumes dropped. Gross margins compressed. Net losses widened. And the cash-strapped balance sheet faced serious liquidity concerns.

Everything has changed in 2020.

Post Covid-19, China’s auto market has rebounded with vigor on the back of easing trade tensions, pent-up consumer demand and seemingly unlimited fiscal and monetary stimulus. China has committed to expanding EV subsidies for another two years. And NIO has begun to sell a ton of cars.

Delivery volumes are surging by 175% year-over-year every single month. Gross margins are expanding. Net losses are narrowing. And that cash-strapped balance sheet scored big financing, which has entirely eliminated liquidity risks.

Of note, this big turnaround is happening before China’s economy hits full stride, before the pandemic is over and before NIO launches its new 2020 vehicle.

As such, it’s quite likely that NIO’s robust turnaround momentum only gains stream over the next few months. As it does, NIO stock will keep charging higher.

Overstock.com (OSTK)

Year-to-Date Gain: +440%

Of course, e-commerce stocks have been on fire in 2020. But few have been as hot as Overstock.com, which is the e-commerce industry’s best turnaround stock of 2020.

Long story short, Overstock.com has been the eyesore in a surging e-commerce market for a long time. Thanks to a lack of innovation on the platform and an overly broad focus from former management, Overstock.com’s share of the U.S. furniture e-retail market has slipped from 8% in 2015, to just over 3.5% in 2019, leading to negative sales growth against the backdrop of a market that was growing very quickly.

But, last year, the company got a new management team. That new management team implemented a far-reaching turnaround plan built on improving the platform’s search relevancy, enhancing the mobile web experience, expanding the product’s content on the site, leveraging data to improve pricing strategies, optimizing logistics for shorter delivery times and introducing free shipping on everything.

Those steps have worked wonders in making Overstock.com a better, more value-driven and more relevant e-commerce platform — at the same time that the e-commerce industry’s biggest tailwind ever, the Covid-19 pandemic, emerged globally.

The numbers speak for themselves. Revenue growth rates have consistently trended higher every quarter since the second quarter of 2019, including a +120% revenue growth rate in April. Gross margins have ticked up every single quarter since the second quarter of 2019, too. And contribution margin has risen at a steady pace, as well.

This robust turnaround should persist because: 1) the Covid-19 pandemic has permanently accelerated e-commerce adoption globally, and 2) Overstock.com has turned into a much better and more profitable version of its former self.

As such, I see the red-hot rally in OSTK stock continuing for the foreseeable future.

Cinedigm (CIDM)

Year-to-Date Gain: +220%

Shares of entertainment company Cinedigm have taken off like a rocket ship in 2020 for one very simple reason: the company’s big bet on streaming is starting to pay off in a huge way.

Specifically, in 2019, Cinedigm management made a huge bet: they decided to put all their eggs in the OTT basket, and spend all their time and resources turning the company’s content library, which includes over 32,000 movies and TV shows, into a portfolio of streaming channels.

Those newly launched streaming channels — including Comedy Dynamics (a channel dedicated to stand-up comedy specials), The Bob Ross Channel (a channel dedicated to legendary landscape painter Bob Ross), Docurama (a specialized documentary streaming channel), CONtv (a streaming channel dedicate to all things Comic-Con related) and more — have dramatically expanded their distribution across the OTT landscape in 2020.

Specifically:

  • In January, Comedy Dynamics landed on Samsung TVs, which is a big deal since Samsung is the No. 1 TV maker in North America.
  • In late May, multiple Cinedigm streaming channels, including Comedy Dynamics, CONtv and Docurama, landed on Amazon’s (NASDAQ:AMZN) IMDB TV.
  • A few weeks later, in early June, many of those same Cinedigm channels scored distribution through Vewd, the world’s largest Smart TV OTT software provider with an install base of more than 300 million Samsung, Sony, Philips and TiVo TVs.

In other words, in 2020, Cinedigm’s portfolio of niche streaming channels have gone from being available nowhere, to being available everywhere.

And Cinedigm’s viewership shape base has dramatically expanded.

Cinedigm exited 2019 with 5.6 million OTT viewers. That number rose by 73% to 9.7 million viewers in March. It rose another 36% to 13.2 million viewers in May. Management expects increased distribution to spark 100% growth in viewers over the next 18 months.

The growth won’t stop there.

There is ample and significant demand out there for animated content, documentaries, stand-up comedy and Bob Ross. Thanks to broad distribution agreements, Cinedigm has a visible and compelling opportunity to capitalize on that significant demand in the growing OTT channel over the next several years. As the company does that, CIDM stock will keep flying higher.

Arcimoto (FUV)

Year-to-Date Gain:+420%

As the electric vehicle revolution has gained significant traction in the wake of the Covid-19 pandemic, three-wheel EV pioneer Arcimoto has not been left in the dust.

In fact, up 420% year-to-date, FUV stock has turned into one of the market’s best turnaround stocks.

Why?

Because this company’s innovative three-wheel EV platform finally launched in late 2019 — and the potential upside of this platform through both consumer and commercial applications over the next few years is huge.

Specifically, Arcimoto’s consumer-oriented product, the Fun Utility Vehicle (FUV), finally started deliveries in late 2019. For all intents and purpose, this vehicle looks like a next-generation ATV of sorts. It has potential to be the leisure urban vehicle of choice in the future.

Then there’s Arcimoto’s commercial-oriented products, the Deliverator and the Rapid Responder. The Deliverator is a three-wheel, compact delivery EV aimed at optimizing last-mile delivery logistics by improving speed and cutting costs. The Rapid Responder is a three-wheel, compact emergency EV aimed at enabling law enforcement, security and emergency services to more quickly and affordably respond to incidents. Production of these commercial cars will start in late 2020.

Across these various consumer and commercial verticals, Arcimoto’s potential is quite enormous. You could easily see the company sell thousands of FUVs in every major city across America, sign contracts with multiple delivery services for tens of thousands of Deliverators and deploy a half dozen or so Rapid Responders at each of the 50,000+ fire stations in America.

If so, this company will turn into a much bigger company than its current $170 million market cap implies.

Blue Apron (APRN)

Year-to-Date Gain: +90%

For years, Blue Apron was best known on Wall Street as that failed meal-kit delivery company whose IPO was a flop for the history books.

Then the Covid-19 pandemic emerged in 2020.

Covid-19 forced restaurants to close, and made many consumers wary of going into grocery stores for fear of catching the virus. As such, consumers turned to formerly niche online food options, such as meal kits. Demand for meal kits has soared in March, April, May and June. As it has, Blue Apron — one of America’s leading meal kit players — has seen its stock price soar, too.

The big question now: will this momentum persist even after Covid-19 hysteria fades?

I think the answer is yes.

For the first time in a long time, there are a ton of new customers in Blue Apron’s pipeline that arrived there without the company spending an arm and a leg on marketing. History says most of these new customers will churn, especially as restaurants re-open. But some will stick. Those that do stick, will tell their friends about why they like Blue Apron. Some of those friends will try it. Some will stick.

Lather. Rinse. Repeat.

It’s the start of a new growth cycle for Blue Apron. All the company needs to do to sustain this growth cycle is ensure that the number of new customers exceeds the number of churning customers.

That seems entirely possible to me. If Blue Apron can execute, then APRN stock will fly higher from here.

Waitr (WTRH)

Year-to-Date Gain: +980%

Consumers have turned to online food delivery services like Uber Eats, Door Dash and GrubHub (NYSE:GRUB) amid the Covid-19 pandemic. As they have, one of the smaller players in this space — Waitr — has seen its share price soar nearly 10X.

Why such a huge gain? Because before Covid-19 emerged, Waitr was on its last legs. Growth was stalling out. Losses were mounting up. The balance sheet was running out of cash.

Then Covid-19 emerged.

The company recently reported that, thanks to restaurant closures and stay-at-home orders, April order volume rose approximately 20% versus the first quarter. A quick look at Google Trends over the past 90 days shows that Waitr search interest has stabilized around April levels, implying that the company has maintained its strong April momentum into May and June. It also helps that the Five Guys and Waitr linked up for a huge partnership in May.

All of this positive momentum has guided Waitr into profitable territory for the first time ever. Plus, the company is using cost-savings and increased scale to pay down debt.

In other words, Waitr is in as good of a fundamental position as the company has been in several years, with rising sales and improving profitability. At the same time, the online food delivery space is rapidly consolidating. Over the past four weeks alone, Just Eat Takeaway bought GrubHub and Uber (NYSE:UBER) bought Postmates.

It doesn’t take a rocket scientist to connect the dots.

It isn’t just likely that Waitr gets acquired by a DoorDash or an Uber in 2020, but it’s also likely that Waitr will have leverage in those M&A discussions and that, if taken out, such an acquisition will happen at a sizable premium.

For those reasons, I think the red-hot 2020 rally in WTRH stock has more runway ahead.

Etsy (ETSY)

Year-to-Date Gain: +160%

Specialized e-commerce marketplace Etsy came into 2020 with some serious problems.

Growth was slowing. Margins were compressing. Profits were falling flat. And ETSY stock stumbled to a 5% loss in 2019.

All of those trends have reversed course with vigor in 2020, mostly thanks to the Covid-19 pandemic forcing increased consumer adoption of online shopping.

Sales volume on the Etsy platform rose a whopping 130% year over year in April. Margins are ticking higher. Profits are expected to rise 90% next quarter. And ETSY stock has surged 160% higher in 2020.

This momentum will slow over the next few months as physical shopping destinations re-open. But it won’t altogether disappear. Covid-19 has permanently accelerated e-commerce adoption. Consumers who pivoted to Etsy during this time, will stick around as long-term Etsy customers. And Etsy’s growth narrative, over the next 5+ years, will remain very strong.

As it does, ETSY stock will continue to be a winner on Wall Street.

Author: Luke Lango

Source: Investor Place: 7 Red-Hot Turnaround Stocks Soaring High in 2020

Many cloud stocks will rebound on the back of strong demand trends in the second quarter

The rapidly spreading novel coronavirus is causing financial markets across the globe to tumble. But, some stocks will actually “win” in response to the pandemic, because of shifts in consumer and enterprise behavior. As such, many of the “winners” will be cloud stocks.

The thinking is pretty simple. Every student is now learning from home. Every employee — if possible — is now working from home. And every consumer is now shopping from home. That means every academic institution, every enterprise and every consumer-facing business needs to have a digital presence built on the cloud in order to survive. Demand for cloud computing technology should, therefore, accelerate over the next few quarters.

As the analyst team over at Wedbush wrote in a note from last week:

“With remote learning, work from home, and more applications and technology needing to be accessed during this lockdown, we emphasis the shift to cloud computing over the last few years is now the ‘hearts and lungs’ core technology and infrastructure enabling companies and governments globally to operate smoothly during this unprecedented stay at home period.”

This isn’t a near-term, one-time boost. Companies that pivot to the cloud, end up staying in the cloud. In this sense, major cloud providers have an opportunity to generate significant, long-term tailwinds coming out of this pandemic.

Yet, cloud stocks — alongside the rest of the market — are falling off a cliff. Year-to-date, the First Trust Cloud Computing ETF (NASDAQ:SKYY) is off 10%.

All things considered, then, it seems like now is the time to buy the dip in high quality cloud stocks. Some top cloud stocks to buy on the coronavirus dip include:

Microsoft (NASDAQ:MSFT)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
Adobe (NASDAQ:ADBE)
Salesforce (NASDAQ:CRM)
Amazon (NASDAQ:AMZN)

Cloud Stocks to Buy on the Dip: Microsoft (MSFT)

Source: NYCStock / Shutterstock.com

Of all potential cloud stocks to buy on the dip, the one that looks the most compelling is Microsoft.

That’s because Microsoft has the most momentum in this space. Exiting 2019, Microsoft had just won the hugely sought-after $10 billion cloud computing contract for the Pentagon. The contract win was broadly seen by insiders and analysts as confirmation that Microsoft has the strongest cloud infrastructure business in America, and many believed the company could turn that huge contract win into several, smaller contract wins throughout 2020 and 2021.

The coronavirus pandemic has thrown a wrench into that thesis. But not for long.

As stated in the intro, cloud computing demand will actually accelerate higher now. Not just for cloud infrastructure services like Azure. But for cloud-host enterprise works solutions like Microsoft Teams and Office 365, too.

As it does, Microsoft’s cloud business will regain the momentum it had in late 2019. This healthy momentum will propel the company to win contract after contract, post steady double-digit growth and guide the stock back to all-time highs.

Alphabet (GOOG)

Source: soul_studio / Shutterstock.com

Another top tier cloud stock to buy on the dip is Alphabet.

Alphabet’s Google Cloud is one of the three major players in the U.S. cloud infrastructure market. Naturally, this positioning exposes the company to coronavirus-related cloud computing tailwinds over the next few quarters. Such exposure should provide a lift to Alphabet’s overall growth trajectory.

That’s the good news.

The better news is that Alphabet also has the world’s biggest digital advertising business — which should be able to weather the coronavirus storm because of increased consumer engagement on things like Google Search and YouTube — and one of the strongest balance sheets in technology (the company’s cash pile measures around $120 billion).

The best news is that, for all of those positives, GOOG stock trades at just 21-times forward earnings, a multi-year low valuation for the tech giant.

Connecting all the dots, Alphabet stock looks like a strong “buy the dip” candidate here.

Adobe (ADBE)

Source: r.classen / Shutterstock.com

The bull thesis on Adobe is fairly straightforward.

Adobe is the dominant player in providing various cloud-enabled creative and work solutions to consumers and enterprises. Demand for these solutions was robust before the coronavirus pandemic, as both consumers and enterprises were shifting towards creating, editing and publishing pictures, videos and work documents online.

It will remain robust during the coronavirus pandemic, because consumers and enterprises will remain on this shift in a “stay at home” environment. It also helps that the company employs a subscription-based model, the likes of which won’t see a significant downturn even if demand does dry up.

“Our recurring revenue model and the real-time visibility we have into our business uniquely positions Adobe to manage through an uncertain environment,” said CFO John Murphy in a recent press release.

It should be no surprise, then, that Adobe reported 19% revenue growth in the first quarter of 2020. Or that management is guiding for about 16% revenue growth in the second quarter. Or that profits rose more than 25% year over year in Q1.

Those are the types of numbers Adobe will continue to report for the foreseeable future. So long as they do, this stock will charge higher.

Salesforce (CRM)

Source: Bjorn Bakstad / Shutterstock.com

Cloud customer-relationship-management (CRM) giant Salesforce is one of the best cloud stocks to buy on the dip, not because of what has happened, but because of what will happen.

What has happened in 2020 isn’t that great. According to JMP Securities, enterprise spending on business help tools like Salesforce’s cloud CRM tools has dropped by about 20% in the wake of the coronavirus pandemic.

But, this weakness won’t last forever.

It increasingly appears that the whole “work from home” situation will stay in place until the end of April, at least. Companies can’t afford to sit on their hands and not invest for a whole month. Eventually, they will do their best to get back to business as usual, even if all employees are working remotely. When they do, they will re-up investment into various mission-critical services. For many companies, Salesforce’s cloud CRM tools are some of those mission-critical services.

Broadly, over the next few weeks, Salesforce’s demand trends will rebound. Rebounding demand will drive a rebound in Salesforce stock.

Amazon (AMZN)

Source: Mike Mareen / Shutterstock.com

Last, but not least, on this list of cloud stocks to buy is the cloud infrastructure market’s biggest player: Amazon.

It’s no secret that Amazon Web Services is the Goliath in cloud infrastructure. With over 30% market share, AWS dwarfs Azure (17% share) and Google Cloud (6% share). This dominant positioning exposes Amazon to robust cloud infrastructure tailwinds over the next few weeks, and should provide a nice boost to Amazon’s overall growth trajectory.

At the same time, Amazon’s other big business — the e-commerce platform — is also “winning” during the pandemic. Consumers aren’t shopping in physical stores anymore. But, they still need to shop, especially for household essentials and consumer staples. They are doing all of that shopping on e-commerce websites, of which Amazon.com is the largest.

Big picture: both of Amazon’s core businesses are “winning” during the coronavirus pandemic, making the recent 10% drop in share price seem unwarranted.

Author: Luke Lango

Source: Investor Place: 5 Cloud Stocks to Buy on the Coronavirus Dip

Real estate crowdfunding, which simply allows accredited and non-accredited investors to buy private real estate assets through an online platform, is more than just a revolutionary concept in the investment world. It’s actually something that could significantly improve your portfolio today.

Looking for yield and steady income in a world of near zero yields everywhere? Crowdfunding real estate assets give juicy cash yields that provide ample income.

Want steadier returns and more stability in your portfolio at a time when stock markets have been anything but that? As largely uncorrelated assets with a long history of value appreciation, crowdfunding real estate investments provide essential diversification and are a shot of stability into any portfolio.

That’s just the tip of the iceberg. Real estate crowdfunding offers investors numerous ways to boost their portfolio returns, and reduce their portfolio risks.

Sound like a win-win? It is. As such, you next question should be: how do I get started?

Sign up for a real estate crowdfunding platform. But not just any platform. There’s a lot of players in the space. Only a select few are quality players which should be trusted with your money.

With that in mind, here’s a breakdown of the five best real estate crowdfunding platforms out there today:

Best Real Estate Crowdfunding Platforms: Cadre

The Short: A high quality, reputable real estate crowdfunding platform made for accredited investors willing to commit a lot of cash to a real estate investment for several years.

The Long: New York-based Cadre is perhaps the most well known real estate crowdfunding platform in the market, and with good reason. The company has arguably the best crowdfunding platform in the market, with access to some of the highest quality real estate assets in the crowdfunding world.

Cadre is also backed by some fame and expertise. Jared Kushner, son-in-law of U.S. President Donald Trump, founded the company, and the management team consists largely of former Wall Street bankers and private equity experts. There are also some deep pockets backing the company. Cadre has raised about $130 million in venture funding, with the lead investor in their most recent round being the very reputable venture firm Andreessen Horowitz.

But, there’s a catch. Unless you’re wealthy and have time on your hands, you can’t invest with Cadre.

That is, Cadre is for accredited investors only. The investment minimum is $50,000. Most investments are relatively non-liquid, and investors will typically have their money tied up for several years. The fees are also relatively high at 1.5% of net asset value, and there’s also performance fees (they take a cut of investors’ profits).

If that criteria is what you’re looking for, then Cadre is the best crowdfunding platform for you. Else, there are better options out there.

Fundrise

The Short: A great, low-hassle starter crowdfunding platform for retail investors who want to get their feet wet in real estate crowdfunding, and don’t have any expertise in real estate markets.

The Long: Fundrise is one of the biggest and oldest real estate crowdfunding platforms in the market, and it’s probably the best option out there for retail investors who want to get into real estate crowdfunding, but don’t know what makes a good real estate investment.

The Washington D.C. based company offers one of the few real estate crowdfunding platforms that allows retail investors on the platform. More than that, they are actually built for retail investors. The platform has one of the lowest minimum investments in the space at just $500, and industry-low fees that equate to just 1% of net asset value. There also aren’t any performance fees.

More uniquely, though, Fundrise doesn’t allow its investors to pick-and-choose their own real estate investments on the platform. Instead, all funds put into the platform are automatically allocated across multiple Fundrise REITs, so Fundrise investors are essentially trusting the platform to make smart real estate investment decisions for them.

For savvy real estate investors, that’s a lose. For novices who don’t know the difference between a good property and a bad one, that’s a win.

Depending on who you are — and how much money you make and are willing to commit to real estate crowdfunding — Fundrise could be the perfect crowdfunding platform for you.

ArborCrowd

The Short: Built for accredited investors who want exposure to high quality real estate investment opportunities, but don’t want to put in the effort of finding those high quality opportunities.

The Long: ArborCrowd is a very unique real estate crowdfunding platform which is built for a very specific type of investor.

An offshoot of publicly traded REIT Arbor Realty Trust (NYSE:ABR), ArborCrowd leverages its robust real estate experience to carefully select real estate projects for its platform. The upside? If a real estate project makes it through ArborCrowd’s vetting process, it’s probably a great investment. The downside? Not many projects do make it. Usually, there’s only one project at a time on ArborCrowd.

For investors who trust ArborCrowd’s vetting and don’t want to pick-and-choose their own investments, that’s great news. But, for investors who prefer to pick-and-choose, ArborCrowd isn’t a great real estate crowdfunding platform.

Also of note, the platform is for accredited investors only, has a $25,000 investment minimum, and has no liquidity.

In other words, there are some upsides and downsides of ArborCrowd for accredited investors. If liquidity isn’t a concern and you want highly curated investment opportunities, ArborCrowd is a perfect fit. But, if you want some liquidity and more flexibility, then a platform like Cadre is probably better.

The Short: In an attempt to create the real estate crowdfunding’s version of house-flipping, Groundfloor has built a revolutionary platform which allows both accredited and retail investors to participate directly in real estate investment loans on a fractional basis.

The Long: One of the bigger, more exciting, and liquid markets in residential real estate is house flipping. Think popular shows like Flip or Flop. A person or group of people secure some financing to buy a distressed home, repair that home, and sell the repaired version on the market at a higher price, paying back the principal plus interest and pocketing the difference.

Traditionally, if house flippers tapped the debt markets, they did so by securing a loan from a bank. Groundfloor has created a platform where flippers can now tap the “crowd debt” markets, and raise money from accredited and retail investors instead of a bank.

It’s a revolutionary concept. And it’s great for investors. For as little as $10, investors can help fund a house flipping project, and earn interest depending on the risk level of the project (which is determined by Groundfloor). In other words, it’s a great alternative yield play for investors both big and small.

Of course, there are some catches, the biggest of which is that some of the loans can default, resulting in a loss of capital for investors. Groundfloor says that this doesn’t happen often, and that significant liquidity on the platform makes up for any defaults that do happen (investors can bounce back, and invest in a new project). Still, it’s a risk worth noting.

All in all, though, if you’re interested in house flipping but don’t have the capital to actually flip homes, Groundfloor is, at the very least, worth a look.

Small Change

The Short: The environmental, social, and governance (ESG) friendly way to partake in real estate crowdfunding, so that you can make money and help the world become a better place at the same time.

The Long: ESG investing in the stock market is one of the bigger, most relevant, most important, and most powerful trends happening in the stock market today, and it revolves entirely around investing with an eye towards making the world a better place.

It’s only natural, then, that ESG investing is also a thing in the real estate crowdfunding world.

Small Change is a real estate crowdfunding platform which allows both accredited and retail investors to invest as little as $500 into real estate projects which positively impact cities and neighborhoods. They do that by evaluating real estate projects according to their Small Change Index, which measures how positively a real estate projects impacts mobility, community, and economic vitality. If a projects ranks well according to those measures, then it gets listed on Small Change, and investors can thereafter invest in that project.

In other words, Small Change is the ESG-positive real estate crowdfunding platform for retail investors. If you’re a retail investor looking to commit upwards of $500 to ESG-positive real estate projects, then Small Change is perfect for you.

Author: Luke Lango

Source: Finance. Yahoo: The 5 Best Real Estate Crowdfunding Platforms

Here is a look at my potential 100%-upside picks for 2020

About a year ago, I wrote a piece on InvestorPlace.com where I outlined 7 stocks that could double in 2019. There a lot of stocks out there, and not many of them double in any given year. Thus, the odds of picking the ones that do isn’t very high.

However, fortune was on my side. As it turns out, my selection of 7 stocks that could double in 2019 was pretty spot-on.

Four of the seven stocks that I said could double in 2019, did double at some point in 2019. One of them — Roku (NASDAQ:ROKU) — is up nearly five-fold from its 2019 opening price. Another one — Advanced Micro Devices (NASDAQ:AMD) — is up nearly three-fold over that same stretch. Two of them — Skechers (NYSE:SKX) and Micron (NASDAQ:MU) — are up between 80%-90%. Of the remaining three stocks, two — Facebook (NASDAQ:FB) and Spotify (NYSE:SPOT) — have both risen around 60% and 40%, respectively. Meanwhile, only one of the seven stocks — Canopy Growth (NYSE:CGC) — had a negative showing in 2019.

For what it’s worth, an equally weighted portfolio of these 7 stocks that could double, would’ve indeed doubled since early 2019, rising about 115%.

But, now it’s a new year. And that means it’s time for a new portfolio of stocks that could double in 2020. Will I have the same luck with these stocks as I had with the 2019 batch? Let’s hope so.

Please note: this year’s iteration of the “stocks that could double” list is only 5 stocks, versus last year’s 7 stocks. This is mostly because coming into last year, stocks were broadly depressed. This year, however, stocks are broadly elevated — leaving less room for potential upside.

Stocks That Could Double in 2020: Beyond Meat (BYND)

The Fundamentals: Shares of plant-based meat maker Beyond Meat (NASDAQ:BYND) are the quintessential manifestation of a famous Bill Gates quote that goes something like this: people tend to overestimate what can be accomplished in a year, and underestimate what can be accomplished in a decade.

In 2019, investors overestimated what Beyond Meat could accomplish in a year — and BYND stock suffered from an extreme valuation as a result. But, on the heels of a major selloff, investors are underestimating what Beyond can accomplish over the next decade. This includes leveraging plant-based meat’s health, cost and resource conservation advantages to turn into the one of the world’s biggest meat producers with a market cap in the tens of billions of dollars.

In addition, this long-term potential will become obvious throughout 2020, as Beyond sustains big growth quarter after quarter through steady retail expansion. As it does become more and more obvious, BYND stock will rebound in a big way from a selloff.

The Numbers: My long-term Beyond Meat model pegs the company’s 2030 earnings per share potential at $15. Based on a packaged foods sector average around 17.5 times forward multiple and a 10% annual discount rate, that equates to a 2020 price target for Beyond Meat stock of over $110.

We all know that growth stocks with momentum can often sustain price tags above their fair values. Therefore, BYND stock does have a realistic opportunity to double in 2019, or hit a price tag of around $140.

NIO (NIO)

The Fundamentals: The bull thesis on Chinese premium electric vehicle (EV) maker NIO (NYSE:NIO) comes down to two big things.

First, the company’s delivery and revenue trends — which were massively depressed throughout most of 2019 — improved meaningfully in late 2019. This is thanks to easing U.S.-China trade tensions, the company’s newest vehicle gaining sales momentum and China phasing out EV subsidy cuts. Looking forward, all these favorable developments will persist in 2020, and will be joined by new catalysts such as a new vehicle launch from NIO. As such, today’s improving delivery and revenue trends will improve even more in 2020.

Second, the company’s stressed balance sheet will find support in 2020. Specifically, given that China’s economy is rebounding, China’s central bank is easing monetary policy and expanding lending capacity. And, because NIO’s delivery trends are improving, it seems fairly likely that NIO will secure some form of capital market funding this year. If/when they do, cash burn and liquidity concerns will be eased, and lead NIO stock higher.

The Numbers: My long-term model on NIO assumes that the company will craft a sustainable niche for itself as the number one premium EV supplier in China. Furthermore, my model sees that this niche will enable the company to achieve unit annual delivery volumes of about 200,000 by 2030. Additionally, assuming NIO maintains respectable pricing power and operates at Tesla (NASDAQ:TSLA) like gross margins, I think that NIO can grow earnings per share towards 65 cents by 2030.

In a best case scenario, however, I think that number can grow to $1.40. If so, based on around a 16-times forward earnings multiple and a 10% annual discount rate, that implies a 2020 price target for NIO stock north of $9.

Sure, that’s a best case scenario price target. But, in 2020, the best case scenario could get adopted by enough investors that shares do trend back towards $9.

Canopy Growth (CGC)

The Fundamentals: Alongside every other pot stock out there, shares of leading Canadian cannabis producer Canopy Growth got killed in 2019 as everything that could’ve gone wrong in the marijuana sector, did go wrong. Demand trends in Canada flattened, leading to stalled revenue growth at Canopy. Black market competition picked up, putting pressure on Canopy’s margins. Furthermore, there was C-Suite turnover and a lack of progress on the U.S. front.

Now, however, all those trends are reversing course.

Demand trends in Canada will rebound in 2020, thanks to the introduction of new edible and vape products. Significant retail store expansion will help, and Canopy’s revenues will start marching higher at a steady pace again. Profit margins will improve, too, as Canopy leverages bigger production capacity and enhanced distribution to fight back against black market competition. It also appears that most of the C-Suite departures are in the rear-view mirror. With that said, Canopy is ready to make a splash in the U.S. market with its new “First & Free” product line.

As all of these trends reverse course in 2020, beaten-up CGC stock will bounce back.

The Numbers: My long-term model on CGC makes some very basic assumptions, including: 1) cannabis will be globally legal by 2030, 2) global sales in the legal cannabis market will measure in the several hundred billion dollar range, smaller than but comparable to the sales volume in the global alcoholic beverage market, 3) Canopy will be one of the bigger players in that market with a $10 billion-plus global sales base, and 4) Canopy’s profit margins will consistently improve towards 30%, roughly where they sit in the alcoholic beverage industry.

Under those assumptions, I think Canopy can do about $5 in earnings per share by 2030. Based on around a 20-times forward earnings multiple — which is average for alcoholic beverage producers — that equates to a 2029 price target for CGC stock of $100. Discounted back by 10% pear year, that implies a 2020 price target of over $40.

Plug Power (PLUG)

The Fundamentals: Shares of hydrogen fuel cell (HFC) maker Plug Power (NASDAQ:PLUG) more than doubled in 2019, as its HFC products gained traction among commercial clients looking to deploy alternative fuel solutions in high utilization markets (in which HFCs are better solutions than batteries because they last longer and have shorter re-charge times). This trend should continue in 2020.

Additionally, there is tremendous pressure on companies across the globe to more robustly adopt and deploy alternative fuel solutions. Battery tech will be the most commonly deployed alternative fuel solution. But, in certain high utilization areas like warehouses, HFC tech will beat out battery tech. And in those markets, you will start to see a rapid increase in things like HFC forklifts.

Indeed, this is already happening. Plug Power recently announced that a Fortune 100 customer placed a $172 million order for HFC deployments over the next two years. The company will announce many similar orders over the course of 2020. And as they do, the company’s revenues, profits and stock price will all march higher.

The Numbers: Management recently laid out an ambitious plan to get to $1 billion in annual revenue and $200 million in annual EBITDA by fiscal 2024. That represents huge growth from 2019’s projected revenue base of $235 million. But, it’s very doable, considering the company is winning several hundred million dollar contracts and that the materials handling industry is $30 billion large.

Assuming Plug Power does hit those targets, the company could realistically achieve 50 cents in earnings per share by 2024. Based on a market-average 16-times forward earnings multiple and a 10% annual discount rate, that implies a 2020 price target for PLUG stock of $6.

Pinterest (PINS)

The Fundamentals: Social media platform Pinterest (NYSE:PINS) was one of the hottest new companies on Wall Street in 2019; Until it wasn’t. The company’s revenue growth trajectory slowed meaningfully in the third quarter of 2019. And ever since, PINS stock has fallen off a cliff and not recovered.

However, shares will recover in 2020 for three big reasons.

First, digital ad tailwinds will strengthen in 2020 as rebounding economic strength coupled with increased political interest will spark robust ad spending increases. Second, new ad platform features at Pinterest, including a focus on increasing the effectiveness of retail ads, will translate into digital ad market share gains for the company. Third, profit margin improvements will persist with increased scale, converging with renewed revenue growth to drive Pinterest into profitable territory.

The Numbers: Pinterest is in the early stages of turning into the next big social media company. In other words, over the next several years, a few things will happen.

One, Pinterest will steadily expand its global user base thanks to a consumption shift towards visual experience discovery. Two, Pinterest will simultaneously expand how much money it makes from each one of its users. This will be done by increasing reach and the effectiveness of its ad platform. Three, profit margins at the company will significantly improve towards digital ad industry average levels.

Under those headline assumptions, I think that $2.25 is a doable earnings per share target for Pinterest by 2025. Based on a technology-sector average 21-times forward earnings multiple and a 10% annual discount rate, that implies a 2020 price target for PINS stock of well over $30.

Author: Luke Lango

Source: Investor Place: 5 Stocks That Could Double in 2020

GE stock is positioned to add to its record 2019 rally

After several years of declines, General Electric (NYSE:GE) stock finally bounced back in 2019, posting a huge gain of over 50% as new management appropriately executed on cost-cutting and debt-reduction measures, against the backdrop of a steadily improving industrial economic outlook.

Now, on the heels of its best annual performance since 1982, GE stock looks positioned to add to this record rally in 2020.

Specifically, there are three big catalysts which should power sustained gains in GE stock over the next twelve months. First, the industrial economic backdrop will continue to improve amid easing global trade tensions. Second, management will continue to execute on cost-cutting and debt-reduction measures, and profit margin and leverage trends will continue to improve. Third, the valuation underlying GE stock remains cheap, and there is ample room for further fundamentally supported share price gains.

Put together, those three catalysts should provide enough firepower for General Electric stock to rise another 20% or more in 2020.

The Backdrop Will Improve

The first big catalyst which will help power GE stock higher in 2020 is a sustained rebound in the global industrial economy.

Throughout 2018 and for most of 2019, the industrial economy tumbled amid escalating global trade tensions, which sparked geopolitical and economic uncertainty and curtailed capital investment. Over the past few months, however, those escalating global trade tensions have meaningfully de-escalated. As they have, uncertainty has turned into certainty, capital investment levels have rebounded, and the industrial economy has bounced back…everywhere.

This rebound will persist in 2020. U.S. President Donald Trump doesn’t want to upset the egg carton in an election year, because doing so would harm his chances at re-election (citizens like stability). China doesn’t want to upset the egg carton, either, because they want their economy to keep rebounding, which it is doing in the absence of trade volatility. As such, for the next few quarters, trade tensions between the U.S. and China will continue to de-escalate.

As they do, capital investment levels will continue to rebound, and industrial economic activity will continue to perk up. This sustained rebound in the industrial economy will provide a meaningful tailwind for GE stock.

Management Will Remain on Track

Second, throughout 2020, GE management will continue to cut costs, sell unrelated business units and reduce leverage, the sum of which will help keep GE stock on a winning path.

A big part of the 2019 rebound in General Electric stock was new management, led by CEO Larry Culp, doing everything right to get the business back on track. Specifically, Culp shed non-core business units, and used the proceeds to pay down debt and streamline investments into the core businesses. At the same time, he cut back on operating expenses in order to create a viable pathway to sustainable profitability.

All of this will continue in 2020. GE still has a lot of moving parts. Culp will continue to sell some of those moving parts in 2020 and use the proceeds to pay down debt. Leverage reduction will have a positive impact on investor sentiment and the stock’s multiple. At the same time, cost-cutting initiatives will start to bear fruit in 2020, at the same time that streamlined investments into the core airline and power businesses should bring revenue growth back into the picture.

Altogether, GE’s balance sheet and revenue and profit trends will improve in 2020. As they do, GE stock should continue to move higher.

The Valuation Remains Discounted

The third big idea behind the 2020 bull thesis in GE stock is that shares remain discounted relative to the company’s intermediate profit growth prospects.

Thanks to the improving economic backdrop and management maintaining disciplined cost control, General Electric should be able to stabilize and potentially even grow sales at a mild pace over the next few years, while margins should improve as revenues rise on a falling expense base. Assuming this dynamic continues to play out, Wall Street’s consensus 2021 earnings per share estimate of 86 cents seems entirely doable for this industrial conglomerate.

The average forward earnings multiple in the industrials sector is about 16.5. Based on that industry average multiple, 86 cents in 2021 EPS reasonably equates to a 2020 price target for General Electric stock of over $14.

GE stock trades hands around $11 today. Thus, the fundamentals say that shares could rise another 20%-plus over the next twelve months.

Bottom Line on GE Stock

General Electric has its groove back, in that: 1) the industrial economy is back to expanding, and 2) General Electric is doing everything right to maintain healthy and profitable positioning in that expanding industrial economy. As long as those two things remain true — and so long as GE stock remains reasonably valued, which it does today — then this record rally in GE stock will live on.

Author: Luke Lango

Source: Investor Place: 3 Reasons Why GE Stock Could Rally Another 20% in 2020

These rebounding momentum stocks have ample firepower to keep breaking out

In early September, we saw an unprecedented shift in the investment landscape from momentum stocks to value stocks. This came amid a recovery in economic fundamentals and a sharp rise in interest rates.

By mid-September, the the iShares Momentum Factor ETF (BATS:MTUM) was down more than 1%, while the iShares Value Factor ETF (BATS:VLUE) was up more than 7%. This big divergence prompted me to write a piece on InvestorPlace outlining seven momentum stocks to buy on the dip.

The logic was simple. These sharp momentum-to-value shifts don’t happen often. But, when they do, it’s when the things are getting better. See late 2016. It is investors voting with their money that the coast is clear to buy stocks that require a good economy to head higher. As such, these shifts are normally temporary, and a harbinger of a broader market rally. When they end, both value and momentum stocks power higher alongside a rising economy.

Thus, I reasoned that the September weakness in momentum stocks presented a solid buying opportunity into 2020, when all stocks would power higher supported by easing trade tensions, re-accelerated global capital investment and economic activity, revamped corporate profit growth, healthy labor markets and supportive central bank policy.

Fast forward two months. Since then, both the Momentum Factor ETF and Value Factor ETF are up more than 3%, five of the seven momentum stocks I recommended are up more than 8%, and three of them are up more than 20%.

I think this momentum stock rebound will continue. As such, let’s take a deeper look at five of my favorite momentum stocks that have shown impressive strength since mid-September.

Momentum Stocks to Buy on the Rebound: The Trade Desk (TTD)

% Gain Since Sept. 16: 20%

At one point in time, programmatic advertising leader The Trade Desk (NASDAQ:TTD) was one of the biggest losers in the mid-2019 momentum-to-value shift. Shares had shed almost a quarter of their value by mid-September. But, since then, shares have soared 20%.

This big rebound in TTD stock will persist for a few reasons.

First, the long-term fundamentals are favorable here. Programmatic advertising is “smart” advertising, which leverages algorithms, data and machine learning to transform ad transactions and ad spend allocations from a guess-and-check process, to an automated and optimized process. The whole ad industry is pivoting into programmatic advertising, yet only a small portion of global ad dollars are transacted programmatically today. The Trade Desk is at the center of this pivot. Thus, as more ad dollars flow into the programmatic channel over the next few years, TTD’s revenues and profits will continue to roar higher.

Second, the valuation remains reasonable. By my numbers, The Trade Desk will net $12 in earnings per share by fiscal 2025, behind 20%-plus annual revenue growth, steady profit margin expansion and 25%-plus profit growth. Based on an exit multiple of 35-times forward earnings (which is average for application software stocks) and a 10% discount rate, that equates to a 2019 price target for TTD stock of $260 — above today’s $250 price tag.

Third, the optical backdrop will remain supportive. Yields appear to be done surging, so the valuation headwinds which hit TTD stock in September also appear to be over. At the same time, easing trade tensions should support a rebound in enterprise capital spending, and as that picks up, companies should spend more on their programmatic advertising pivots.

Ultimately, TTD stock should stay in rebound mode.

Adobe (ADBE)

% Gain Since Sept. 16: 8%

Shares of creative solutions giant Adobe (NASDAQ:ADBE) weren’t hit that hard by the mid-2019 momentum-to-value shift. But, ADBE stock has still rattled off an impressive 8% gain since mid-September as momentum stocks have come back in favor. Shares presently trade just a few bucks shy of all-time highs.

The fundamentals here imply that ADBE stock should hit new all-time highs soon.

The economic and market backdrops are healthy. Trade tensions are easing. Easing trade tensions will support a rebound in capital spending, which will fuel a rebound in the global economy. As the global economy rebounds, stocks will broadly power higher. This rising tide will lift most boats, including ADBE stock.

Adobe’s internals are equally healthy. This is a company which dominates the secular growth creative solutions market with essentially no real competition. Growth is big because enterprises and professionals are investing more into creative solutions as the world becomes more visually based. Margins are huge, because Adobe commands tremendous pricing power. Profit growth is consequently big, too. All of this should continue for the foreseeable future, and at an accelerated rate in 2020, thanks to a rebound in enterprise spending trends.

Also of note, the valuation on ADBE stock remains tangible. By my projections, Adobe will remain a double-digit revenue growth company for several years thanks to creative market tailwinds, while margins will naturally improve with scale. Those growth projections create visible runway for earnings per share to hit $20 by fiscal 2025. Based on a systems software sector-average 25-times forward earnings multiple and a 10% discount rate, that equates to a 2019 price target for ADBE stock of $310.

All in all, then, the data here suggests that ADBE stock will remain in rally mode.

Okta (OKTA)

% Gain Since Sept. 16: 24%

Another momentum stock which was hit hard during the momentum-to-value shift was identity cloud company Okta (NASDAQ:OKTA). Much like TTD stock, OKTA stock lost about a quarter of its value during this shift. Since mid-September, though, OKTA stock has rattled off a 24% gain.

OKTA stock should continue to rebound for three big reasons.

First, Okta is a big growth company with strong long-term fundamentals. At its core, this company is reinventing the way companies protect their data. Instead of building a castle of security surrounding an entire enterprise ecosystem (as most traditional cybersecurity solutions do), Okta is outfitting each member in an enterprise ecosystem with personalized “armor,” under the idea that if each individual is protected, so is the entire ecosystem.

Okta calls this new method the Identity Cloud. This Identity Cloud is surging in popularity, because it improves enterprise flexibility, mobility and convenience, without compromising on security integrity. Still, Okta is a relatively small company (less than $500 million in revenue) in a huge cybersecurity market ($170 billion and growing), so there is ample room for Okta to stay on a big growth trajectory for a lot longer.

Second, the valuation on OKTA stock isn’t stretched. My modeling suggests that Okta has a visible opportunity to net $11 in EPS by fiscal 2030 (assuming 20%-plus revenue growth, sustained big gross margins, and significant positive operating leverage). Based on an application software sector-average 35-times forward multiple and a 10% discount rate, that equates to a 2019 price target of nearly $150.

Third, the optics are improving. Specifically, capital spending trends are rebounding, and Okta’s revenues come from the capital spending well.

Big picture — OKTA stock can and will keep moving higher.

Chegg (CHGG)

% Gain Since Sept. 16: 11%

On seemingly no catalyst whatsoever, shares of digital education giant Chegg (NASDAQ:CHGG) tumbled from nearly $50 in late July 2019, to below $30 by early November 2019. Then, Chegg reported strong third-quarter numbers, which implied that the selloff was grossly overdone. CHGG stock has since rebounded to $40.

This rebound should continue until CHGG stock runs back to its $50 all-time highs.

Chegg is a big growth company. This company has created a connected learning platform which is increasingly becoming a necessary and vital part of the learning experience for high school and college students. That’s because Chegg has built the first education platform that caters to modern student’s needs. They want digital services, they want on-demand services, they want streamlined services and they want all-the-time services. Chegg provides all four, all in one place.

As such, it isn’t too far off to think that Chegg will one day be used by most high school and college students across America. There are 36 million students who fit that description. Chegg has only nabbed 3.1 million of them. Thus, with a meager 10% penetration rate in a highly fragmented market that is ripe for disruption, Chegg is primed for big growth over the next few years.

This big growth simply isn’t priced into CHGG stock today. By my numbers, Chegg has a realistic opportunity to hit $2.50 in EPS by fiscal 2025. Based on a big-growth 30-times forward earnings multiple and a 10% discount rate, that equates to a 2019 price target for CHGG stock of $45.

That’s well above where shares trade today. So long as shares remain fundamentally undervalued and the momentum/growth stock backdrop remains favorable, CHGG stock should grind higher.

Splunk (SPLK)

% Gain Since Sept. 16: 28%

Big data analytics company Splunk (NASDAQ:SPLK) was hit hard in mid-2019 on cash flow, growth, and margin concerns. But, Splunk reported third quarter numbers in November that put those concerns to ease. SPLK stock has since sprinted to all time highs.

Although the valuation on SPLK stock seems somewhat stretched here, most signs indicate that this rally will continue.

First, Splunk is in the game of turning data into actionable insights. Current trends imply that demand for this service is surging. Not only did Splunk just report strong Q3 numbers that included 30% year-over-year growth, but Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) also recently acquired Fitbit (NYSE:FIT) in a data acquisition play, tennis players have recently started using big data to prep for matches and the real estate industry is getting in on the big data trend.

Second, recovering business sentiment — thanks to easing trade tensions — should provide a lift to Splunk’s revenue trends, since the higher business sentiment goes, the more those businesses spend on things like data, and the more money makes its way into the Splunk ecosystem.

Third, Splunk is in the early stages of realizing the financial benefits of its recently launched Data-to-Everything platform. Building that platform has been a multi-year, multi-billion dollar commitment. That investment phase is over. Now comes the growth part. This transition should provide a lift to SPLK stock.

I’m slightly concerned about valuation on SPLK stock up here. But, momentum stocks have a tendency to ignore valuation risks when they have full momentum. That’s exactly what Splunk has right now. So, for the foreseeable future, shares should keep making new highs.

Author: Luke Lango

Source: Investor Place: 5 Momentum Stocks to Buy on the Rebound

In late September, I wrote a gallery on InvestorPlace.com about “lottery stocks”, or high-risk, high-reward stocks with huge long-term upside potential.

The theme of the gallery was very simple. It was reiterated by our very own CEO, Brian Hunt, in his October piece on lottery stocks. Investors of all shapes and sizes would be wise to invest some money into a basket of these high-risk, high-reward lottery stocks because doing so is all about risking a tiny bit of money for the shot of making a fortune.

Sure, the actual lottery is all about the same thing. Buy a scratch ticket for a few bucks. Have a 0.0001% chance of winning the jackpot. Still, no one would consider this a financially wise decision because the odds of winning are so small.

But, investing in lottery stocks has much more favorable odds … if you do the leg work of figuring out which lottery stocks have the best chance of turning into multi-baggers in the long run.

I’ve done that work for you. I’ve identified a handful of lottery stocks that have visible and realistic pathways to 200%-plus upside over the next few years. Are they still risky? Of course. But, the risks here are fully compensated by the possibility of huge long term returns.

This column examines five stocks deemed worth of the term “lottery stocks,” each with a very realistic chance to triple over the next few years.

Lottery Stocks That Could Triple: Plug Power (PLUG)

Current Price: $3.50

Potential Future Price: $12

One lottery stock that I’m particularly bullish on is hydrogen fuel cell, or HFC, maker Plug Power (NASDAQ:PLUG), because this company has a visible opportunity to grow by leaps and bounds over the next few years if hydrogen become a viable second fiddle to electricity in the alternative fuels market — and that very well could happen.

In the alternative fuels market, there are basically two core and competing technologies: hydrogen and electricity. You’ve heard all about electricity because, at present, it’s much better than hydrogen. That is, it’s safer, it’s cheaper, and it’s supported by better infrastructure.

But, hydrogen tech has it’s advantages. The two big ones? Shorter recharge times and longer range, meaning that hydrogen cars actually save consumers a ton of time. Some consumers really value time. For those that do, hydrogen could become a more attractive alternative fuel option than electricity, especially as hydrogen safety continues to go up and HFC costs continue to come down (both of which are already happening).

Given that, here’s the bull thesis on PLUG stock. Plug Power is at the epicenter of the HFC market. It’s only an $800 million company. Tesla (NASADQ:TSLA), the world’s leading electric car company, has a $65 billion market cap. Thus, even if HFC tech only gets to a tenth the popularity of electric cars at scale, one could still very reasonably argue that Plug Power would warrant a market cap the tenth the size of Tesla, or about $6.5 billion, in the future.

Indeed, the numbers do work out like that. Plug Power management expects expansion of HFC adoption in core commercial markets to drive big growth over the next few years. Specifically, management is pointing towards $1 billion in revenue by 2024, with $200 million in EBITDA. Is that possible? Yes. If Plug Power does hit those aggressive targets, the numbers shake out for the company to net about $0.50 in EPS by 2024, and likely somewhere around $0.60 in EPS by 2025.

Apply a growth stock average 20-times forward multiple to that $0.60 EPS base in 2025. That implies a 2024 price target of $12, which means that in an “everything goes right” scenario, PLUG stock could rally more than 200% from here over the next few years.

Nio (NIO)

Current Price: $1.80

Potential Future Price: $14

Often dubbed the “Tesla of China”, Chinese luxury electric vehicle maker NIO (NASDAQ:NIO) has a realistic opportunity to turn secular EV and self-driving trends into big growth for the company over the next few years.

The story on NIO is pretty straightforward. This company was supposed to be just like Tesla. Start with one premium EV. Sell a bunch of those models. Establish strong brand equity. Leverage that strong brand equity to keep launching new, high-demand EV models. Gradually gain share in the huge Chinese EV market, and leverage scale to produce huge profits.

Things haven’t played out like they were supposed to. NIO started off with a bang, but over the past few quarters, delivery volumes have come tumbling lower, even amid a new car launch, mostly because: 1) there are simply too many EV companies in China, and 2) the EV market in China slowed considerably in 2019.

But, given that this company has crafted a niche for itself in the luxury EV market and that the company just announced a strategic collaboration with Intel’s (NASDAQ:INTC) Mobileye unit for the development of self-driving cars, there is a possibility that NIO regains its groove over the next few years.

Let’s say they do. The numbers here work out so that China’s EV market will likely measure around 7 million to 10 million cars by 2030. NIO could control about 5% of the market, implying around 375,000 EV deliveries in 2030. Assuming a $50,000 ASP and auto average 10% operating margins, we could easily be looking at $1.40 in earnings per share. Based on a market-average 16-times forward multiple and 10% annual discount rate, that implies a 2024 price target for NIO stock of $14.

Stage Stores (SSI)

Current Price: $2.20

Potential Future Price: $9.50

Struggling department store operator Stage Stores (NYSE:SSI) ostensibly looks like just another retailer that is being made irrelevant by Amazon (NASDAQ:AMZN). But, underneath the hood, Stages Stores is making some aggressive changes, and if they work, SSI stock could be a multi-bagger in the long run.

Long story short, Stage Stores has been killed by online retail competition over the past few years. Comparable sales, revenues, and margins have all dropped. Profits have been wiped out. SSI stock has plummeted, weighed by not just an operational crash but also by a heavily levered balance sheet.

But, management is finally doing something to right the ship. Specifically, Stages Stores owns both full-price and off-price stores. The off-price stores are doing much better than the full-price ones. Management is now in the process of converting all of its full-price stores, to off-price stores. The result? Stage Stores could look like a mini TJX (NYSE:TJX) or Ross Stores (NASDAQ:ROST) within a few years.

Those off-price retail giants have stable sales bases and margins. If SSI’s off-price transition works out, that’s exactly what should happen. Sales will stabilize, and margins will peek back into positive territory. Making conservative assumptions on both fronts (sales stabilize around their current $1.5 billion base and operating margins move towards 2.5%), then Stage Stores could realistically net about $0.50 in earnings per share by 2025.

Based on an apparel retail sector-average 19-times forward earnings multiple, that implies a 2024 price target for SSI stock of $9.50.

Aurora (ACB)

Current Price: $2.30

Potential Future Price: $16

The cannabis market has been under siege recently, amid crumbling demand trends and widening losses. Canadian cannabis producer Aurora (NYSE:ACB) hasn’t been an exception to the trend. But, in the long run, Aurora still looks positioned to be an important player in a huge market, and ACB stock is way undervalued today if that reality comes to fruition.

There’s a lot going wrong in the cannabis market today. Demand is staying in the black market, because the legal market is having trouble keeping up with black market prices (taxes and fees make the legal market cost base way higher than the black market cost base). Legal producers are having to discount their cannabis to compete. The result? Slowing demand and falling margins, a troublesome combination for what was supposed to be a growth industry.

But, the core fundamentals here remain favorable. That is, data shows that not only is cannabis consumption on the up and up, but also that young consumers like to smoke cannabis almost as much as they like to drink alcohol. The implication? Once the legal market figures out logistics and pricing, and out-muscles the black market, the legal cannabis market will be very, very big in a decade — like $200 billion big.

Aurora is currently one of the biggest players in the cannabis world. More competition over the next several years will bring Aurora’s market share lower. Ultimately, though, this company should be able to nab 5% share in the $200 billion cannabis market, implying about $10 billion in revenues by 2030.

ACB’s gross margins are already at 60%. Opex rates should fall toward more normal 30% levels with scale, eventually resulting in 30% operating margins. That’s about $3 billion in operating profits. Take out 20% for taxes. Assume 1.5 billion shares out. Use a price-earnings multiple of 16, which is average for the market. All that math gets you to a 2029 price target for ACB stock of over $25. Discounted back by 10% per year, that equates to a 2024 price target of nearly $16.

Stitch Fix (SFIX)

Current Price: $20

Potential Future Price: $64

Last, but not least, on this list of potential lottery stocks that could triple is personalized styling service Stitch Fix (NASDAQ:SFIX), a company which could change the entire apparel retail model, and in so doing, become a multi-bagger stock over the next few years.

Apparel retail today works like this. You go in a store or to a website. You peruse apparel in different categories, adding some to your checkout cart as you go. At the end of the shopping trip, you pay for the stuff you liked and wanted.

Seems simple, right? Sure. But, Stitch Fix is in the game of making it even more simple. Imagine if you could just sign up for a service that had a bunch of personalized stylists, and those personalized stylists did all the shopping for you. All you have to do is answer a few questions, and sit back and wait for the clothes to arrive. Better than that, if you don’t like what the stylists picked out, you can send it right back.

That’s the Stitch Fix model. They are taking the thinking out of shopping so it becomes as easy as just answering a few questions. Sure, it’s not for everyone. Some people really enjoy going into stores and doing their own shopping. But, this model unequivocally saves time, and it’s also professionally curated, so for us design-challenged folks, it yields better results, too.

The implication? It seems inevitable that Stitch Fix’s reach across the apparel retail landscape will only grow over time. This is a huge, huge market — $430 billion in the U.S. and United Kingdom alone. Stitch Fix is a small company — only $1.6 billion in revenue over the last twelve months. Thus, the opportunity for further growth here is tremendous.

All things considered, Stitch Fix should grow sales at a 20% pace over the next several years. During that stretch, operating margins should improve thanks to increased scale. Assuming so, then this company could be looking at $3.20 in earnings per share by 2025.

Based on a consumer discretionary sector-average 20-times forward earnings multiple, that equates to a 2024 price target for SFIX stock of $64 — up more than three-fold from today’s $20 price tag.

Author: Luke Lango

Source: Investor Place: 5 Lottery Stocks With Triple-Digit Upside

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