When it comes to stocks to buy, electric vehicle (EV) darling Tesla (NASDAQ:TSLA) has proven to be a great long-term investment, soaring nearly 400% over the past 52 weeks and splitting its stock five-for-one during the period. Bradford Cornell of the Anderson School of Management at UCLA highlights, “Although stock splits have no fundamental impact on value, Tesla’s stock price rose 17.94% in the 2 days following the split—adding almost $50 billion in market value.”
The explosive move in Tesla’s share price shows the powerful investor momentum here. TSLA stock’s performance over the past decade has been even more impressive, generating an outstanding return of over 12,700% in a decade. That is a compound annual growth rate (CAGR) of over 60% a year.
So, are you one of the investors looking for the next Tesla? The market potentially has a number of stocks with explosive short-term gains. However, not many would necessarily achieve sustained growth over a decade.
How can you identify the stocks that carry such growth potential? First of all, the company should serve a mass market that promises rapid growth potential. The business should also have growing revenues leading to profits. It should also be an innovator or disruptor, whether through its product, service, technology or management style. Finally, a successful growth firm puts people — including employees, customers, suppliers and other stakeholders — at the center of everything it does.
So, with this in mind, here are seven stocks to buy that are positioned to be the next Tesla in terms of generating shareholder value. They all carry robust growth potential for the road to economic recovery and beyond:
- Blink Charging (NASDAQ:BLNK)
- Chipotle Mexican Grill (NYSE:CMG)
- DocuSign (NASDAQ:DOCU)
- DraftKings (NASDAQ:DKNG)
- Fiverr International (NYSE:FVRR)
- Nio (NYSE:NIO)
- Taiwan Semiconductor Manufacturing (NYSE:TSM)
Stocks to Buy: Blink Charging (BLNK)
52-week range: $1.55 – 64.50
Year-to-date (YTD) change: Down about 13%
In addition to EV companies, alternative energy shares have also gained significant attention as investors search for the next Tesla. More specifically, charging infrastructure is becoming increasingly important in the adoption of EVs.
Blink Charging operates over 23,000 EV charging stations and offers residential and commercial charging equipment. Plus, with a current market capitalization of $1.48 billion, it certainly has more room for growth.
On Mar. 25, Blink announced its fourth-quarter and full-year results. Quarterly revenue went up by 250% to $2.5 million, compared to $700,00 for Q4 2019. Net loss came at $7.9 million or 24 cents per basic and diluted share. A year ago, Blink had a net loss of $2.9 million or 11 cents for the quarter. Finally, cash and marketable securities came to $22.3 million compared to $7.1 million a year prior. Looking forward, CFO Michael Rama cited:
“In January, we completed a successful equity raise, significantly strengthening our balance sheet, which will enable us to continue our growth at a systematic and accelerated pace. Our growth will continue both organically and through targeted acquisitions as we look to grow our footprint of EV chargers.”
Because this company owns and operates its charging stations, raising cash to grow operations has been necessary over the past year. At these stations, Blink charges a margin on the cost of the electricity offered. However, the company’s charging revenue is not enough to make it profitable any time soon. Thus, its current stock valuation is extremely high.
Over the past year, BLNK stock shares are up over 2000%. Right now, the stock’s forward price-sales (P/S) and price-book (P/B) ratios stand at 138.89 and 49.43, respectively. So, potential investors could wait for a further pullback closer toward the $30 level. That would make BLNK one of the better stocks to buy.
Chipotle Mexican Grill (CMG)
52-week range: $856.50 – $1,579.52
YTD change: Up about 7%
Our next name on this list of stocks to buy is Chipotle Mexican Grill, one of the largest players in the domestic, fast-casual Mexican restaurant segment. In 2020, Chipotle made sales of nearly $6 billion. As of December 2020, the firm also operates some 2,700 company-owned restaurants in the United States, Canada and Europe.
Chipotle reported Q1 results on Apr. 21. For starters, the company’s revenue increased 23.4% year-over-year (YOY) to $1.7 billion. While comparable restaurant sales increased 17.2% YOY, CMG’s digital sales grew almost 134% and accounted for over 50% of sales. Adjusted diluted earnings per share (EPS) came at $5.36. During the quarter, Chipotle also closed five restaurants but opened 40 new ones. On the results, CEO Brian Niccol said the following:
“Chipotle is off to a great start in 2021 […] As vaccines roll out and we get closer to moving past this pandemic, I believe Chipotle is well positioned for growth. I’m excited about our future as we remain focused on innovating.”
This restaurant group managed to adapt to the pandemic by integrating digital ordering further into its business model. As a result, its stores relied less on physical customer visits. CMG has even been adding drive-thru pick-up lanes into its restaurants to improve this adaptability.
For the past year, CMG stock is up a little over 68%. Its forward price-earnings (P/E) and P/S ratios are 60.89 and 5.63, respectively. That said, a potential decline toward the $1,400 level would make this name more attractive long-term.
Stocks to Buy: Docusign (DOCU)
52-week range: $100.71 – 290.23
YTD change: Up about 4%
Next on this list of stocks to buy is DOCU stock. Founded in 2003, this San Francisco-based group offers electronic signature solutions as well as a range of office-productivity software. It currently has around half a million customers worldwide and many more users. Additionally, many top pharmaceutical and financial companies subscribe to its products.
On Mar. 11, Docusign released robust Q4 and fiscal 2021 results. Quarterly revenue was up 57% YOY to $430.9 million. Of that amount, $410.2 million was “subscription revenue” while professional services and other revenue accounted for the remaining $20.7 million. Non-GAAP net income per diluted share was 37 cents on 209 million shares outstanding. A year ago, it had been 12 cents on 194 million shares. Finally, at the end of the quarter, DOCU’s cash and equivalents came to $866.5 million.
CEO Dan Springer spoke on the results. He noted that in fiscal 2021, DocuSign grew its “business nearly 50%, reached almost $1.5 billion in revenues, and achieved a record net retention rate of 123%.” He continued, “We believe this performance represents an acceleration of the ongoing trend towards the digital transformation of agreements.”
DOCU stock’s price is up about 121% over the past 12 months. Moreover, its forward P/E and P/S ratios are 180.8 and 23.10, respectively. By traditional valuation measures, these metrics are very frothy, even for a growth firm. So, in the case of profit-taking, a move toward $210 would improve the margin of safety for potential investors. Today the stock trades at around $230.
52-week range: $18 – 74.38
YTD change: Up about 29%
Draftkings is a digital sports entertainment and gaming company. It mainly offers daily fantasy sports (DFS), sports betting and iGaming opportunities.
Draftkings reported fourth-quarter and full-year 2020 results back in late February. For the three months ended Dec. 31, the group reported revenue of $322 million, an increase of 98% YOY. Management also raised its fiscal year 2021 revenue guidance to a range of $900 million to $1 billion. That equates to a YOY growth rate of 40% to 55%. In the report, CEO Jason Robins cited the following:
“With a favorable fourth quarter sports calendar and strong marketing execution, DraftKings was able to generate tremendous customer acquisition and engagement that propelled us to $322 million in fourth quarter revenue, a 98% year over year increase.”
This company is growing rapidly and forming partnerships with major brands, such a the National Football League (NFL). It is now an official sports betting partner for the NFL, which gives the company access to key NFL media properties like the league’s website and app. However, although DKNG’s revenue growth is impressive, investors should note that its bottom line remains unprofitable. Draftkings is also burning through significant amounts of cash.
DKNG stock is up about 212% in the past 12 months. Right now, its forward P/S ratio is 22.96. In the case of short-term profit-taking, investors could consider investing at around the $50 level for this pick of the stocks to buy.
Stocks to Buy: Fiverr (FVRR)
52-week range: $36.91 – $336
YTD change: Up about 18%
Based in Tel Aviv, Israel, Fiverr International operates an online global marketplace for freelancers offering services in some 300 categories, including graphic design, digital marketing, programming, video and animation. Businesses of various sizes use the platform to purchase these services.
Fiverr reported results for Q4 and full-year 2020 on Feb. 18. Quarterly revenue increased 89% YOY to $55.9 million. Non-GAAP net income was $4.8 million, or 12 cents per diluted share, compared to a net loss of $2.7 million or 8 cents in the prior-year quarter. On the results, CEO and founder Micha Kaufman said the following:
“2020 was a landmark year for our business with 77% year over year revenue growth driven largely by bringing more freelancers and businesses together during a critical time of global change.”
Fiverr’s CFO, Ofer Katz, added, “We believe the strong momentum is carrying into 2021 and the increased awareness and adoption of digital freelancing services will continue to provide tailwinds for our business.”
Fiverr has grown rapidly in the past 12 months as the pandemic forced many to work from home. As demand increased, FVRR stock soared over 505%. Today, it’s hovering around $225 per share.
Remote-working is here stay in the long-run, which bodes well for this name. That said, FVRR stock has had a significant run-up in price. Now is the time to be careful. As the earning season continues and many businesses look to return to the pre-pandemic modes of operation, I expect selling pressure in the shares. For this pick of the stocks to buy, a potential decline toward $200 would improve the margin of safety for investors.
52-week range: $3.08 – $66.99
YTD change: Down about 14%
Next up on this list of stocks to buy is NIO stock, a Chinese EV maker. Shares of NIO have become a proxy for Tesla stock. Following the lows seen in March 2020, the stock took off and never looked back. Now in the past 12 months, NIO has returned over 1300%. Put another way, $1,000 invested in NIO last April would now be worth close to $13,250.
Nio announced Q4 and full-year 2020 results back on Mar. 1. Vehicle sales were $946 million in the fourth quarter, an increase of 130% YOY. Total revenue also came at a little over $1 billion in Q4, up 133% from the prior year. But Nio also delivered a wider-than-expected loss for the quarter. Adjusted non-GAAP net loss was about $204 million or 14 cents per diluted share. Finally, cash and equivalents were $6.5 billion as of Dec. 31, 2020.
Currently, China remains the world’s largest EV market. In 2021, EV sales are expected to rise 40% to 1.8 million units in China. Moreover, Nio is likely to benefit further from the government’s efforts to accelerate EV adoption. For instance, the Chinese state-owned oil and gas group Sinopec Shanghai Petrochemical (NYSE:SHI) and Nio recently announced that they will build battery swap stations.
Regular InvestorPlace.com readers should be familiar with how Nio aims to differentiate itself with its battery-as-a-service (BaaS) strategy. With a battery swap, a car can get a new battery in under an hour, as opposed to recharging for over an hour. Analysts concur this service will become an important of part of Nio’s growth story.
In recent weeks, NIO stock has given up some of its annual gains. Therefore, interested investors now have a better entry point. Any decline below $40 would make this name even more attractive for long-term buyers.
Stocks to Buy: Taiwan Semiconductor Manufacturing (TSM)
52-week range: $49.38 – $142.20
YTD change: Up about 11%
Taiwan Semiconductor Manufacturing is the world’s largest semiconductor foundry. The company is highly regarded for its semiconductor process technology, dominating the fabrication side of the semiconductor space.
In mid-April, TSM announced Q1 results. Revenue for the quarter came in at $12.92 billion, an increase of over 25% YOY and nearly 2% over the previous quarter. Diluted EPS was also 96 cents per ADR unit. Management highlighted the following:
“In the first quarter, shipments of 5-nanometer accounted for 14% of total wafer revenue; 7- nanometer accounted for 35%. Advanced technologies, defined as 7-nanometer and more advanced technologies, accounted for 49% of total wafer revenue.”
For the past 52 weeks, TSM stock is up close to 129%. This name’s forward P/E and P/S ratios are also 30.61 and 10.05, respectively. For this pick of the stocks to buy, a decline below the $110 level would improve the margin of safety. That said, the recent global chip shortage should mean strong demand for the company for the remainder of 2021.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.