The name of the game is growth; that’s what investors are looking for. Growth ensures profits, profits boost share prices, and higher share prices are the investor’s goal. In truth, this should not come as a surprise; the S&P 500 is up over 20% year-to-date, and statistically speaking, that sort of gain must encompass some stocks that are growing far faster.
We’ve opened up TipRanks’ Best Stocks to Buy to find three buy-rated stocks that have more than doubled so far in 2019. But more importantly, analysts believe there's more upside in store heading into 2020; all three of these stocks show more than 30% upside potential. The stocks cover a wide range of market sectors – social media, online games, and biotechnology – reflecting the market reality that great opportunities abound, for investors willing to look.
Sea Limited (SE)
The online gaming sector has the benefit of devoted fans who will eagerly snap up their favorite companies’ latest offerings – but it has the risk of a tech-savvy fan base that won’t be amused by substandard offerings. Sea Limited owns and maintains a number of active titles in the Battle Royale genre, including Free Fire and Ring of Elysium. The company’s PUBG Lite was the most popular Battle Royale mobile game in South East Asia in the third quarter of this year, followed by SE’s Garena Free Fire. SE games rank among the top 10 grossing ranks in 51 as of this past September.
Popular games are the path to profits, and SE announced a 203% year-over-year revenue gain in Q2 2019, reporting $665.4 million compared to $219.6 million in the prior-year quarter. Quarterly active users (QAU) gained 93% year-over-year, reaching 310.5 million. Of that total, 8.4% were quarterly paying users – more than double the year-ago number. With pre-registration starting for Call of Duty: Mobile, a collaboration with online giants Activision Tencent, Sea has excellent prospects to keep increasing its active and paying user numbers. The strongly positive outlook has pushed this stock up 151% year-to-date.
Credit Suisse analyst Varun Ahuja was duly impressed. He reiterated his Outperform rating (an equivalent to Buy), while slightly increasing the price target from $43 to $44. His price target suggests a robust 54% upside potential. (To watch Ahuja's track record, click here)
Ahuja wrote, “For 3Q19, we are building in gaming revenue to grow by c.4% QoQ as the growth in Free Fire is likely to be offset by slowdown in other mobile games… SEA Ltd's stock price has corrected by c.15% post the 2Q19 results. We see the correction as a strong accumulating opportunity given that its underlying fundamentals remain solid.”
JPMorgan's team added, “SE’s share price declined by 9% on 8 October (CCMP -1.7%). Different investors attributed the sell-off to different reasons. Interestingly though, none of the factors created a major concern on their own but together resulted in a sell-off in a weak market. We remain OW on SE and see improving monthly gaming revenues…” The firm gives this stock a $41 price target, indicative of a 43% upside.
So, the consensus on SE is ‘buy the dip.’ The stock has a Strong Buy consensus rating, based on 5 positive reviews in the last three months. Shares or selling for $28.50, and the $44 average price target suggests an upside potential of 54%. (Sea Limited stock analysis on TipRanks)
Snap, Inc. (SNAP)
With Snap, we get into social media. The popular Snapchat app allows users to put a variety of funny filters on their smartphone photos, use image messaging, chat and exchange images with other users, and create and share ephemeral online ‘stories.’ The company’s other products include Spectacles, a wearable camera, and Bitmoji, a personalized sticker spin-off of the popular Bitstrip cartoon app.
Snap went public in 2017 and has been volatile ever since. The market downturn in 2H 2018 hit the company hard, and shares lost 64%. SNAP has recovered since and is now trading 179% higher than its December 2018 bottom. For the year-to-date, SNAP is up 153%.
In its most recent earnings report, for Q3, SNAP reported a series of strong metrics. Daily active users were up to 210 million, revenues were up to $446 million, and the reported loss per share was 4 cents. The forecasts had called for 207 million DAUs, revenues of $435.1 million, and a 5 cent EPS loss. The gains were welcome news, because the company lowered guidance for forward revenues, to the $540 to $560 million range, while the expectation had been for $555. Shares slipped on the lower guidance.
Top analysts see SNAP’s recent share price slip as a buying opportunity. Writing from JPMorgan, 5-star analyst Doug Anmuth said, “We believe Snap shares are increasingly compelling following a 20%+ pullback from recent highs and after delivering 3Q results that we believe showed more encouraging trends. Importantly, we believe that Snap's platform and business have both improved dramatically over the past several quarters…” Anmuth’s $20 price target implies an upside potential of 43%. (To watch Anmuth's track record, click here)
Ross Sandler, from Barclays, also gives SNAP a Buy rating, explaining his stance with several points: “We are Overweight based on 5 key elements: 1) SNAP’s Ad revenue headwind is almost done, 2) the overall narrative may change in 2019, 3) new Ad formats could help starting 1Q19, 4) short interest is high, and 5) SNAP could see stronger user growth in early 2019.”
SNAP’s analyst consensus rating is a Moderate Buy, based on 11 Buys and 10 Holds set in the past three months. The average price target of $18.82 suggests a healthy upside potential of 34% from the current trading price of $13.96. (See Snap stock analysis on TipRanks)
The biotech industry is known for its high upside potential, and also its risk. This is not a field for fainthearted investors – it is capital intensive, and slow to show returns. A failed drug trial or a denial of regulatory approval can spell ruin. But once a new product shows its worth, the profits can be staggering. So, it should come as no surprise that NovoCure stock shows a 43% upside potential.
The company inhabits the cancer treatment niche. The company’s product, Optune, is not a drug; rather, it uses specially tuned electrical fields (Tumor Treating Fields) to disrupt the growth and division of cancer cells in tumors. Optune was designed to combat recurrent glioblastoma, and received FDA approval in 2015. The company currently markets the treatment system actively in the United States, Europe (Germany, Austria, Switzerland, and Sweden), Israel, and Japan.
NovoCure’s pipeline includes trials of Optune as a treatment for six other cancers: non-small cell lung cancer (NSCLC), liver cancer, pancreatic cancer, ovarian cancer, liver cancer, and mesothelioma. These trials of Tumor Treating Fields have reached Phase 3 as of this year.
A unique product, with FDA approval, and the prospect of applications beyond its original target are all positive aspects for a biotech company, and NovoCure’s earnings and revenues have reflected this. Like many small to medium biotech startups, the company is still in the red, but earnings are on an upward trajectory and have beaten the forecasts twice in the last four quarters. In the most recent report, for Q2 2019, NVCR showed a loss of 1 cent per share, well ahead of the forecast 7 cent loss and far better than the year-ago loss of 17 cents. Revenues came in at $86.7 million, beating the estimates by 6.4%. Despite a slip in recent weeks, NVCR stock is up 104% so far this year.
This company’s strong performance has attracted a laudatory review from Oppenheimer. Analyst Esther Rajavelu set a Buy rating and raised her price target by 14%, to $97, saying, “We raise our PT as we now better appreciate the incremental Optune GBM revenue potential if used in conjunction with radiation therapy (vs post radiation). While a registrational trial and regulatory approval will be required prior to use, we view this incremental patient pool as low hanging opportunity beginning in 2023…” Her target indicates confidence in a 42% upside to the stock.
With 3 Buy ratings given in the last three months, NVCR has a Strong Buy from the analyst consensus. The stock sells for $68.30, and the average price target of $97 implies room for a 43% upside. (See NovoCure stock analysis on TipRanks)