Many growth stocks struggled in recent weeks amid COVID-19 uncertainty and just how our economic recovery might turn out in the weeks ahead. Research company Ipsos confirms that there has been a “great decline” in consumer confidence in the United States this month, and globally, there was a relatively small 0.2 basis point improvement in the index from last month.
Those issues are showing on the market, as there are more buying opportunities than there were only a few months back when hopes were better. But analysts, who usually set stock price targets going into the next 18 months, are optimistic about the following two stocks: GrowGeneration and Boston Beer Company. Many analysts think these stocks can increase by over 70%, and it is hard to argue with these projections.
Gardening and Hydroponics company GrowGeneration has been performing well, but shares of the company are now lower 27% year to date — far under the S&P 500’s gains of 18%. The company is coming away from a strong Q1 performance where their sales of $126 million for the time period ending June 30 were higher 190% y/y. It even increased its guidance and predicts the top line for next year to be between $455 million and $475 million — even at the lower range, that would be a y/y increase of 136%.
But what could cause investors to be wary of the investment is that GrowGeneration is not cheap. While the business is profitable, investors are giving a multiple of 100 times earnings for the stock. On the SPDR S&P 500 ETF Trust, 26 times profits is the average.
However, given this company’s growth opportunities inside the cannabis industry and the possibility for GrowGeneration to give more growers the supplies they need to cultivate marijuana, there is still lots of potential.
2. Boston Beer
Boston Beer had an underwhelming performance in its Q2 results, which were published in July. Although the company’s net sales of $603 million for the time frame ending June 26 were higher by 33% y/y, that fell under the $658 million that analysts were anticipating. Its per-share profit of $4.75 was also under forecasts of $6.69.
Overzealous forecasting might be to blame, as the company admitted within its press release that it “overestimated our growth in the hard seltzer sector.” Hard seltzer, which has less calories than many other alcoholic drinks, has been sky-rocketing amid the pandemic.
Although things are slowing down, the company’s popularity in hard seltzer might again translate into strong sales numbers if the delta variant does not derail the economy’s reopening. In the previous two periods, Boston Beer’s net sales have gone up by 65% and 53%, respectively. And hard seltzer sales have been crucial to the company’s strong numbers.
Shares of Boston Beer are lower by 40% in the past six months (the S&P 500 is higher by 15%), weighed down greatly by the earnings mishap. But for investors, this might be a great opportunity to buy. Numerous analysts here have made their price targets of well more than $1,000 for the stock, representing a huge upside of over 70%. Some even believe the growth stock might more than double in value.
Author: Blake Ambrose