In less than a week, Wall Street will turn the page on what’s been a stellar year for optimists. The 30-component Dow Jones Industrial Average climbed to a record high, while the growth-driven Nasdaq Composite has surged 43% year to date, as of the closing bell on Dec. 22.
Though a lot of credit for this rally goes to the “Magnificent Seven,” it was an overall strong year for growth stocks. The U.S. economy continuing to chug along, coupled with the prospect of the Federal Reserve reducing interest rates in 2024, has investors incredibly bullish on fast-paced companies as a whole.
But no two growth stocks are cut from the same cloth. Based on the consensus price targets of Wall Street analysts, three growth stocks are expected to skyrocket in 2024.
Plug Power: Implied upside of 102%
The first supercharged growth stock that Wall Street, collectively, sees rising by triple digits in the new year is hydrogen fuel-cell solutions company Plug Power (NASDAQ: PLUG). Wall Street’s consensus price target of $9.13 per share implies that Plug’s stock could gain 102% in 2024.
Plug Power optimists are counting on a continued shift to renewable energy sources by developed countries. In an effort to reduce their carbon footprints, the world’s largest economies are promoting greener transportation. The expectation is for hydrogen fuel-cell vehicles, along with green hydrogen infrastructure, to be part of that equation.
Aside from landing a green hydrogen deal in 2022 with e-commerce and logistics juggernaut Amazon, Plug’s biggest wins came in early 2021. It received an equity investment from SK Group, as well as forged a joint venture with French automaker Renault. The partnership with SK Group will focus on bringing hydrogen fuel-cell vehicles and infrastructure to Asian markets, while the joint venture with Renault will tackle Europe’s light commercial vehicle market.
Unfortunately, Plug Power’s attempts to rapidly expand its green hydrogen ecosystem are costing a pretty penny. Although the company’s sales growth is topping 50% on an annual basis, its cost of revenue is growing at an even faster pace. Through the first nine months of 2023, Plug reported a net loss of more than $726 million.
To build on this point, Plug Power made clear when it reported its third-quarter operating results that it’s going to need additional capital. A “going concern” warning was also included in the company’s financial statements, which suggests it doesn’t have adequate capital on hand to cover its liabilities over the next 12 months.
Another problem for Plug Power’s shareholders is the company’s dilutive money-raising efforts. Five years ago, Plug Power had approximately 219 million shares outstanding. As of Sept. 30, 2023, the company had more than 624 million shares outstanding. Ongoing dilution to pay for the company’s aggressive expansion efforts is doing shareholders no favor. It’s also a big reason a $9.13 price target seems unachievable in 2024.
Lexicon Pharmaceuticals: Implied upside of 293%
A second growth stock expected to skyrocket in 2024, based on the collective forecast of Wall Street analysts, is small-cap biotech company Lexicon Pharmaceuticals (NASDAQ: LXRX). Lexicon shares closed out Dec. 22 at $1.31. However, Wall Street’s consensus one-year price target suggests they’ll head to $5.15, which represents upside of 293%!
Two factors look to be fueling this incredibly optimistic price target: the launch of Inpefa and the ongoing development of LX9211.
In May, Lexicon earned its first true win when Inpefa (scientifically known as sotagliflozin) was approved by the U.S. Food and Drug Administration (FDA) as a treatment to reduce heart failure in patients with type 2 diabetes, chronic kidney disease, and other cardiovascular risk factors. Sotagliflozin was previously rejected in 2019 by the FDA as a treatment for patients with type 1 diabetes.
Inpefa is unique in that it’s the first-approved SGLT1/SGLT2 inhibitor. Whereas a handful of SGLT2 inhibitors, which block glucose absorption in the kidneys, have found their way onto pharmacy shelves, a dual inhibitor (SGLT1 blocks glucose absorption in the intestines) hadn’t been approved until now. Although peak sales estimates vary, Inpefa is expected to ramp from around $4 million in sales in 2023 to potentially north of $500 million annually by 2028.
The other source of excitement is the late-stage development of LX9211, an AAK1 inhibitor that’s attempting to become the first non-opioid therapy for diabetic peripheral neuropathic pain in more than two decades. On Nov. 30, Lexicon enrolled its first patient in the phase 2b study that could expand the company’s product portfolio beyond Inpefa.
Similar to Plug Power, the biggest risk for Lexicon shareholders looks to be the prospect of dilution. Although Lexicon raised $143.7 million in gross proceeds by selling stock in June, operating losses are liable to continue as the company ramps up its marketing and branding efforts.
While I’m not convinced Lexicon has a shot at hitting $5 per share in 2024, a triple-digit percentage gain on the heels of Inpefa’s launch does seem doable in the new year.
Cassava Sciences: Implied upside of 316%
The third growth stock expected to skyrocket in 2024, according to Wall Street, is clinical-stage biotech company Cassava Sciences (NASDAQ: SAVA). Though shares ended the previous week at $23.94, Wall Street’s consensus price target for the company chimes in at a cool $99.50. For those of you keeping score at home, this represents upside potential of 316% in the new year.
Cassava Sciences first put itself on the map in 2021 when it released an interim analysis of its open-label phase 2b study involving simufilam for patients with Alzheimer’s disease. The first 50 people dosed with simufilam demonstrated mean improvements in cognition scores, as measured by the Alzheimer’s Disease Assessment Scale, at the six-, nine-, and 12-month mark. Considering how few drugs have been successful improving the quality of life for Alzheimer’s patients, optimists flocked to Cassava.
The company is currently in the midst of a randomized, 1900-patient, phase 3 trial with simufilam that’s expected to yield top-line 52-week results toward the end of 2024, with top-line 76-week results announced by mid-2025. With $142.4 million in cash and cash equivalents available as of Sept. 30, it would appear that Cassava has enough capital, and access to capital, to see this extensive trial through to completion.
On the other hand, Cassava Sciences has faced serious allegations that its trials are flawed. In particular, an investigative report by the City University of New York (CUNY) found that an associate professor at CUNY’s school of medicine may have deliberately falsified scientific findings in 14 out of 31 allegations. Though Cassava Sciences management team has repeatedly blamed short-sellers for pushing its stock lower, any validity to these allegations would be highly detrimental to the company and its only developed experimental therapy.
To add fuel to the fire, investors have witnessed a number of success stories when it comes to treating Alzheimer’s in phase 2 clinical trials only to see these same companies fall flat in expanded phase 3 studies. Historically, few late-stage indications have a poorer success rate than Alzheimer’s.
While it’d be great to see Alzheimer’s drugs succeed, it’s far more realistic to expect Cassava Sciences to fall well short of Wall Street’s lofty price target.
Should you invest $1,000 in Plug Power right now?
Before you buy stock in Plug Power, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Plug Power wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of December 18, 2023
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
3 Growth Stocks Expected to Skyrocket in 2024, According to Wall Street was originally published by The Motley Fool
Source: finance.yahoo.com