When the markets crashed due to the pandemic, it seemed like the end of the world. However, dozens of stocks generated multiple returns over the next 12-18 months. The euphoric rally in growth stocks was largely over by the end of 2021. One of the main reasons was contractionary policies coupled with muted growth expectations.
While the markets are correcting, investors are pessimistic. However, the stage is also being prepared for the next rally. Over the decades, markets have continued to stay in an uptrend amid an intermediate correction. While economic headwinds may continue over the next few quarters, stocks bottomed long before the economy bottomed out.
It is therefore a good time to gradually accumulate growth stocks. In the event of further correction, the average of quality growth stocks may be reduced.
This column will focus on five growth stocks that can deliver multiple returns over the long term.
|LI||Li Auto Inc.||$39.21|
|RADA||RADA Electronic Industries Ltd.||$10.53|
|TLRY||Tilray Brands, Inc.||$3.38|
|LAKE||Lithium Americas Corp.||$21.22|
Growth stocks to buy: Li Auto (LI)
Over a period of six months, Li-Auto (NASDAQ:LI) outperformed among electric vehicle (EV) stocks. Almost all major electric vehicle stocks generated negative returns during this period. On the other hand, the LI stock is 19% higher.
I further believe that LI stock is positioned to be a value creator in the years to come. It should be noted that the company still only has one electric vehicle model launched in November 2019. The model, LI ONE, led to strong growth in deliveries, and Li Auto also recorded positive free cash flow.
Recently, the company unveiled the Li L9, which is a six-seater full-size flagship SUV. Deliveries of the SUV will begin in August 2022. This is a potential catalyst for growth in deliveries through 2023.
It should also be noted that Li reported cash and cash equivalents of $8 billion in the first quarter of 2022. There is ample financial flexibility to invest in aggressive store expansion, product development, and expansion of the manufacturing. Overall, Li stock is among the quality EV stocks that are positioned to offer multiple returns.
Electronic Rada (RADA)
With the defense sector in the spotlight due to rising geopolitical tensions, Electronic Rada (NASDAQ:RADA) is worth keeping. The emerging defense company specializing in tactical radars has a total addressable market of $6 billion.
Recently, Rada Electronic announced an equity merger agreement with Leonard DRS. The latter is a supplier of advanced defense electronics products and technologies. For 2021, the combined entity is expected to record revenue of $2.7 billion and adjusted EBITDA of $305 million.
The merger is likely to create value, with the addressable market growing to $19 billion. Additionally, with a strong balance sheet, the company will be positioned for aggressive international expansion.
Over the long term, the merged entity is likely to generate revenue growth of a medium to high compound annual growth rate (CAGR). With a strong credit profile, the company also expects further inorganic growth.
With favorable winds in the industry, the merger seems to have come at the right time. I believe that RADA shares can be considered for multiple returns.
Growth Stock to Buy: Tilray (TLRY)
After an 81% correction over the past 12 months, Tilray (NASDAQ:TLRY) looks ready for a reversal. I believe there are several positive catalysts in the next few years for TLRY stocks.
For example, the legalization of cannabis at the federal level is always a consideration. This possibility will open up a large addressable market and the TLRY stock will likely rise.
It should also be noted that for the third quarter of 2022, Tilray recorded revenue of $152 million. On an annual basis, turnover increased by 23%. Revenue growth is expected to accelerate as medical cannabis also gains traction.
Tilray outlined plans to generate $4.0 billion in revenue by 2024. A key part of that plan is to accelerate growth in the wellness space. I also think further consolidation is needed in the industry. The Tilray-Aphria merger could be just the start of inorganic growth for the company.
Overall, TLRY stock looks significantly oversold. It should be noted that 16 analysts have a 12-month futures price forecast (median) of $7 for the stock. That in itself would imply over 100% returns from the current $3.3 levels.
Lithium Americas (LAC)
Lithium Americas (NYSE:LAKE) is another quality name among growth stocks to buy. After a correction of 27% since the beginning of the year, the LAC stock is in an accumulation zone.
Lithium demand will remain strong in the long term with the growing adoption of electric vehicles. Lithium Americas is well positioned to meet this demand with high quality assets.
The company’s Thacker Pass project has a lifespan of 46 years and an after-tax net present value of $2.6 billion. The company also has a 44.8% stake in Cauchari-Olaroz, which can generate an annualized EBITDA of $308 million.
Once these assets are operational, the company has strong EBITDA and cash flow potential. It is important to note that if lithium remains in a long-term uptrend, the NPV of the assets is likely to be higher.
Currently, Lithium Americas has $500 million in cash and cash equivalents. This will ensure a steady development of the projects. With the commissioning of Cauchari-Olaroz scheduled for the second half of 2022, there is a potential catalyst for the stock to rise in the short term.
Growth Stock to Buy: Coupang (CPNG)
After registration, coupang (NYSE:CPNG) the stock had hit highs of $46. There has been a massive correction over the past six months and the stock is trading at $12.2. I believe CPNG shares are oversold and poised for a comeback rally.
One of the main reasons to be positive about Coupang is the clarity of the company’s profitability and cash burn scenario. The company expects a long-term EBITDA margin in the range of 7% to 10%. Coupang also expects to report positive Adjusted EBITDA by Q4 2022.
Coupang has also seen steady growth in revenue per active customer. Once marketing and sales expenses stabilize, ARPU growth should ensure EBITDA margin expansion.
It should also be noted that the total number of Korean online shoppers is estimated at 37 million. Coupang has 18 million active customers. Therefore, there is ample opportunity to reach a wider market. This factor, together with international expansion, is likely to ensure continued healthy growth.
As of the date of publication, Faisal Humayun does not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.