Want a 54% to 244% Return? Try These Growth Stocks, Wall Street Says

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The new year is still fresh, but the stock market is off to a bumpy start to 2022. The S&P 500 index, which is followed for its diverse array of sectors, has already fallen by 2.4% since Jan. 1. 

The technology sector has fared even worse, but that presents some opportunities given its history of, and potential for, high growth over the long term. Some individual tech stocks in particular have received a strong vote of confidence from Wall Street analyst firms for their innovative business models focused on driving the future. 

These two could supercharge your portfolio this year with a potential upside of 54% to 244%, according to analysts.

Image source: Getty Images.

1. Unity Software: Implied upside of 54%

When it comes to platform technology, you’d be hard-pressed finding a more exciting company than Unity Software (NYSE:U). It’s effectively an advanced creative studio for programmers and developers, whether they’re making games, films, or 3D renderings for industrial purposes. But since it supports virtual and augmented reality, its most exciting future use might rest with the metaverse.

The company’s flagship Unity Pro is a full-service platform for game developers from creation to operation. It allows developers to build their product and deploy it to closed platforms like Sony‘s PlayStation, and Microsoft‘s (NASDAQ:MSFT) Xbox. Then, Unity Pro offers analytics on player behavior, an advertising solution, and a plug-in for in-app purchases. In 2020, over 50% of all mobile, console, and PC games were made with Unity. 

The company has experienced tremendous growth recently, especially among its highest-spending customer base. At the end of 2019, it had 600 customers that each spent $100,000 or more annually. And in the most recent period, the third quarter of 2021, that number grew to 973, a 62% increase in less than two years. Naturally, this has driven a surge in revenue.

Metric

2019

2021 (Estimate)

CAGR

Revenue

$541 million

$1.08 billion

41%

Data source: Unity Software. CAGR = compound annual growth rate. 

Unity’s 2021 estimate is pending its official fourth-quarter result. But in 2022, analysts are expecting revenue to exceed $1.4 billion and for the company’s net loss per share to inch closer to breakeven. If revenue growth continues at the current pace, profitability won’t be far off.

Wall Street investment bank Morgan Stanley has a $185 price target on Unity’s stock, a 54% gain from the current price of $120. But as developers turn their attention to the metaverse, which could be an $800 billion opportunity by 2024, investors might find Morgan Stanley’s price target to be conservative over the long term. 

Image source: Getty Images.

2. C3.ai: Implied upside of 244%

Enterprise artificial intelligence (AI) company C3.ai (NYSE:AI) has blazed its own trail in an emerging high-tech industry. Most companies don’t have the resources (nor can they attract the talent) to build their own AI applications in-house. C3.ai fills that gap with a suite of pre-built solutions that can be fully customized to meet the needs of companies in 14 different industries.

AI delivers unprecedented benefits in the business world. Its predictive capabilities can help forecast consumer trends, or even anticipate crucial equipment failures, which is how oil and gas companies use C3.ai’s applications. The fossil fuel industry is a prime example of a legacy sector that lacks the technological resources to build its own AI tools, and that’s why C3.ai has developed an entire portfolio specifically for it in collaboration with oil services company Baker Hughes

C3.ai is also being recognized by its peers in the tech industry. It has collaborations with the cloud computing arms of Microsoft and Alphabet‘s Google. Together, the companies are leveraging AI to help a range of industries including manufacturing, healthcare, and financial services.

C3.ai’s customer base has exploded by 395% from 21 in fiscal 2019 to 104 today, highlighting soaring demand for advanced AI applications.

Metric

Fiscal 2019

Fiscal 2022 (Estimate)

CAGR

Revenue

$92 million

$249 million

39%

Data source: C3.ai, Yahoo! Finance.

C3.ai’s stock has fallen by 83% from its all-time high, as investors appear to have initially overestimated the company’s growth rate. But that presents an enticing opportunity to buy it at a heavy discount, especially given the significant growth in customer numbers, which is likely to accelerate in the future as more companies seek the benefits of AI.

Wall Street firm Needham has attached a $103 price target to C3.ai’s stock, which represents a whopping 244% gain from today’s price. That’s an encouraging thumbs-up, especially when considered alongside the heavy-hitting tech titans C3.ai is working with. This stock could really supercharge your portfolio in 2022 and beyond.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.