Growth stocks certainly haven’t been in fashion this year. With inflation and interest rates rising, investors have sought value and dividends.
But after a sustained fall impacted very many growth stocks over the past six to 10 months, valuations have become much more attractive.
I’m looking at two stocks, NIO (NASDAQ:NIO) and Darktrace (LSE:DARK), to boost my portfolio. I’ve already bought both, but at their current prices, I’m looking to buy more. I’m also wondering whether I can double my money with these two stocks.
NIO
NIO is down 58% over the past 12 months. In fact, it fell further in April, before rising in May.
NIO is one of the most promising EV makers in the world. While it’s not anticipated to turn a profit until 2024, it’s trading with a price-to-sales (P/S) ratio of just 4.5. That means it’s much cheaper than US peers like Tesla (14) or Rivian and Lucid that both trade with P/S ratios above 100.
Based on this metric, I can see that if the NIO share price were to double, it would still be cheaper, based on its P/S, than sector leader Tesla. NIO is currently valued at $18 a share. If it were to reach $36, it would remain far below its year high of $55.
So, could I double my money with NIO stock? It’s certainly possible. I’m actually very bullish on NIO because of its impressive range of EVs and use of battery swapping technology. The latter allows users to swap their empty batteries for full ones at NIO garages in a matter of minutes.
One concern is Chinese Covid lockdowns which could hurt production and demand.
I bought NIO stock when it dipped in May, but would buy more at the current price.
Darktrace
Darktrace fell considerably in May. It has since recovered and is up nearly 10% against 12 months ago. But it still trades at less than half of its year high. Investors have struggled to value this stock, which has huge potential.
Like a number of its peers, the AI cyber-security firm appears to be benefiting from a renewed focus on cybersecurity following Russia’s invasion of Ukraine.
Darktrace is on an impressive growth curve, although some analysts have questioned its sustainability. Total revenue increased from $79.4m in the year to June 2018, to $281m in the year to June 2021. Revenue for latest four quarters is $347.5m.
So, could I double my money with Darktrace? Well, Jefferies has a 730p target price on the stock, almost double the current share price. Other brokers have similar targets.
It also trades with multiples considerably below its peers. Its P/S ratio is around 9, while peer CrowdStrike has a P/S ratio of around 22. So even if the Darktrace share price doubled, it would still appear cheaper than several peers.
I’m bullish on Darktrace, although some analysts are concerned about increasing competition in the space.
It’s certainly possible that these two stocks’ prices could double based on their peers’ valuations and even their own valuations over the past year. They’re both on an impressive growth curve but need to sustain that growth to drive the share prices much higher.
That growth isn’t guaranteed and there are hurdles ahead, but I’d still buy both.
