Growth stocks have performed notoriously poorly this year. In fact, many growth-focused companies, with huge valuations, have seen their share prices more than half.
Conditions aren’t exactly great for growth stocks right now either. Higher interest rates tend to push the cost of growth upwards, unless the company in question has sufficient cash reserves to fund growth — Moderna being a good example.
For me, now is a good time to buy. So here are three high-potential growth stocks I’m looking at for my portfolio.
Ceres Power
Ceres Power (LSE:CWR) is a UK-based leader in fuel cell technology, enabling the production of clean and low-cost energy. Its main product, SteelCell, uses a perforated sheet of steel with a ceramic layer that converts fuel directly into electrical power.
There is clearly huge potential here. Fuel cells could be used in everything from cars, to powering homes in more remote areas, and even supporting data centre operations.
Ceres is also expanding its operations rapidly. It also has lucrative partnerships with Bosch and Doosan Fuel Cell, with the latter expected to soft launch its 10kW SOFC product this year. The South Korea firm is scaling up production and will open a 79,200 sq m plant in 2024.
Ceres has also recently announced a partnership with Shell. It will provide the oil producer with its SOEC system to power R&D facilities in India.
With the share price falling this year, Ceres now trades with a price-to-sales (P/S) ratio of 34. It’s expensive, but that reflects the huge potential. I’d gladly add this stock to my portfolio.
NIO
I’m already a NIO (NYSE:NIO) shareholder, but I’m looking to buy more stock. However, although I think we’re going to see downward pressure on China-based stocks in the coming weeks, I believe the brand has great long-term potential.
NIO is on a Tesla-esque growth curve and its got a great USP. The Chinese electric vehicle maker uses battery-swapping technology to allow drivers to quickly return to full charge while on the road. The cars are also tech-packed and include gadgets like Nomi — an Alexa-like dashboard-mounted device that can open the windows for you, or even take a selfie.
The Chinese firm also looks cheap compared to its peers. It has a P/S ratio of 5.5, which is half that of Tesla and a fraction of US-based manufacturers.
I fear general economic woes in China may weigh on the share price in the coming weeks. But, again, I see the share price soaring in the long-run.
Twilio
US-based Twilio (NYSE:TWLO) provides programmable communication solutions for the telecommunications industry. It allows your smartphone apps to seamlessly connect with one another.
Like other growth stocks, its been a tough year for Twilio. But there is some positive news behind the share price. In the last quarter, organic revenue rose 35%, above expectations, while revenue (including takeovers) rose 48%.
Scotiabank initiated coverage of Twilio with a bullish ‘outperform’ rating in June. The broker’s price target of $215 implies 160% upside from $85.
I think the firm is still some distance from turning a profit, hence the $221m loss in the last quarter. However, I’d be willing to add this stock to my portfolio due to its long-term potential.
Twilio stock is down 76% over 12 months.
