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The bulk of today's great companies were once unproven start-ups with big ideas. The prospect of finding a stock that can compound severalfold over time is one of the most alluring aspects of investing in the stock market. But it can also be the most risky form of investing as there are many companies that underperform the stock market or even fail entirely.
Investing in hidden gems requires a great deal of patience and risk tolerance. And for most folks, it should only make up a small portion of a diversified portfolio. For those bold enough to venture into the unknown, LanzaTech Global (NASDAQ: LNZA), Nio (NYSE: NIO), and Joby Aviation (NYSE: JOBY) are three stocks that could have massive upside potential in addition to a great deal of risk. Here's why each growth stock could be worth a look.
This carbon capture innovator could deliver considerable growth
Scott Levine (LanzaTech): Global interest in carbon capture and storage is escalating. ExxonMobil, for example, estimates that the carbon capture and storage market could grow to $2 trillion by 2040 from an estimated $2.4 billion in 2022. In light of this market opportunity, LanzaTech is a compelling consideration.
Unlike some companies that plan on simply capturing carbon and storing it somewhere, LanzaTech captures the carbon and transforms it into new products. Currently, LanzaTech operates three facilities that use its gas fermentation platform to transform carbon into desired chemicals, and in 2023, the company plans on commencing operations at four more facilities. Eight facilities, moreover, are in development. This year operations are expected to start at the Freedom Pines Fuels facility in Georgia, where it will produce sustainable aviation fuel (SAF). Management projects that once the facility is operational, it will produce about 67% of SAF used in the United States. Additionally, the company expects to start operations at a steel mill in Europe and a refinery gas-to-ethanol facility in India during 2023.
In 2022, LanzaTech reported revenue of $37.3 million, about 47% higher than that which it reported in 2021. Management projects sales growing to $80 million to $120 million in 2023. With regard to the bottom of the income statement, management projects achieving adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $80 million in 2024 rising to $250 million in 2025.
A leader in a nascent industry, LanzaTech has the potential to provide significant returns for patient investors. However, a variety of risks surround the company as well, so investors should be mindful of carving out a portion of their portfolios commensurate with their tolerance for risk.
Nio stock is worth the risk
Daniel Foelber (Nio): Nio stock tumbled to a 52-week low on Tuesday and is now down a staggering 87.4% from its all-time high. The electric vehicle (EV) maker isn't expected to report earnings until June. Rather, the sell-off may be attributed market volatility, a weak earnings report by Tesla, and General Motors' announcement that it is ending production of its Chev…
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