Stocks To Watch In 2023
(Last Updated On: 12. January 2023)
If case you have read Peter Lynch’s book “One up on Wall Street“*, you should be familiar with his invented term “tenbagger”. If not: a tenbagger is a stock with the potential to increase in its price tenfold. There are a lot of opportunities out there, you just need to seek for them. Especially in the most welcome bear market 2022, there are even more opportunities for tenbaggers or even bigger ones (I call them x-baggers). In this article I’ll show you my personal favorite stocks to watch in 2023.
Disclaimer: I am NOT a financial advisor. I’m using information sources believed to be reliable, but their accuracy cannot be guaranteed. The information I publish is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website.
The Lovesac Company
About the company
Lovesac is an American furniture designer and retailer, specializing in a patented premium modular furniture system called Sactionals. Lovesac also sells so-called Sacs, a bag seat filled with a foam mixture. Another big brand of Lovesac is called StealthTec which represents furniture with integrated cinema speakers for a unique 5.1 Dolby Surround experience at home. Lovesac’s products are sold across the United States via its website or company-owned retail stores, a lot of them located in shopping malls.
Why to watch this stock in 2023?
Key Figures
Reported EPS
From the quarterly point of view, you won’t see a “smooth” increase but rather a “shaky” development of the earnings per share:
But on the annual basis, the EPS improved 4 years in a row and in 2020 got positive, even during the COVID-19 pandemic.
Revenue
We have the same picture in the revenue:
EPS past 5 years: 49.10%
EPS next 5 years (estimated): 30%
Overview
During the Q3 2022, the industry backdrop remained challenging. Given the significant inflationary pressures that U.S. consumer is facing, Lovesac observed that the furniture category overall is down off late in the mid-teens percent wise versus last year. Despite this operating environment, Lovesac delivered strong results against tough comparisons from a record set in Q3 2021.
Lovesac’s consecutive outperformance and market share gains are a testament to its differentiated business model, including its value proposition and patented innovation, design for life platform, foundation of sustainability, inflecting brand awareness, and consumer adoption, with an industry leading in-stock position.
One of the advantages of Lovesac’s is its inventory which is not seasonal and is designed intentionally to carry little to no fashion risk. It is primarily made up of just a few key evergreen stock keeping units.
Latest commercial achievements
- Total net sales were 134.8 million, up 15.5% versus the prior year period.
- Total comparable sales growth in Q3 2022 was 8.9% with broad based strength from both new and existing customers.
- Adjusted EBITDA loss of 8.4 million was better than the expectations for the quarter, driven by the better than planned gross margin declines.
- Lovesac has already repurposed more than 159 million plastic bottles to date (Q3 2022), converting them to Sactionals and Saks upholstery fabric, which is made from 100% recycled input.
- There is an enormous progress with Lovesac’s brand called StealthTech, which was a game changer. The brand continues to gain market share and could have the ability to generate hundreds of millions annually.
- Collaboration agreement with Alica + Olivia in September 2022
- Partnership with Disney to increase the viewing experience of the consumer
- Partnership with PredictSpring as a pilot, a world-class POS vendor, with the purpose to increase transaction efficiency and set the foundation of the continued growth
- Re-launch of the web configurator on Lovesac’s website for a better consumer experience by introducing augmented reality
Costs
Lovesac continues to be very disciplined on the cost side, while still investing across the business in support of its growth initiatives. Coming off four years of nearly 50% growth rates, headcount growth has always lagged.
Also, Lovesac sees a notable cost release, especially on the in-bound freight side, and the company is starting to see some benefit come through in Q4 with most of the benefit expected to be realized in 2023.
However, the much discussed inflationary pressures across key cost items continues to impact the overall cost base with labor as a notable example. Lovesac continues to deploy levers to help offset some of these inflationary pressures, even as the company remains very surgical in terms of any price actions.
But in total, the cost model doesn’t need a drastic rationalization to what is now a sizeable revenue base.
Demand
The Q3 2022 results marked a record third quarter for the company and the demand growth of 22% outpaced its revenue growth.
Lovesac is generating real time demand for its superior products even in this challenging macro backdrop. A full 38% of recent customers report not to cross-shop against any other competitor. This is a sign of the growing power of Lovesac’s reputation and of true demand.
Summary
The macro backdrop should remain challenging in the short-term point of view. In such an environment, Lovesac believes it will continue to significantly outperform its category and generate growth, but at a more modest rate versus this year overall. Even in the recessionary environment, Lovesac can continue to deliver sales growth supported by the planned showroom growth.
The past three to four years of rapid growth that Lovesac has delivered has been driven in a large part by rapid increases in dollar spend and planned and focused marketing. In fact, the marketing expenses have gone from 9.2 million spent back in 2018 to 71 million total spend projected the fiscal year 2022 – 2023 or a CAGR of about 53%. It is likely the largest focused spend in the subcategory of couches in the marketplace.
Besides that, there is also an interesting information for all who look for sustainable investments: Lovesac committed to divert more than a billion plastic bottles from the waste stream. Also, according to the company’s statement, it’s making progress toward its goals of achieving zero waste and zero emissions by 2040.
With a strong debt free balance sheet and a model that can continue delivering relative outperformance, Lovesac can become a significantly larger multi-billion dollar company over the longer-term. At least, from this moment, there is for sure a real incredible path to getting there. In order to realize these ambitions, Lovesac will continue to invest in innovation and R&D while scaling its infrastructure cautiously even in this challenged macro environment.
This should also be supported by Lovesac’s evergreen inventory position and operational focus which has driven the customer satisfaction to record levels.
Velodyne Lidar
About The Company
Velodyne Lidar Inc develops smart and powerful lidar sensor solutions. The sensor and software solutions offered by Velodyne Lidar are used in areas such as autonomous driving and advanced driver assistance systems (ADAS), unmanned aerial vehicles (UAV) and robotics. The company’s 2020 IPO was followed by a brief hype that took the stock to an all-time high of $32.50 in September 2020. At the beginning of 2021, a brutal downward trend started, which, after losses of almost 98% (!), brought the share to an all-time low of USD 0.712 in November 2022. But apart from that, this company is worth to be get onto the watch list for stocks in 2023.
Why To Watch This Stock in 2023?
Key Figures
Reported EPS
From Q2 2022, the EPS improved three times in a row. Of course, this does not make this stock a buy candidate. Therefore, let’ check the revenue and the detailed description below.
Revenue
The revenue was fluctuating in the past quarters and was not really inviting. But according to the forecast, the revenue should get more “smooth” in the future.
Let’s check the annual revenue forecast. Here we can see that the annual forecast shows a smooth increase of the revenue:
Expected EPS past 5 years: not enough data yet
Expected EPS next 5 years: 20%
Is this stock automatically a buy? No, of course not! But let’s check the overview below to get a better picture.
Overview
According to the report by Fact.MR, the global LiDAR sensor market is expected to be valued at $5.6 Billion by 2031, expanding at an impressive CAGR of 12.5% over the forecast period of 2021 to 2031.
In total, the global automotive industry sees revolutionizing changes with integration of IoT devices like robot vacuum cleaners. But self-driving and connected cars and other vehicle are boosting the demand for LiDAR sensors too, as these help self-driving vehicles to identify obstacles. Vehicle automation and transportation planning will play a key role in the transformation of the automotive industry over the coming years.
Latest Commercial Achievements:
- Velodyne signed an agreement with Stanley Robotics in France to provide lidar sensors for their automated valet parking solution.
- Yamaha Motor selected Velodyne for eve autonomy, a joint venture in Japan between Yamaha Motor and Tier IV Incorporated. Velodyne has already begun shipping sensors to support the launch of the eve auto service.
- Velodyne Lidar signed a new multi-year agreement with its longtime Swedish partner Visimind, a provider of airborne mapping and portable solutions for major European energy distributors. The shipping of sensors has already begun.
- In October 2022, Velodyne acquired Canadian AI software company Bluecity. Velodyne and Bluecity have had a long-standing partnership, and this acquisition was the natural next step. The addition of Bluecity expands Velodyne’s expertise in intelligent infrastructure, traffic systems and software. Intelligent Infrastructure Solution, or IIS, is now deployed in 82 pilot installations around the globe and continues to expand.
Costs
Velodyne implemented measures to reduce expenses by streamlining the product portfolio and operations, as well as improving the processes. Since March 2022 operating expenses could be reduced by $10 million per quarter or 28%.
Demand
Velodyne entered the fourth quarter 2022 with strong demand across the entire business, adding more long-term customer agreements on multiple continents that reflect the global acceptance of Velodyne solutions. This strong demand should continue in 2023.
Summary
Velodyne Lidar’s goal is to evolve into a leading supplier of AI-powered Lidar solutions. For this, the CEO Ted Tewksbury outlined four strategic pillars to achieve this goal. In every four pillars, Velodyne is now making enormous progress over the year 2022 which should continue in 2023.
First pillar: driving sales of existing products into the early autonomous markets, including industrial, robotics and intelligent infrastructure. According to industry research company Yole, the available market for Lidar in industrial and robotics is expected to grow to $6.3 billion in 2027 with a compound annual growth rate between 2022 – 2027. This estimation even exceeds the mentioned report of Facts.MR at the beginning.
Second pillar: the development of low-cost sensors to drive mass adoption of Lidar in automotive and other price-sensitive applications. Velodyne is looking forward to providing more detail on these new products in the future reports.
Third pillar: expanding software to enable complete AI-powered vision solutions that make it easy for customers to deploy Velodyne Lidar in any application. In Q3, Velodyne continued to develop and expand Vella, Velodyne’s software product line, which will make it easy for customers to manage sensor settings, generate point clouds and calibrate one or more Lidar sensors in minutes right out of the box.
Fourth pillar: leading in high-volume, low-cost manufacturing, operational excellence and quality. Velodyne’s gross margin improvement plan is well underway, and the company expects to realize further progress. The three main levers in this plan are the manufacturing transition to Thailand, the design of low-cost sensors, and the development of full stack solutions that include software.
IonQ
About The Company
IonQ Inc was founded in 2015 and as a leader in quantum computing, it counts as a first pure quantum company. IonQ’s next-generation quantum computer is the most powerful trapped-ion quantum computer. Besides that, at this moment, it is the only company with its quantum systems available through the cloud on Amazon Braket, Microsoft Azure, and Google Cloud, as well as through direct API access.
Why To Watch This Stock in 2023?
Key Figures
Reported EPS
As IonQ is not long enough a stock company, there is not enough historical data available. That’s maybe why the forecast doesn’t look promising. If you follow the forecast, you will see that EPS will even get worse in the next two years.
Revenue
The revenue forecast on the other hand, should increase steadily, particularly in 2025.
EPS past 5 years: not enough data yet
EPS next 5 years: around 30%
Overview
Just after a year of being public, IonQ’s system performance has consistently outpaced every other quantum computer available to the public. By continuing to propel the technical milestones, this company is on its way of the winning approach for quantum computing. With a strong balance sheet and disciplined cost management, IonQ is able to accelerate. This is noticed not only by the market but also by customers, government and the talent. In total, the main goal of IonQ is to win the race by reducing the time to market for quantum computers.
In Q3 2022, IonQ generated a strong $16.4 million of new bookings and puts the company on track to achieve the aimed annual bookings number of between $23 million and $27 million. As a result, IonQ expects 50% year-over-year growth in annual bookings based.
According to the public road map published in December 2020, it shows the progress from an Algorithmic Qubits (AQ) of 6 it had in 2020, with a goal of 25 AQ in 2022, growing to 64 AQ in 2025. The goal for 2022 of 25 algorithmic qubits was achieved, and 29, 35 and 64 AQ are next.
IonQ also develops a line of custom chips. In 2021, the company presented its first custom-made chip the Evaporated Glass Trap or EGT for short. Already in 2022 IonQ announced the next-generation custom chip called the Multilayer Glass Trap or MGT.
Latest Commercial Achievements
- In September 2022, IonQ announced a $13.4 million contract with the U.S. Air Force Research Lab, or AFRL. This multi-part contract will supply AFRL with cloud access to compute on IonQ’s systems and with hardware components to further their research in quantum networking.
- In Q3, IonQ started a new project with the Department of Energy’s Oak Ridge National Laboratory (ORNL). IonQ will provide cloud access as well as applications development research support to ORNL.
- Another exiting news is that IonQ and Dell have formed a partnership to offer a world-class hybrid computing solution, combining the best of quantum computing: IonQ’s ARIA system with the best of classical computing, Dell’s PowerEdge servers. With this cooperation, customers will have the ability to seamlessly transition workloads between classical and quantum hardware.
- Beyond these new contracts, IonQ also signed several new contracts and renewed partnerships with several existing customers.
- In Q3 2022, the company added IonQ’s to Microsoft Azure Quantum cloud, meaning that anyone with an Azure account can now access IonQ’s most powerful quantum computer.
Costs
Total operating costs and expenses for the third quarter were $27.7 million, up 156% from $10.8 million in the prior year period, but well within the plan for the year. Keep in mind that IonQ is investing heavily in R&D and is building more systems than projected.
The sales and marketing costs in the third quarter were up 54% from the prior year period. This increase was due to growing the go-to-market function. The general and administrative costs in the third quarter were up 304% from in the prior year period. This increase is largely attributable to a growth in stock-based compensation expense, which was $4.5 million for the third quarter compared to $837,000 in the prior year period.
Demand
The market for quantum computing is currently growing rapidly despite global market headwinds that much of the order technology industry is currently experiencing. Meanwhile, interest in quantum computing continues to be promising. Having a quantum strategy is becoming an existential imperative for corporations and governments.
Summary
According to a study of MarketWatch, the global Quantum Computing Market was valued at around $89 million in 2016 and should reach around $949 million by 2025. Get detailed information about quantum computing in my blog post.
And, according to IonQ’s CEO, it was a phenomenal Q3 2022 for IonQ on all counts. The company hit its Algorithmic Qubits goal, innovated on its Quantum chips and put themselves within striking range of the financial targets.
In summary, IonQ is meeting and exceeding all the expectations. But is it a buy right now? According to the available figures, right now it is probably not a buy yet. Therefore, it should be on the watch list for 2023 to be ready when the time is right.
Exelixis
About the company
Exelixis is a biopharmaceutical company that discovers, develops, and commercializes treatments for cancer. It’s not the most popular drugmaker, but there are several interesting things about this company. First, currently it is focused on just one area, cancer treatment, which is the largest and one of the fastest-growing therapeutic areas in the industry.
Why to watch this stock in 2023?
Key Figures
Reported EPS
Exelixis is reporting positive EPS since 2017 but there was a decline in 2019 and 2020. In 2021, the decline maybe has bottomed out and if you follow the forecast, EPS should increase slightly but steadily the next years:
Revenue
The revenue, on the other side, had this desired growth. Since 2014 to date, the revenue was steadily increasing and the forecast is also showing a positive development. This should speak for the stock and increase the probability of future growth and a gains in the stock’s price.
EPS past 5 years: around 35%
EPS next 5 years: around 46%
Overview
Oncology is the leading therapy area for innovation. During a global pandemic, cancer care continued to be delivered. And Exelixis was one these leading players, for it had a strong third quarter 2022 across all components of company’s business. There was continued growth of the Cabozantinib franchise in the U.S. while expanding the portfolio of clinical and discovery programs with new collaborations to build the Exelixis product portfolio of the future.
Latest commercial achievements
- There is a strong performance of the business with significant growth in demand and revenue in the U.S.
- Collaboration agreement with Cybrexa Therapeutics, providing Exelixis the right to acquire CBX-12 (alphalex™ exatecan), a clinical-stage drug
- Exclusive clinical collaboration agreement with Sairopa for an option to obtain an exclusive, worldwide license to develop and commercialize antibodies
Costs
The total operating expenses for the third quarter 2022 were approximately $329 million compared to $336 million in the second quarter 2022. SG&A expense was the primary driver of the decrease in total operating expenses, which was primarily related to lower legal and employee-related expenses. The increase in R&D expense guidance is primarily to reflect the two deals mentioned above, and the increase in SG&A expense guidance is primarily related to increase in stock-based compensation.
Demand
There is a high demand for Exelixis’ drug Cabometyx. Total prescriptions (TRX) have grown for eight consecutive quarters. Year-over-year TRX growth in Q3 2022 was 23% relative to Q3 2021. This Demand growth is being driven primarily by the longer duration of therapy for patients on Cabometyx in combination with Nivolumab.
Turning to the TKI market basket, market share has increased every quarter since Q1 2021 and its share in Q3 2022 was 38%. The first line RCC market is very competitive, and Exelixis has got a steady footing with the performance of Cabometyx in combination with Nivolumab in this setting. Additionally, in contrast to data from public sources, Exilixis internal data showed that Cabometyx has the highest level of new patient starts ever in Q3 2022.
Within the Q3 2022, there was a particular strength in both demand and new patient starts in September. This can be considered as encouraging and it aligns with the feedback the company received from customers about a significant level of vacation and travel. Therefore, there should be a continuous growth in demand for Cabometyx.
Summary
Exelixis is tightening its revenue guidance and increases the R&D and SG&A expense guidance. The increase in R&D expense guidance is primarily to reflect the two deals with Cybrexa and Sairopa. The increase in SG&A expense guidance is primarily related to increase in stock-based compensation.
The company is also developing other cancer medicines, trying to replicate the success it has had with Cabometyx. Maybe the company’s most advanced candidate is Zanzalintinib, orginally known as XL092. In June 2022, Exelixis started a phase 3 clinical trial for Zanzalintinib in treating metastatic colorectal cancer.
In total there is a tremendous potential for the multiple growth drivers, including development activities, expanding pipeline of diverse clinical opportunities. That’s why this stock has a potential to become an x-bagger in the near future.
Ginkgo Bioworks
About the company
Ginkgo Bioworks is a biotech company. Its platform enables biotechnology applications across diverse markets, from food and agriculture to industrial chemicals to pharmaceuticals. It operates through the Cell Programming/Foundry, and Biosecurity segments. The company was founded by Jason Kelly, Reshma Shetty, Bartholomew Canton, Austin Che, and Thomas F. Knight, Jr. in 2008 and is headquartered in Boston, MA. The company went public in 2021 and profited from the hype during this year before its price plunged in 2022 like many others growing stocks because of the bear market. All the better now as this stock is currently trading at its “fair” low value and this could be a really great opportunity to become a tenbagger or more. So let’s check the facts.
Why to watch this stock in 2023?
Key Figures
Reported EPS
Following the forecast, the negative EPS would continue until 2025. But you can also see, that the negative figures would reduce steadily and eventually go into the black.
Revenue
This should be supported by increasing revenue which is, admitted, not a perfect one as you can see dip in the forecast for 2023. But remind that this is what it is, a forecast and all we can do now is to wait for the reported figures.
Overview
The mission of Ginkgo Bioworks is to make biology easier to engineer, and the company does this by scaling its platform for programming cells. Ginkgo’s platform which works as a B2B service, enables customers to develop end-products for consumers. And so the platform consists of two assets, the foundry and the code base. The foundry is an automated lab. The key idea here is to turn what is typically an fixed cost investment for most companies into a variable cost service for the customers.
The code base is a learning asset. It accumulates and includes physical strains, data, and various tools for programming cells. These learnings can be used in incremental programs which in turn increases the probability of program success and reduces program cost for customers.
Latest commercial achievements
- One of the highlights in Q3 2022 is the Merck collaboration announcement wich increases the already really strong momentum in the pharma and biotech vertical. This enzyme development project with a blue chip pharma customer brings up to $144 million in milestone payments.
- Acqusition of Circularis which has a circular RNA and promoter screening platform that will help drive the work in cell and gene therapy.
- Acquisition of Altar, a longtime partner of Ginkgo that has a screening platform that will drive adaptive laboratory evolution.
- Acquisition of Bayer’s West Sacramento Biologics Research & Development. Namely the site, the team, the internal discovery and the lead optimization platform.
- Acquisition of Zymergen which is expected to accelerate the development of Ginkgo’s innovative horizontal synthetic biology platform. Zymergen is coming in with over a $100 million in cash, even after paying all of the transaction related expenses.
These recent M&A activity demonstrates Ginkgo’s ability to play offense in the current market environment, while still thoughtfully managing the cash balance and the multi-year runway.
Costs
R&D expense, excluding stock-based comp, increased from $53 million in the third quarter of 2021 to $73 million in the third quarter of 2022. R&D expense related to the Foundry increased as expected year-over-year driven by expansion of Foundry capacity and increased breadth of capabilities to support both current and future collaborations.
G&A expense, excluding stock-based comp grew to $59 million in the third quarter of 2022, compared to $29 million in the third quarter of 2021.
These costs were the result of business development and all other G&A functions to support the growth of customers and programs, as well as a higher level of foundry activity, public company requirements, etc. There are also incurred approximately $12 million in transaction and integration costs, related primarily to the four transactions mentioned above.
Capital Expenditure (CapEx) in the third quarter of 2022 was $13 million, reflecting Foundry capacity and capability investments. Ginkgo expects an increase in CapEx in Q4 relative to prior quarters as the company completes certain projects.
Demand
According to the Ginkgo’s statement, the customer demand remains very strong, and the company doesn’t see any deceleration neither in 2022 nor in 2023. And there is still a lot of room in demand growth. For instance, at the cancer conference SITC, Ginkgo encountered a lot of people were surprised about Ginkgo’s work because they thought this company just engineers microbes and fungi. Therefore, there is still a lot of room for demand growth.
Summary
Ginkgo expects to add an incremental 16 to 21 new Cell Programs in the fourth quarter 2022 for a total of 55 to 60 for a full-year 2022. This guidance reflects a very robust growth as Ginkgo is almost doubling its new program additions year-over-year, despite a challenging economic climate.
Besides that, the company increases its full-year guidance for total revenue by $35 million to $40 million over our prior outlook to a new range of $460 million to $480 million. The foundry revenue outlook should be in a range of $150 million to $170 million for the full-year 2022.
In total, Ginkgo is at very early innings of tapping its addressable customer base at Ginkgo, and the customer demand remains very strong.
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