They say lightning never strikes the same place twice. The thing is, that’s not true. It can, and it does … and when the place in question is an effective lightning rod, it does so frequently.
The idea also applies in the world of investing. As unlikely as it seems a stock that’s already doubled in value will do so again in the foreseeable future, plenty of stocks are capable of doing just that. Here’s a closer look at three of the top current prospects for being stock lightning rods of growth.
1. Carnival
It’s clear why cruise line operator Carnival Corp. (CCL) struggled during the COVID-19 pandemic’s height. The maritime cruise industry was shut down for over a year. It wouldn’t have been surprising to see Carnival and its peers declare bankruptcy in response to those incredibly tough times.
This company managed to survive the challenge, even if its shares lost nearly 90% of their value during the pandemic. This sizable pullback makes the stock’s 155% bounce back from October’s low a little less impressive.
For investors, however, history isn’t nearly as important as the plausible future. And the plausible future here is a bullish one, with Carnival’s shares still priced at one-third of its pre-pandemic peak.
There’s every reason to expect a continuation of the stock’s recovery effort, too. The company just logged its best-ever fiscal second-quarter revenue, with bookings and deposits for future sailings also reaching record levels during the three-month stretch ending in May. That’s despite a lethargic economic backdrop.
But it’s a lethargic economic backdrop, by the way, that’s not a problem for any aspect of the leisure travel industry. Airports in the United States handled a near-record number of passengers around the July 4 holiday this year, according to the Transportation Security Administration, while the U.S. Travel Association reports year-to-date domestic travel spending is up 5.5% through May.
The nation’s hotel per-room revenue is up 15.5% year over year, according to data from real estate investment trust CBRE Group, preceding a full-year growth expectation of 5.8%. These higher room rates indicate robust pricing power. The rest of the world’s full recovery isn’t far behind, either.
Read between the lines. People are traveling again and aren’t sweating the cost. That bodes well for Carnival.
2. DraftKings
DraftKings (DKNG) shares soared during the first half of the pandemic for a fairly obvious reason. That is, millions of people were trapped at home looking for ways to abate their boredom. Many of them embraced betting on the few sports still being played at the time. The bulk of that pandemic-prompted rally was unwound between mid-2021 and mid-2022. While DraftKings was and still is a compelling prospect, investors realized the stock raced too far ahead of its actual results.
But that big pullback was also overdone. Shares are bouncing back this year now that the market sees what’s in store for the business, gaining more than 170% just since the end of 2022.
What’s in store for the business is growth, by the way. Online betting guide World Sports Network suggests the sports-betting market will grow at an average annual clip of more than 12% through 2032, jibing with forecasts from Polaris Market Research, Technavio, and others. This growth will be led in the United States by the ever-expanding online sports betting market where DraftKings continues to take aim at FanDuel’s market share supremacy.
The thing is, DraftKings is adding share here in a couple of key ways. Leveraging its brand name and its partnerships with conventional casinos, the company reports its share of the mobile sports betting market grew from 28% in the first quarter of last year to 32% in Q1 of this year. Its GGR (gross gaming revenue) share improved from 24% to 28% during the same stretch.
This progress paired with sheer market growth is leading analysts to look for total top-line growth of 44% this year, followed by another 22% improvement next year. And this revenue growth is leading DraftKings out of the red and toward profitability just as quickly.
The company’s current lack of net earnings means this stock is still off-limits for more conservative, defensive investors. For growth-seekers who can stomach the extra risk, though, another triple-digit run is still a possibility.
3. Celsius Holdings
Of the three stocks in question, Celsius Holdings (CELH) shares are starting out their next prospective triple-digit run-up at a big disadvantage. See, unlike DraftKings and Carnival, Celsius stock wasn’t shellacked during and because of the pandemic. If anything, it was boosted by the pandemic’s effect, which (among other things) left people with lots of time to exercise and explore all their health-minded beverage options. This stock’s up more than 3,800% from its March 2020 low.
And yet, never say never. As young as this company’s current growth surge is, it could still double the stock’s current value again.
As you might have surmised, Celsius is an energy drink name. It’s a market co-dominated by Red Bull and Monster Beverage. It’s also a market, however, that’s perpetually ripe for disruption by something new.
Enter Celsius.
While at first blush its products look a lot like Red Bull’s and Monster’s, Celsius Holdings’ drinks are somewhat unique in that none of them contain aspartame, high-fructose corn syrup, sugar, artificial flavors, or artificial colors. They’re also made with non-GMO ingredients. Although rival companies are moving in this all-natural, healthier ingredients direction, they’re still playing catch-up to Celsius.
The real growth driver, however — and the reason shares could still double from here — is the relative newness of its expansion efforts.
CEO John Fieldly took the helm in 2018, making a major push right out of the gate to win convenience store and grocery store selling space at a time when a worldwide contagion would quickly complicate and stifle the effort. That plan is still being pieced back together. Then in 2022, beverage powerhouse PepsiCo made a major investment in Celsius Holdings, injecting the brand into its enormous distribution network.
The growth benefits of these newly forged partnerships have already become clear. The company’s only scratched the surface of its potential upside, however.
— James Brumley
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Source: The Motley Fool