In less than a week, Wall Street will be putting behind what has been an outstanding year for optimists. The 30 component Dow Jones Industrial Average climbed to a record high as growth was driven Nasdaq Composite is up 43% year to date since the closing bell on December 22nd.
While this rally owes much to the Magnificent Seven, overall it was a strong year for growth stocks. The continued weakening U.S. economy and the prospect of a Federal Reserve interest rate cut in 2024 have investors extremely optimistic about fast-moving companies overall.
But no two growth stocks are made of the same cloth. Based on consensus price targets from Wall Street analysts, three growth stocks are expected to skyrocket in 2024.
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Plug Power: Implied upside potential of 102%
The first high-growth stock to post a triple-digit rise on Wall Street overall in the new year is the hydrogen fuel cell solutions company Plug-in power supply (PLUG 2.49%). Wall Street's consensus price target of $9.13 per share implies Plug stock could gain 102% in 2024.
Plug power optimists expect developed countries to continue switching to renewable energy sources. To reduce their carbon footprint, the world's largest economies are promoting greener forms of transportation. Hydrogen fuel cell vehicles are expected to be part of this equation, along with green hydrogen infrastructure.
Apart from signing a green hydrogen contract in 2022 with the e-commerce and logistics giant AmazonPlug's biggest successes came in early 2021. The company received equity investment from SK Group and formed a joint venture with a French automaker Renault. The partnership with SK Group will focus on bringing hydrogen fuel cell vehicles and infrastructure to Asian markets, while the joint venture with Renault will target the European light commercial vehicle market.
Unfortunately, Plug Power's attempts to quickly expand its green hydrogen ecosystem are costing a pretty penny. Although the company's revenue growth is over 50% annually, its cost of sales is growing even faster. For the first nine months of 2023, Plug posted a net loss of more than $726 million.
To build on this point, Plug Power made it clear when it released its third-quarter operating results that it will need additional capital. A “going concern” warning has also been included in the company's financial statements, indicating that the company does not have sufficient capital to cover its liabilities over the next 12 months.
Another concern for Plug Power shareholders is the company's dilutive fundraising efforts. Five years ago, Plug Power had about 219 million shares outstanding. As of September 30, 2023, the company had more than 624 million shares outstanding. Continued dilution to fund the company's aggressive expansion efforts is not benefitting shareholders. This is also a big reason why a price target of $9.13 in 2024 appears unattainable.
Lexicon Pharmaceuticals: Implied Upside Potential of 293%
A second growth stock expected to surge in 2024, according to Wall Street analysts' collective forecast, is a small-cap biotech company Lexicon of medicines (LXRX 3.15%). Lexicon shares closed at $1.31 on December 22nd. However, Wall Street's one-year consensus price target suggests they will rise to $5.15, representing an upside potential of 293%!
Two factors appear to be driving this incredibly bullish price target: the launch of Inpefa and the ongoing development of LX9211.
In May, Lexicon achieved its first real success when Inpefa (scientifically known as sotagliflozin) was approved by the U.S. Food and Drug Administration (FDA) as a treatment to reduce heart failure in patients with type 2 diabetes, chronic kidney disease, and other cardiac diseases. Circulatory diseases were approved risk factors. Sotagliflozin was previously rejected by the FDA in 2019 for the treatment of patients with type 1 diabetes.
Inpefa is unique in that it is the first approved SGLT1/SGLT2 inhibitor. While a handful of SGLT2 inhibitors, which block glucose uptake in the kidneys, have found their way onto pharmacy shelves, a dual inhibitor (SGLT1 blocks glucose uptake in the intestine) has not yet been approved. Although peak revenue estimates vary, Inpefa is expected to grow its revenue from around $4 million in 2023 to potentially over $500 million annually in 2028.
The other source of excitement is the late development of LX9211, an AAK1 inhibitor that is attempting to become the first non-opioid therapy for diabetic peripheral neuropathic pain in more than two decades. On November 30, Lexicon enrolled its first patient in the Phase 2b trial, which could expand the company's product portfolio beyond Inpefa.
Similar to Plug Power, the biggest risk for Lexicon shareholders appears to be the prospect of dilution. Although Lexicon received gross proceeds of $143.7 million from stock sales in June, operating losses are expected to continue as the company ramps up its marketing and branding efforts.
While I'm not convinced that Lexicon has a chance of hitting $5 per share in 2024, a triple-digit percentage gain following the Inpefa launch seems feasible in the new year.
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Cassava Sciences: Implied upside potential of 316%
The third growth stock expected to skyrocket in 2024, according to Wall Street, is a clinical-stage biotech company Cassava Sciences (SAVA -3.82%). Although shares closed at $23.94 the previous week, Wall Street's consensus price target for the company is a cool $99.50. For those of you keeping score at home, that represents 316% upside potential in the new year.
Cassava Sciences first came to attention in 2021 when the company published an interim analysis of its Phase 2b open-label trial of simufilam for patients with Alzheimer's disease. The first 50 people given simufilam showed moderate improvements in cognition scores as measured by the Alzheimer's Disease Rating Scale after six, nine and 12 months. Considering how few drugs have successfully improved the quality of life of Alzheimer's patients, optimists flocked to cassava.
The company is currently in the midst of a 1,900-patient randomized Phase 3 trial of simufilam that is expected to deliver best-in-class 52-week results toward the end of 2024, with initial 76-week results expected to be announced by mid-2025. With $142.4 million in cash and cash equivalents available as of September 30, it appears that Cassava has sufficient capital and access to capital to see this extensive test through to completion.
On the other hand, Cassava Sciences faced serious allegations that its studies were flawed. Specifically, an investigative report from the City University of New York (CUNY) found that an associate professor at CUNY's medical school may have intentionally falsified scientific evidence in 14 of 31 allegations. Although Cassava Sciences' management team has repeatedly blamed short sellers for pushing the stock lower, any validity to these claims would be extremely damaging to the company and its only experimental therapy developed.
To add fuel to the fire, investors have witnessed a number of Alzheimer's disease treatment success stories in Phase 2 clinical trials, only to see the same companies fail in expanded Phase 3 trials. Historically, few late-stage indications have a worse success rate than Alzheimer's disease.
While it would be great if the Alzheimer's drugs were successful, it's far more realistic to expect Cassava Sciences to miss Wall Street's lofty price target by a wide margin.