On the surface, 2023 has been a great year for stocks. THE Nasdaq Composite is up about 25% since the start of the year, and the S&P500 is up about 10%. But digging deeper, many industries and former market darlings have suffered brutal sell-offs. Most of the 2023 gains come from the growth of a relatively small number of big tech stocks.
Several growth stocks, especially smaller names, are down sharply so far this year – but this could be an opportunity. here’s why Rivian Automobile (RIVN 0.68%), Hexcel (XL -1.27%)And Global LanzaTech (LNZA 3.65%) stand out as three great stocks worth buying now during a downturn.
Rivian continues to achieve its goals
Daniel Foelber (Rivien): Rivian stock has been all over the place this year, trading as high as $11.68 on April 26, only to more than double in just three months to reach an intraday price of $28.06 on July 22.
Since the company’s IPO in late 2021, Rivian’s shares have been difficult to value. Early on, it got caught up in the meme stock frenzy and reached an unsustainable valuation well over $100 billion. Over the past two years, the electric vehicle (EV) maker has faced a host of challenges shared by other automakers, including slowing consumer spending and the impacts of rising interest rates.
If you judge Rivian solely on its stock price, then it looks like a complete wild card. But Rivian, the company, has been particularly consistent with its production goals, manufacturing expansion and growth plans, especially considering how difficult this period has been for automakers and the constraints of supply chain that have hampered the electric vehicle industry.
The electric vehicle maker deserves a lot of credit for pushing its production and delivery goals forward. And most recently, it provided an update on its 400,000-vehicle annual capacity plant in Georgia, construction of which is expected to begin. early next year.
Rivian continues to implement its growth plans, even if they appear riskier in the short term. His stubborn approach worries some investors who would like management to rein it in a little. But Rivian has an asset at stake: its cash flow. Its balance sheet has more than $9.2 billion in cash and equivalents. And as it grows, its cost profile should become more efficient and its margins should improve.
The stock could do just about anything in the short term. And Rivian’s biggest risk is that the electric vehicle market remains depressed for longer than expected, which would leave the company spread too thin with its larger manufacturing footprint and higher operating costs.
Rivian is a high-risk stock, even after falling more than 40% over the past three months. But for investors who view its vehicles as attractive and believe in its execution, the stock is worth a closer look.
Advanced composites are the future of aerospace
Lee Samaha (Hexcel): According to Boeing According to CEO Dave Calhoun, composites will play an important role in any new aircraft developed. It’s this kind of comment that highlights the investment case for advanced lightweight composites manufacturer and seller Hexcel. Not only will Hexcel benefit from significant accelerations in the production of aircraft manufacturers Boeing and Airbusbut it also presents a considerable growth opportunity due to the increasing percentage of composite content in newer models.
Hexcel’s composites offer strength and weight advantages over traditional materials like aluminum, meaning reduced aircraft operating costs and higher productivity.
The long-term demand outlook is excellent. However, Hexcel faces margin issues as it increases capacity to keep ahead of expected demand growth. The resulting margin squeeze has investors worried, and shares sold off sharply following the company’s third-quarter earnings release.
That said, it appears to be a question of when, not if, Hexcel will begin to see the benefits of reopening production lines and hiring and training workers. The company appears poised for double-digit revenue growth as Boeing, Airbus and others, including business jet makers, do everything they can to meet their books multi-year orders.
As such, Hexcel’s actions to anticipate rapid expansion in demand make sense, and the stock sell-off has created a good buying opportunity in a company with a bright future.
LanzaTech has developed a smart way to capture carbon
Scott Levine (LanzaTech): It’s been a rocky road for LanzaTech over the past three months, as the company’s shares plunged 41% – and seemingly with no negative news. From installing solar panels on their roofs to retrofitting buildings with energy-efficient solutions, businesses are adopting a variety of methods to reduce their carbon footprint.
Committed to helping facilitate this transition to a low-carbon future, LanzaTech has developed an innovative method to capture corporate carbon emissions and convert them into usable materials such as ethanol. LanzaTech likens its technology to a brewery deployed atop an emissions source, using bacteria to convert pollution into fuels and chemicals in the same way brewers use yeast to ferment sugars in wheat and produce beer.
LanzaTech calls products that use ethanol – and ethanol derivatives – that its technology produces CarbonSmart. And the company sees significant opportunity for CarbonSmart products. According to management, the addressable market for CarbonSmart products – including household cleaning products, cosmetics and sustainable aviation fuel, to name a few – exceeds $1 trillion.
Operations are only just beginning. As of early 2023, LanzaTech had three facilities operational and plans to bring three more online by the end of the year. She also has a considerable number of projects in progress. In its second quarter report, LanzaTech reported having more than 80 projects in early stages of development.
Growth stocks like this carry higher risks than established companies, so investors will want to act accordingly. If the company met its 2023 guidance target and reported revenue between $80 million and $100 million, and then achieved positive adjusted earnings earnings before interest, taxes and depreciation in 2024, these would certainly be signs that the situation is moving in the right direction.