With the market hitting a low, speculative growth stocks have become a hot topic of conversation among investors. The big question is: Which stocks will make the biggest climb back up? The concept of the market being cyclical is reinforced by the recent actions of the Federal Reserve, such as effectively bailing out banks, increasing its balance sheet and loosening monetary policy. Sure, there was a recent 25 basis-point hike, but there is now a widespread consensus that the Fed has either reached its terminal rate or is only a quarter-point hike away from the peak.
Thus, investors should find the current environment favorable as there is no longer the discouraging uncertainty as there was at this same time last year. Indeed, with the banking crisis out of the periphery, many are convinced that the Fed has managed to pull off a soft landing. I share that belief to some extent, though inflation may cause concern in the long run if the monetary policy gets too loose.
But, of course, we are talking about speculative growth stocks, many of which recovered in January. However, I believe with the market at a turning point, the following three stocks in particular still have more to deliver:
Marathon Digital Holdings (MARA)
Marathon Digital (NASDAQ:MARA) has been making calculated moves in the Bitcoin (BTC-USD) mining industry. The company has significantly increased its mining capacity and announced a record production of 687 BTC, up 45% month-over-month, on track to double its hash rate in the next few months. Moreover, it already had 8,260 BTC, now worth $234.6 million at the end of February.
The recent rally is a blessing for this company as it has sold 650 BTC from its February mining rewards of 683. That will cover around $14.5 million worth of expenses. Indeed, investors have realized the opportunity here, and the stock has surged 26% from its trough.
Nonetheless, it still has to deal with the Bitcoin halving event next year. The halving will effectively reduce its gross revenue by 50% and put MARA in murky water until BTC climbs more in price to match demand. But the company is playing it smartly so far by building up a reserve of BTC instead of selling. Historically, Bitcoin prices have gone up after halving events, and by accumulating BTC now, they’re preparing for potential future gains.
DraftKings (NASDAQ:DKNG) is among the speculative growth stocks with robust tailwinds. The company has turned around its financial outlook, and investors are jumping on board. The stock is up a remarkable 73.6% this year as sports betting is exploding in popularity, particularly driven by Millennials and Gen Z betters.
The company’s Q4 revenue of $855 million is up 81% year-over-year, guiding 2023 revenue of $2.95 billion at the midpoint. DraftKings is also targeting profitability in Q4, with positive earnings before interest, taxes, depreciation and amortization in 2024. For now, it is focusing more on growth, which is paying off massively. Still, there is a lot of speculation here since growth is likely to slow down unless more states allow sports betting. The stock’s momentum could also lose steam in the coming weeks as it has already delivered so much growth.
Nonetheless, most analysts remain bullish as the stock is averaging a 19.8% upside. One of the more bullish names is Bernie McTernan from Needham, whose stock ratings implied a 47.06% upside potential with a $28 price target.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ:TLRY) dominates the cannabis market in Canada, and I believe federal-level marijuana legalization could help it dominate the much larger informal market in the U.S. as well. With Republicans in control of The House, that may not happen in the near future. But the younger generation overwhelmingly supports the legalization of marijuana, and I believe it is only a matter of time before that happens.
Regardless, it is among the top super speculative growth stocks as the legalization catalyst is the only thing holding the stock afloat. Should the country turn more red, it could even take until the 2030s for Tilray Brands to expand into the U.S. cannabis market. There are a lot of “ifs” to consider, such as regulatory hurdles and increased competition. In light of that, this is a very speculative play.
However, the current level of risk for the potential reward is compelling. It is also expanding into the alcohol business, diversifying its revenue sources.
In the meantime, Tilray Brands continues to bleed. The CEO admitted in its “Q2 2023” earnings call that the “longer-than-anticipated march toward legalization in key markets” is forcing the company to slow down production and save cash. Revenues declined to $144.1 million in its November quarter from $153.2 million in August, and all the cost-cutting has yet to yield significant results. Operating losses have gone up to $42.8 million from $32.2 million, while net losses remain essentially flat. I would only buy here if you wish to gamble on a possible phenomenal Q3 report in April or if you wish to hold for years.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.