Some of the best performing stocks of last year—including Tandem Diabetes (NASDAQ: TNDM), Turtle Beach (NASDAQ: HEAR), Twilio (NASDAQ: TWLO), and Crocs (NASDAQ: CROX)—have one thing in common: they had been all but written off by the end of 2017.
These dark horse stocks all went on to deliver triple-digit returns in 2018.
For 2019, there are a few dark horse stocks that could explode higher over the next twelve months.
Here’s what you need to know about three such stocks.
Weibo (NASDAQ: WB)
Weibo (NASDAQ: WB) had a rough year in 2018. In fact, the stock is down nearly -60% since peaking in February of last year.
And while investors have been attracted to other tech stocks recently, Weibo hasn’t followed that trend as many have stayed away from Chinese stocks both because of trade tensions with the U.S. and the economic slowdown the country is exhibiting.
But while those concerns are valid, Weibo’s sell-off is overblown. The company has built a solid digital platform and is known as the Twitter (NYSE: TWTR) of China, though Weibo is growing much more quickly than Twitter ever has, and boasts much higher margins.
In its Q3 report, the company posted net revenues that had grown 44% year-over-year to $460.2 million, and its net income soared 63% to $165.3 million. What’s more, the Chinese social media giant continues to post strong user growth and added 70 million net monthly active users, pushing its total monthly active user base to 446 million. Weibo also has a very strong balance sheet, and has $1.6 billion in cash.
Thus, there’s nothing about the underlying company-specific fundamentals of Weibo that pushed the stock lower in 2018 and has kept it from climbing so far this year as other tech stocks have.
Certainly the U.S.-China trade war is a big headwind on the stock, but it seems likely the trade war will end in 2019. When and if that happens, Weibo stock is sure to head much higher considering its robust user and revenue growth.
The average analyst price target for WB is $77.29, suggesting possible upside of 32.82% over the next twelve months. Late last year, Barclays rated the stock a Buy and set a price target of $80 – 38% above the price as of this writing.
Stitch Fix (NASDAQ: SFIX)
Stitch Fix (NASDAQ: SFIX) is down -56% from its high reached in mid-September, and fell -37.5% in December alone.
So what happened? Well, the revolutionary data-driven personalized shopping e-retailer fell victim to what many early-stage, hyper-growth companies fall victim to: a combination of slowing growth, stagnating reach, and sinking margins. Topped off with a weak holiday quarter that showed no user growth and weak margins and sent shares crashing in the last month of the year.
But those factors that have weighed on the stock are all near term in nature. And what’s more, the big picture with Stitch Fix remains intact as the company is still leveraging data and technology to revolutionize the $1.7 trillion global apparel market.
The personalized shopping space that Stitch Fix is the leader of is sure to gain steam in the years to come as shoppers realize that it is a lower cost way to shop, is less time intensive, and is less of a hassle than traditional shopping. As the personalized digital shopping space grows, Stitch Fix will grow right along with it.
The stock also still trades at relatively low valuation levels for a growth company, and it’s likely any good news will send the stock soaring in 2019.
Analysts’ average price target for SFIX is $29.89, indicating possible upside of nearly 30% over the next twelve months. Last month, KeyCorp gave the stock an Overweight rating and set a price target of $38 – 65% higher than Friday’s closing price.
Spotify (NASDAQ: SPOT)
Streaming music giant Spotify (NASDAQ: SPOT) was a victim of too much hype in 2018. The stock fell as much as -48% between its high reached in July and the all-time low hit on Christmas Eve.
SPOT went public early last year at $132, and quickly climbed to nearly $200 by mid-year. But the price wasn’t supported by fundamentals, and as reports of competition—especially from Apple Music—made the rounds, shares sank well below the IPO price.
But 2019 could turn out to be a much better year for the stock. The over-hype bubble it saw last year has popped, and now there’s too little hype surrounding the stock. And it seems sentiment for the stock is already starting to normalize as shares are currently up 30% from the low reached in late December.
In its last quarter, the company reported 28% year-over-year growth in total monthly active users, its premium subscriber base grew by 40%, and revenues jumped by just over 30%. And those figures are roughly in line with what the company has reported over the last several quarters.
The reality with this stock is that the company is growing nicely and remains the leader in the streaming music space. The stock is undervalued and oversold, and as fundamentals continue to improve, we could see the stock bounce back in a big way.
There are currently 23 Buy ratings for SPOT, with an average price target of $190.70, suggesting possible upside of 41.61% over the next twelve months. Late last year, JPMorgan Chase gave the stock an Overweight rating and set a price target of $200 – nearly 49% higher than the current price.