As the broader indices like the Nasdaq and the S&P 500 continue to move higher, this has led to this list of high-risk, high-reward stocks that investors should pay attention to. When the backdrop is bullish as it is today, investors could make some solid returns via investing in companies such as these, as a rising tide lifts all boats.
It should be noted that these companies are especially risky. Most have speculative trajectories and could be considered contrarian plays that need to be examined closely before starting a position. Some of them were once strong performers and have been in the past few months, yet past performance is not a guarantee of future performance.
Still, for investors with the right time horizon and appetite for thrills, here are three high-risk, high-reward stocks for investors to scoop up in February. I think owning even fractional shares in these companies could satiate someone’s risk appetite.
Aurora Innovation (AUR)
Aurora Innovation (NASDAQ:AUR) is a software company focused on developing autonomous driving technologies. While currently burning through the substantial amount of cash it has on its balance sheet, Aurora Innovation has set its sights on achieving commercial launch by the end of the year. It’s also progressing towards closing the final 7% of its Safety Case for the launch lane, which is near the final stages of its operational roadmap before market entry.
The stock currently has a mixed outlook from analysts, with a range of ratings from Strong Buy to Hold. In terms of financial health, Aurora Innovation has no significant debt and a current and quick ratio of 10.96. This means its balance sheet is robust.
Analysts expect a 53.26% upside in its stock price within the next 12 months, which alone makes it a high-risk, high-reward stock due to the expected volatility.
Enovix (ENVX)
Enovix (NASDAQ:ENVX) operates in the battery technology sector. It outperformed analyst EPS estimates in its second-quarter earnings report, which has led the market to feel bullish.
The company’s prospects for the rest of the year are bright, but it pays to recap some history quickly. So far this year, Enovix’s notable achievements included a collaboration with Group14 Technologies to develop silicon batteries, aiming to use Group14’s silicon-carbon composite material for anodes.
Due to ENVX’s outperformance this year, Wall Street seems to appreciate its efforts greatly. It has a 165.43% predicted upside for its stock price, along with a Strong Buy rating.
The company has a long runway before it starts to record accounting profit, with estimates pointing sometime around FY2027 or FY2028 as the due date. But, with significant execution risks and great upside potential, it may have all the elements that a risk-tolerant investor could ask for.
HashiCorp (HCP)
HashiCorp (NASDAQ:HCP) operates in the cloud infrastructure sector and has carved a niche in infrastructure automation, security and networking across multiple clouds. Recently, the company reported a 17% year-over-year increase in third-quarter revenue, reaching $146.1 million.
What I like about HCP stock is that its customer growth is impressive, with 4,354 customers by the end of the third quarter of fiscal 2024, and 877 of those contributing more than $100,000 in Annual Recurring Revenue (ARR). That customer base underpins 89% of the total revenue.
However, HCP also has negative accounting profits, and its forward P/E ratio of 106.38 may be too expensive for some investors to bear. And despite its excellent gross margin of 81.32%, its operating margin of negative 47.74% suggests it needs to scale even further in order to reduce its cost basis, making it one of those high-risk, high-reward stocks.
If the company continues to perform strongly, it may outperform Wall Street estimates, which currently reflect it trading near its fair value per share.
On the date of publication, Matthew Farley did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
