Over the last several months, the stock market has produced no shortage of surprises. From a general selloff of the tech sector to rising risks in stocks with significant Russian exposure, early 2022 has been a volatile period, to say the least.
In this environment, several companies have unexpectedly reported unusually high or unusually low rates of growth. Here are three of the top growth surprises that have occurred recently.
Tesla
Long a rising star in the stock market, Tesla (NASDAQ:TSLA) posted remarkable growth in its Q1 earnings report. The company’s revenues advanced to $18.8 billion for the quarter, up 80.5 percent from the same quarter in 2021. This result beat analyst expectations of $17.9 billion.
Earnings growth was even stronger for Tesla in the first quarter, with each share earning $3.22 on an adjusted basis. This was a gain of 246.2 percent year-over-year and a substantial beat when compared to the consensus projection of $2.31 per share. This was perhaps the biggest single surprise of the Q1 report.
Needless to say, analysts were expecting Tesla to grow at a rapid rate in any event. The 80 percent revenue growth, however, was a surprising turn of events for the company, given its high capital intensity and the fact that its vehicle production in Q1 actually slightly missed analyst expectations.
Interestingly, Tesla is arguably the most capital-intensive company on this list, and it is also the one that is currently delivering by far the highest growth.
Going forward, this high rate of growth in both earnings and revenues makes Tesla attractive as an investment. The stock’s median target price over the coming 12 months is $1,138, up more than 30 percent from current levels.
Snap
Snap (NYSE:SNAP) is the parent company of popular social media app Snapchat. In Q1, Snap reported revenue growth of 38 percent for a quarterly revenue of $1.06 billion.
While impressive, this actually represented a modest miss against analyst expectations of $1.07 billion. Earnings were similarly lower than expected, with Snap reporting a loss of $0.02 per share against analyst estimates of $0.01 positive earnings.
Despite obviously facing some challenges in Q1, Snap’s growth is remarkably strong and quite surprising, given the general slowdown in digital services that has accompanied the end of the pandemic.
User growth also continued in Q1, with 13 million new daily active users. This put the user growth slightly above previous expectations. Critically, 10 million of these new DAUs were from outside of the North American market, pointing to good growth on the international level.
Snap stock appears to have considerable upside over the coming 12 months, reflecting its ongoing revenue growth and the expansion of its user base. The median target price from 35 analyst forecasts is $45, 72.3 percent above the current price at the time of writing.
Given the modest misses in Q1, it’s far from inconceivable that Snap would fail to reach this price target. With so much room to run, though, it seems very likely that Snap will do well over the next year. This view is borne out by the fact that even the lowest price target puts Snap up 30.2 percent at $34.
Netflix
Ending this list is Netflix (NASDAQ:NFLX), a company whose growth surprise was negative rather than positive in nature.
In its Q1 reporting, the company announced a net loss of 200,000 subscribers. The report was a massive upset, as the company had previously expected to add 2.5 million new subscribers. Following the announcement, shares of Netflix plummeted by more than 25 percent.
Despite the shocking disparity between projections and reality, Netflix managed to hold much closer to its revenue forecast. Analysts had expected $7.93 billion in revenue for the quarter, a mark Netflix missed at $7.87 billion. This equated to a lackluster growth rate of just 9.8 percent.
Netflix did, however, manage to pull off a fairly impressive earnings beat by reporting $3.53 per share against a forecast of $2.89. Despite these metrics, however, investors were understandably rattled by the sudden downturn in the Netflix user base.
Over the next 12 months, analysts still give Netflix a good deal of upside. The median target price for Netflix is $300, a 65.8 percent gain over the current price of $181.93. Investors should be somewhat cautious here, however, as another major misstep from Netflix could push the stock lower and put it well out of this target range.
Top Stocks with Massive Growth: The Takeaway
Even among large, established businesses with massive valuations, growth surprises can occur. Tesla’s 80 percent growth rate, for instance, shocked analysts who were already broadly bullish on the company.
On the other end of the spectrum, Netflix’s subscriber loss was a reversal of a growth trend that few analysts could have seen coming to such an abrupt halt.
These examples serve as reminders that surprises in the stock market are still relatively common and can fundamentally change the value of companies from an investment perspective.
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