3 Scary-Good Growth Stocks That Would Have Turned $6,000 Invested Last Halloween Into $91,000 Today

The article highlights the significant, albeit speculative, returns generated by select growth stocks over the past year, specifically Rigetti Computing (RGTI), Rocket Lab (RKLB), and Robinhood Markets (HOOD). RGTI saw a 3,200% surge driven by quantum computing expectations, despite being unprofitable with a P/S ratio exceeding 1,100, highlighting its extreme volatility. RKLB gained 540% on revenue growth but remains unprofitable, while HOOD, the only profitable company among the three, rose 485% with $1.8 billion in earnings and a P/E of 74, supported by platform expansion. The piece emphasizes the high risk and volatility associated with these investments, even as they deliver substantial gains.

Analysis

The article highlights the significant, yet highly speculative, returns generated by select growth stocks over the past year. Rigetti Computing (RGTI) surged 3,200% since last Halloween, turning a $2,000 investment into $66,000, driven by expectations in quantum computing. However, RGTI remains unprofitable, generating only $2 million in quarterly sales against a $14 billion market cap, resulting in an extreme price-to-sales ratio exceeding 1,100, indicating substantial downside risk given its prior 95% drop in 2023.

Rocket Lab (RKLB) also delivered strong gains, up 540% to $13,000 from a $2,000 investment, despite being unprofitable with $504.3 million in sales and a $231.3 million net loss over four quarters. Its future growth and path to profitability are largely contingent on the successful launch of its larger Neutron rocket. In contrast, Robinhood Markets (HOOD) rose 485% to nearly $12,000 and stands out as the only profitable company among the three, reporting $1.8 billion in earnings on $3.6 billion in revenue.

HOOD trades at a P/E multiple of 74, which, while high, is potentially justifiable given its rapidly expanding business and strong brand appeal among retail investors. The overall market sentiment for these high-growth, often unprofitable, companies is mixed and cautious, reflecting the inherent volatility and reliance on future potential rather than current fundamentals. This underscores the high-risk, high-reward nature of such speculative investments.

The performance of these stocks illustrates that while significant gains are possible, especially in emerging sectors like quantum computing and space, the underlying financial health and valuation metrics for many remain highly stretched. Investors are betting on long-term potential, which introduces considerable uncertainty and susceptibility to market sentiment shifts.

Key Decisions for Investors

• Investors should consider taking profits on highly speculative, unprofitable stocks like Rigetti Computing (RGTI) given its extreme valuation (P/S over 1,100) and significant downside risk.
• Monitor Rocket Lab's (RKLB) Neutron rocket development closely as a key catalyst for future revenue and potential profitability, while acknowledging its current unprofitability and high-risk profile.
• Evaluate Robinhood Markets (HOOD) for its established profitability ($1.8B earnings on $3.6B revenue) and expanding platform, but remain cognizant of its high P/E ratio of 74 and potential for volatility.
• Maintain a diversified portfolio to mitigate the impact of highly volatile, speculative growth stocks, as highlighted by the article's initial guidance.