With the labor market printing a much hotter-than-anticipated figure for the month of May, speculators may be emboldened to consider high-risk stocks to buy. Ever since the Covid-19 disaster (and even earlier), more than a few voices have sounded the alarm about a possible recession. However, time and again, the market keeps proving the naysayers wrong.
Hearing the cries of wolf one too many times, it’s possible that at least some investors want to go in the opposite direction. Rather than electing defensive risk-off enterprises, they want to throw their chips at high potential risky stocks. Understandably, because so many fear a recession, going contrarian here might yield significant returns for the intrepid.
At the same time, investors also need to be careful about overdoing the contrarian thesis. If the Federal Reserve decides to tame the inflationary pressure associated with the hot jobs print, this could hurt equities. Nevertheless, if you want to ride with the bulls, below are volatile stocks with high returns.
Clear Secure (YOU)
While biometric travel document verification service Clear Secure (NYSE:YOU) offers a fundamentally relevant business profile, on the charts, YOU represents one of the high-risk stocks to buy. On paper, it’s just not going to appeal to everyone. Since the beginning of this year, shares lost more than 12% of equity value. In the past one-year period, YOU dipped 15%. Since its public market debut in 2021, it collapsed over 49%.
Despite these setbacks, contrarian bulls can potentially rely on the underlying phenomenon known as revenge travel. Basically, people who were tired of being stuck at home longed for the day when Covid-19-related restrictions would ease. So, when the mitigation protocols finally faded, people eagerly took that long-awaited vacation.
Based on multiple sources, revenge travel continues to be a catalyst in this year as well. Therefore, Clear Secure’s specialty of getting people quickly through airport security lines should be supremely relevant. However, the main risk centers on the company’s lack of profitability. Still, analysts peg YOU as a consensus moderate buy. Their average price target lands at $30.14, implying nearly 24% upside potential.
Estee Lauder (EL)
A multinational cosmetics firm, Estee Lauder (NYSE:EL) commands a massive presence in the beauty care segment. Currently, the company carries a market capitalization of nearly $66 billion. Unfortunately, the equities sector doesn’t seem to care much about its historical prominence. Since the beginning of this year, EL stock gave up more than 27% of value. In the trailing year, it’s down over 32%.
Despite the troubles, EL may be one of the high-risk stocks to buy. To be upfront, the underlying enterprise doesn’t seem to offer an attractive value proposition. For example, the market prices EL at a forward multiple of 34.59, which is incredibly elevated. Also, EL trades at 4.2-times trailing sales.
On the other hand, Estee Lauder is consistently profitable. Further, it posts a trailing-year net margin of 6.88%, beating out 72.69% of the competition. Also, its return on equity (ROE) clocks in at 18.79%, above 85.45% of its peers. With the return-to-office movement becoming more prominent, EL could see increased demand. Lastly, analysts peg EL as a consensus moderate buy. Their average price target comes in at $245.86, implying almost 34% upside potential.
Imax (IMAX)
A Canadian theater company specializing in advanced cameras and projection systems, Imax (NYSE:IMAX) makes a grand case for high potential risky stocks. On one hand, with the Covid-19 crisis forcing a reclusive lifestyle for the masses, businesses that specialized in high social contact suffered significantly. Plus, it’s not entirely clear whether Hollywood can comprehensively recover from the pandemic.
On the other hand, with inflation raising the price of just about everything, Imax offers an entertainment value proposition. Basically, through its advanced projector systems, moviegoers can enjoy an experience that they wouldn’t be able to replicate anywhere else. And because other forms of entertainment – such as live concerts and sporting events – have become so expensive, Imax offers great bang for the buck. That’s what makes it one of the volatile stocks with high returns.
Over the trailing year, IMAX has been all over the map, ultimately printing a gain of nearly 9%. However, this year, IMAX is up almost 28%. Thanks to the strong debut of the latest Spider-Man film franchise, more folks appear enthused about the box office. Thus, IMAX is one of the risky stocks with high potential.
In closing, analysts peg shares as a consensus moderate buy. Their average price target hits $24.88, implying over 32% upside potential.
PayPal (PYPL)
On paper, PayPal (NASDAQ:PYPL) offers an incredibly relevant service. As a popular digital payments processor, PayPal already commanded a significant foothold in the broader financial technology (fintech) space. However, with the Covid-19 pandemic forcing even greater dependency on digitalization, PYPL seemed a no-brainer for high-risk stocks to buy.
Unfortunately, it hasn’t been able to keep pace with bullish expectations. Since the January opener, PYPL slipped nearly 13%. Over the trailing one-year period, PYPL gave up nearly 27% of equity value. Much of the recent red ink came about because of PayPal’s first quarter of 2023 earnings report. Though the company beat expectations, the market fretted about its operating margins.
Still, PYPL could be a solid candidate for high-risk, high-reward stocks. Financially, PayPal still sports a solid three-year revenue growth rate of 16.7%. This stat ranks better than slightly over 75% of companies listed in the credit services industry. As well, its book growth rate impresses at 7.4%. Turning to Wall Street, analysts peg PYPL as a consensus moderate buy. Their average price target stands at $96.83, implying nearly 49% upside potential.
Dave & Buster’s Entertainment (PLAY)
At first glance, Dave & Buster’s Entertainment (NASDAQ:PLAY) appears an especially treacherous example of high-risk stocks to buy. Since the Jan. opener, PLAY dipped nearly 5%. Fundamentally, the restaurant and entertainment business depends heavily on high-volume foot traffic. Unfortunately, with the remote work transition following the onset of the Covid-19 pandemic, Dave & Buster’s attempted to spark momentum in its digital, off-store business.
However, the work-from-home paradigm could be ending over time. An increasing number of companies have implemented at least a hybrid schedule, typically work three days in office and two at home. Eventually, with recession pressures rising, it wouldn’t be out of the question for companies to mandate a full return. In that case, PLAY could soar as one of the high potential risky stocks.
To be fair, the pandemic imposed a sharp blow on Dave & Buster’s financials. For example, its balance sheet technically appears distressed. On the positive side, the market prices PLAY at a forward multiple of 10.59. As a discount to projected earnings, PLAY ranks better than 64.22% than the competition.
Looking to the Street, analysts peg PLAY as a consensus strong buy. Their average price target lands at $52.14, implying almost 55% upside potential.
Sea (SE)
Ever since hitting a peak in Nov. 2021 – and subsequently collapsing in market value – tech conglomerate Sea (NYSE:SE) has long been a target for high-risk stocks to buy. At its zenith, SE on average traded hands above $350 per share. As of this writing, you can buy the stock for a little over $61. That’s a massive fall from grace. Nevertheless, those seeking a discount in the tech space might be attuned to the opportunity.
Based in Singapore, Sea offers relevancies in fintech, e-commerce and gaming. While all three sectors enjoy massive addressable markets, the advantage to the enterprise is its geography. In 2022, the Southeast Asia internet economy reached a valuation of $194 billion. By 2025, the sector could be worth $330 billion, according to a Reuters report.
To be sure, the impact of Covid-19, along with the global economic challenges such as blistering inflation negatively affected Southeast Asia’s market projections. Still, it wouldn’t be out of the question for the regional digital economy to hit $1 trillion by 2030 (or around that time). For now, you’ll just have to be satisfied with SE being one of the high-potential risky stocks. Analysts peg shares a strong buy with a $102.44 average price target, implying over 67% upside potential.
Sibanye Stillwater (SBSW)
On the surface, Sibanye Stillwater (NYSE:SBSW) makes an intriguing case for high-risk stocks to buy. A precious metals miner based in resource-rich South Africa, Sibanye benefits from a geographic advantage. Not only that, worries about a recession along with the social instability that a downcycle may catalyze offers cynical relevance for gold. Given how much shares floundered, SBSW could be worth a gamble.
On the other hand, there’s a reason why SBSW dropped nearly 33% of equity value since the January opener. In the trailing year, it slipped almost 42%. With issues such as labor disputes particularly pronounced for Sibanye, many investors have decided to jump ship. Nevertheless, the red ink makes SBSW look quite undervalued. For instance, the market prices SBSW at only a forward multiple of 5.46.
Moreover, Sibanye mines other resources besides gold. Perhaps most notably, it’s a strong producer of palladium. Historically, Russia has been the world’s leader in palladium production. Obviously, that’s not a tree worth barking up right now, affording fortuitous pertinence to Sibanye. On a final note, analysts peg SBSW as a consensus moderate buy. Their average price target stands at $14.50, implying over 99% upside potential.
On the date of publication, Josh Enomoto 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.