7 High-Risk Stocks with Huge Potential Rewards in 2019

7 High-Risk Stocks with Huge Potential Rewards Posted on Monday, April 15th, 2019 by Chris Markoch

Understanding your risk tolerance is one of the keys to successful investing. The relationship between risk and reward was clearly on display in 2018. Equity investors were taken on a wild ride that was punctuated by a closing week that saw 1,000 point shifts in a single day. Times like these illustrate the reality of investor sentiment and the fear of missing out (FOMO). What may have started as end-of-the-year rebalancing and profit taking cascaded into a rout for some equities to close out the year.

The volatility that returned to the market last year also illustrates the fact that there is no such thing as a risk-free market. At the end of 2018, there were fears of interest rate hikes and rising inflation. The market was continuing to divine the tea leaves regarding the United States’ ongoing trade dispute with China.

Today, we’re seeing that inflation is still being held at bay, the Fed has done their part to quiet fears of impending interest rate hikes, and the U.S. and China continue to talk – which doesn’t mean a deal will happen, or even that one is close – but it beats the alternative. However, the market now faces new threats from political unrest in the Middle East that is adding momentum to higher seasonal oil prices. Internationally, there is still unrest over Brexit.

As the market gets ready to take a peek at 2019's first-quarter earnings report, it's a good time to remind investors that there are some risks that are well worth taking. In this report, we'll take a look at seven stocks that are considered "high risk" either because of the sector they're in or because of other factors. However, we'll also point out how each of them offers the potential for a big reward.

#1 - Chesapeake Energy (NYSE:CHK)

Chesapeake Energy logo

CHESAPEAKE ENERGY (NYSE: CHK) - Chesapeake Energy is a possible play for investors looking to take advantage of the higher energy prices. CHK’s stock was a microcosm of the broader market in 2018. Shares of the company surged over 30% at the beginning of the year as the Trump administration’s tax policies and rising employment lifted energy prices. However, an unfortunately timed $4 billion buyout of WildHorse Resource Corporation and concerns of oversupply and a slowing economy in the U.S caused shares to drop more than 45% by the end of the year. Now, with energy prices once again on the rise, CHK’s stock is climbing as well. This year the stock is up over 60%, which is significantly higher than the industry average of just below 14%. Furthermore, analysts are seeing positive signs in a 2018 fourth-quarter earnings report that came in better than expected along with an increase in stock holdings from the company’s management. The risk for Chesapeake is leverage. The company’s debt levels are above the company’s target levels. The recent climb in oil prices is certainly helping CHK’s efforts to get their balance sheet in order. That could backfire however if oil prices endure another correction.



About Chesapeake Energy
Chesapeake Energy Corporation engages in the acquisition, exploration, and development of properties for the production of oil, natural gas, and natural gas liquids (NGL) from underground reservoirs in the United States. The company holds interests in natural gas resource plays, including the Marcellus in Northern Appalachian Basin in Pennsylvania; Haynesville located in Northwestern Louisiana; Eagle Ford in South Texas; Brazos Valley in Southeast Texas; Powder River Basin in Wyoming; and Mid-Continent in Anadarko Basin of northwestern Oklahoma. As of December 31, 2018, it owned interests in approximately 13,200 oil and natural gas wells; and had estimated proved reserves of 1,448 one million barrels of oil equivalent. Chesapeake Energy Corporation was founded in 1989 and is headquartered in Oklahoma City, Oklahoma.

Current Price: $2.31
Consensus Rating: Hold
Ratings Breakdown: 2 Buy Ratings, 8 Hold Ratings, 8 Sell Ratings.
Consensus Price Target: $3.98 (72.3% Upside)

#2 - Splunk (NASDAQ:SPLK)

Splunk logo

SPLUNK (NASDAQ: SPLK) - Splunk is an “operational intelligence provider” and an industry leader in Security Information and Event Management (SIEM). SPLK has a breadth of product offerings in the cybersecurity market which is expected to be a $250 billion industry in five years. According to the company in their 2019 earnings call they solve “data challenges around IT operations and application delivery, security compliance and fraud; as well as business analytics and IoT (Internet of Things)”. The company is well-positioned to remain a leader in the cybersecurity space even as new competitors are emerging. At the moment, the bad news for Splunk is a question of valuation. The stock has been on a tear since the beginning of the year, climbing nearly 30%. This comes after a period of time when the stock had been coming down from lofty levels and looked to be stabilizing. This has investors a little nervous about whether the stock still has room to run. The good news is that the company is drawing attention as an acquisition target of companies such as Cisco (NASDAQ: CSCO) and International Business Machines (NYSE: IBM) which may provide the stock with some welcome room to run.



About Splunk
Splunk Inc. provides software solutions that enable organizations to gain real-time operational intelligence in the United States and internationally. Its products enable users to investigate, monitor, analyze, and act on data regardless of format or source. The company offers Splunk Enterprise, a machine data platform with collection, indexing, search, reporting, analysis, alerting, monitoring, and data management capabilities; Splunk Cloud; and Splunk Light, which offers log search and analysis for small IT environments. It also provides Splunk Enterprise Security that addresses security threats and information, and event management; Splunk IT Service Intelligence, which monitors health and key performance indicators of critical IT and business services; Splunk User Behavior Analytics that detects cyber-attacks and insider threats; Splunk Phantom that automates and orchestrates incident response workflows; Splunk Machine Learning Toolkit; Splunk App for AWS that collects and analyzes data from amazon web services data sources; Splunk DB Connect to get business and enterprise context; and Cisco Firepower App for Splunk. Further, the company operates Splunkbase and Splunk Answers Websites, which provide an environment to share apps, collaborate on the use of its software, and provide community-based support and education, as well as offers application programming interfaces and software development kits. Additionally, it offers maintenance and customer support, training, and consulting and implementation services. The company serves cloud and online services, education, financial services, government, healthcare/pharmaceuticals, industrials/manufacturing, media/entertainment, retail/e-commerce, technology, and telecommunications industries. Splunk Inc. was incorporated in 2003 and is headquartered in San Francisco, California.

Current Price: $134.20
Consensus Rating: Buy
Ratings Breakdown: 24 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
Consensus Price Target: $145.2517 (8.2% Upside)

#3 - GW Pharmaceuticals (NASDAQ:GWPH)

GW Pharmaceuticals PLC- logo

GW Pharmaceuticals (NASDAQ: GWPH) - If there’s one thing that 2018 has taught us is that cannabis – and all the related controversy around it – is not going away. However, controversy frequently brings opportunity and that is the case for GW Pharmaceuticals. Investing in biotech is already risky. GWPH takes that risk to a new level because it develops its drugs from marijuana. But whereas some companies in this space are in the penny stock category, GWPH actually has two products that show legitimate market potential. A leading candidate that is still in development is Epidiolex, which is designed to treat Dravet Syndrome and Lennox-Gastaut Syndrome. The other, Savilex, which is designed to treat the spasticity brought on by multiple sclerosis, is already on the market. GWPH is developing a compound based on Savilex that offers a potential treatment for epilepsy as well as autism spectrum disorders. In this competitive space, a promising pipeline has significant appeal to investors. If Epidiolex can get regulatory approval, the most likely path for the company will be as an acquisition target. And if that happens, the company’s stock may surge even beyond its impressive growth of nearly 70% since the beginning of the year.



About GW Pharmaceuticals PLC-
GW Pharmaceuticals plc, a biopharmaceutical company, focuses on discovering, developing, and commercializing cannabinoid prescription medicines using botanical extracts derived from the Cannabis plant. Its lead product is Epidiolex, an oral medicine for the treatment of refractory childhood epilepsies, as well as for the treatment of Dravet syndrome, Lennox-Gastaut syndrome, tuberous sclerosis complex, and infantile spasms. The company also develops and markets Sativex, an oromucosal spray for the treatment of spasticity due to multiple sclerosis. In addition, it develops various product candidates for the treatment of glioblastoma, neonatal hypoxic-ischemic encephalopathy, and schizophrenia. Further, the company has license and development agreements with Almirall S.A.; Bayer HealthCare AG; Ipsen Biopharm Ltd; and Neopharm Group. It primarily operates in Europe, the United Kingdom, the United States, Canada, and Asia. GW Pharmaceuticals plc was founded in 1998 and is based in Cambridge, the United Kingdom.

Current Price: $178.88
Consensus Rating: Buy
Ratings Breakdown: 10 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $206.7778 (15.6% Upside)

#4 - Chegg (NYSE:CHGG)

Chegg logo

Chegg (NYSE: CHGG) - If you haven’t yet noticed, there is a theme with high-risk stocks … the possibility of an acquisition. It’s one of the outcomes that make a stock like Chegg attractive to investors. Chegg is not a household name, but if you have a son or daughter in college then there’s a good chance that they are using Chegg products. After outsourcing its business in the online textbook rental space, the company is firmly entrenched in establishing a leadership position as a digital platform for U.S. college students. This platform, among other things, provides services such as SAT test preparation. If you’ve followed the news recently you can see why students may put a greater focus on their standardized tests now that there will be an intense focus on keeping the playing field level. The company went through many years of negative growth, but revenues are growing. The risk for Chegg comes from Amazon who is currently offering their Prime services to college students for free. However, some analysts believe that with Chegg already entrenched on college campuses (both virtual and online), Amazon may take the path of least resistance and acquire Chegg.



About Chegg
Chegg, Inc. operates direct-to-student learning platform that supports students on their journey from high school to college and into their career with tools designed to help them pass their test, pass their class, and save money on required materials. The company offers Chegg Services, which include digital products and services; and required materials that comprise its print textbooks and eTextbooks. Its digital products and services include Chegg Study, which helps students master challenging concepts on their own; Chegg Writing that enables automatically generate sources in the required formats, when students need to cite their sources in written work; Chegg Tutors that allow students find human help on its learning platform through a network of live tutors; and Chegg Math solver, which helps students to get math help through self-guided and individualized math solutions The company also offers Other Services, such as Test Prep, internships, college admission and scholarship services; rents and sells print textbooks and eTextbooks; and offers supplemental materials and textbook buyback services. Chegg, Inc. was founded in 2003 and is headquartered in Santa Clara, California.

Current Price: $36.82
Consensus Rating: Buy
Ratings Breakdown: 6 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $39.1111 (6.2% Upside)

#5 - Advanced Micro Devices (NASDAQ:AMD)

Advanced Micro Devices logo

Advanced Micro Devices (NASDAQ: AMD) - Has the opportunity to profit on AMD come and gone? It's hard to say. AMD's stock was the top stock on the S&P 500 for 2018, and the stock continues to show strength. Through the first quarter of 2019, AMD remains in the top five of the S&P 500. What is becoming clear is that this tiny semiconductor company is now gaining market share in the CPU and GPU markets. While it's hard to call a $30 billion company a small company, it is playing in a sector with competitors that are valued at $100 billion. That disparity makes the math pretty simple, and compelling, for investors. If AMD can continue to grow their market share the stock will have plenty of room to run. The concern and the risk is in the company’s valuation. Even if some analysts assume the company’s most aggressive growth forecasts are accurate, the stock is currently bumping up against the top limit of their price target. This would suggest that a correction could be in the works. But when and how much are questions that are yet to be answered. A positive earnings report may spur the stock even higher.



About Advanced Micro Devices
Advanced Micro Devices, Inc. operates as a semiconductor company worldwide. The company operates in two segments, Computing and Graphics; and Enterprise, Embedded and Semi-Custom. Its products include x86 microprocessors as an accelerated processing unit (APU), chipsets, discrete and integrated graphics processing units (GPUs), and professional GPUs; and server and embedded processors, and semi-custom System-on-Chip (SoC) products and technology for game consoles. The company provides x86 microprocessors for desktop PCs under the AMD Ryzen, AMD Ryzen PRO, Threadripper, AMD A-Series, AMD FX, AMD Athlon, AMD Athlon PRO, and AMD Pro A-Series processors brands; microprocessors for notebook and 2-in-1s under the AMD Ryzen processors with Radeon Vega GPUs, AMD A-Series, AMD Athlon, AMD Ryzen PRO, and AMD Pro A-Series processors brands; microprocessors for servers under the AMD EPYC and AMD Opteron brands; and chipsets under the AMD trademark. It also offers discrete GPUs for desktop and notebook PCs under the AMD Radeon graphics and AMD Embedded Radeon brands; professional graphics products under the AMD Radeon Pro and AMD FirePro graphics brands; and Radeon Instinct accelerators for servers. In addition, the company provides embedded processor solutions for interactive digital signage, casino gaming, and medical imaging under the AMD Opteron, AMD Athlon, AMD Geode, AMD Ryzen, AMD EPYC, AMD R-Series, and G-Series processors brands; and customer-specific solutions based on AMD's CPU, GPU, and multi-media technologies, as well as semi-custom SoC products. It serves original equipment and design manufacturers, datacenters, original design manufacturers, system integrators, distributors, and add-in-board manufacturers through its direct sales force, independent distributors, and sales representatives. Advanced Micro Devices, Inc. was founded in 1969 and is headquartered in Santa Clara, California.

Current Price: $26.67
Consensus Rating: Hold
Ratings Breakdown: 14 Buy Ratings, 10 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $29.4348 (10.4% Upside)

#6 - Blue Apron (NYSE:APRN)

Blue Apron logo

Blue Apron (NYSE: APRN) - The risk for meal kit maker Blue Apron is a crowded, highly competitive sector. And when you consider that companies like Grub Hub are making it possible for consumers to have their favorite restaurant food delivered to their doorstep, there is an existential threat that convenience may trump fresh ingredients in the race to consumers’ wallets. Nevertheless, there is a market with consumers who love to cook and experiment with new things, but need a place to start. Consumers are also still intensely concerned about the sustainability of the food they eat. Blue Apron has recently hired the former CEO of Etsy to be a turnaround specialist. The challenge of increasing sales while at the same time cutting costs and improving profitability makes investing in APRN no sure thing at all. In fact, in their most recent quarter where they reported, the company was still showing a 20% decline in revenue. But the category isn’t going away and Blue Apron doesn’t have to be the leader. They just have to be relevant.



About Blue Apron
Blue Apron Holdings, Inc. operates direct-to-consumer platform that delivers original recipes, and fresh and seasonal ingredients. It also operates Blue Apron Market, an e-commerce marketplace that provides cooking tools, utensils, and pantry items. In addition, the company offers Blue Apron Wine, a direct-to-consumer wine delivery service that sells wines, which can be paired with its meals; and supplies poultry, beef, and lamb. It serves college graduates, young couples, families, singles, and empty nesters. The company offers its services through order selections on Website or mobile application primarily in the United States. Blue Apron Holdings, Inc. was founded in 2012 and is headquartered in New York, New York.

Current Price: $0.68
Consensus Rating: Hold
Ratings Breakdown: 0 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $1.6814 (147.3% Upside)

#7 - Lyft (NASDAQ:LYFT)

LYFT logo

Lyft (NASDAQ: LYFT) - Lyft is a small ($20 billion), but growing player in the ride-sharing space. Lyft operates exclusively in the United States and Canada where they currently have about 32% market share. The optimism for the stock centers on the long-term outlook for LYFT which is proving to be a formidable competitor for Uber in their shared markets. Over the long term, analysts are projecting Lyft to become an $80 billion giant in the category. Based on its current valuation, that $80 billion number represents quite a nice ROI. However, it has to get there first. And that is proving to be a challenge. After their initial IPO led to what investors felt was an unsustainable valuation (currently they have a price to sales ratio of around 10). Not surprisingly, the stock has plummeted. It is currently down over 20% since its IPO at the end of March. Plus, space is expected to become more crowded in the years to come. One of the axioms of investing is not to try and catch a falling knife, but that is what investors will need to be attempting if they are looking to invest in Lyft.

 



About LYFT
Lyft, Inc. operates a peer-to-peer marketplace for on-demand ridesharing in the United States and Canada. It provides Ridesharing Marketplace, which facilitates lead generation, billing and settlement, support, and related activities to enable drivers to provide their transportation services to riders. The company also offers a network of shared bikes and scooters in various cities to address the needs of riders for shorter routes; Express Drive program, a flexible car rentals program which connects drivers who need access to a car with third-party rental car companies; and concierge for organizations to manage the transportation needs of their customers and employees. In addition, it integrates third-party public transit data into the Lyft app to offer various enterprise programs, including monthly ride credits for daily commutes, supplementing public transit by providing rides for the first and last leg of commute trips, late-night rides home, and shuttle replacement rides. The company was formerly known as Zimride, Inc. and changed its name to Lyft, Inc. in 2013. Lyft, Inc. was incorporated in 2007 and is headquartered in San Francisco, California.

Current Price: $54.51
Consensus Rating: Buy
Ratings Breakdown: 14 Buy Ratings, 7 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $71.5148 (31.2% Upside)

The bottom line for investors is simple. Investing comes with risk, particularly if you’re investing in equities. And while it can be tempting during volatile times to pull out of the market, many investors know that you can’t win if you don’t play. And for some of these investors, their biggest risks have turned into their biggest rewards.

One of the keys to successful investing is the willingness to change course. That is particularly true with your riskier investments. If you do decide to invest in any of the stocks above, or other high-risk stocks are sure to do your due diligence and make sure that you have a means of staying on top of news surrounding your stock selections. A great way to do that is through our MarketBeat Daily Premium service. With this service, you have all the information you need to make informed trading decisions, including all the breaking news and analysts’ coverage of your current portfolio and watch list in one location.



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