Rivian Automotive has been a bit of a disappointment for investors. Down a whopping 58% already this year, it has been a bigger bust than Cathie Wood’s Ark Innovation ETF, which has crashed more than 30%. While some investors have been hyping Rivian as potentially being the next Tesla-type stock to own, it’s apparent that optimism may be waning in the once-promising company.
In 2022, the carmaker only expects to produce 25,000 vehicles while still generating losses in the billions. It could be a good contrarian pick if you’re willing to take on significant risk.
However, there are safer, better options for growth investors out there, such as Cresco Labs ( CRLBF 3.44% ) and PayPal ( PYPL -1.97% ). Let’s take a look.
1. Cresco Labs
Marijuana producer Cresco Labs is one of the top multistate operators in the country. It announced this week the launching of its 50th retail store in the country and 16th in Florida.
Cresco’s retail operations span seven states. And while its presence could be larger, what’s refreshing about the business is that it carefully picks where it expands to, rather than simply seeking out any and all opportunities. Its newest location, in Lady Lake, Florida, is conveniently located near The Villages — a retirement community for people 55 and older, which Cresco’s press release claims is “the largest active adult community in the U.S.” That could be a key move for the company, as Florida is a top U.S. medical marijuana market.
And Cresco has been expanding into some other markets as well, including Massachusetts, where in September 2021 it closed on an acquisition of a vertically integrated operator in that state. A few months later, in November, it also added to its five Sunnyside dispensaries in Pennsylvania when it closed on its acquisition of Cure Penn, which operates a location in Lancaster, Pennsylvania.
Amid all this growth, Cresco Labs generates adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margins of about 30% of revenue, and it is one of the more profitable companies in the marijuana industry. And with a run rate of close to $1 billion in revenue, it’s also among the largest in terms of revenue.
For growth investors looking for a top stock to own, Cresco makes for a great option. Unlike Rivian, this is an established business and one that has a strong bottom line.
Fintech company PayPal has been off to a rough start to 2022, with shares down close to 40% year to date. The stock still makes for a solid growth investment, as the global digital payments market is expected to expand at a compounded annual growth rate of 20.5% until 2030, according to estimates from Research and Markets.
There will likely be plenty of opportunities ahead for the company to continue building on its already strong numbers, especially with PayPal’s exposure to the crypto world, as the company launched a digital wallet in 2021.
Unfortunately, it’s the near term that has led to the stock’s sell-off. Investors weren’t pleased with the company’s underwhelming projections when it reported earnings in February, estimating revenue growth of no more than 17% in the current year. And given how fragile the markets have been in 2022, shares of PayPal crashed on the news. Although the stock has come off the 52-week lows it hit shortly after earnings, it is still down more than 60% from the high of over $310.16 that it reached within the past year. The shares now trade at a bit less than $115.
However, with a solid profit margin of 16% over the trailing 12 months and still more growth in its future, PayPal presents a much safer growth stock to invest in than Rivian. And its reduced value only makes it a much more attractive buy on the dip, as the business still looks to be in excellent shape, coming off a year where it reported more than $5.4 billion in free cash flow.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.