Three Shares I Fervently Recommend Purchasing Instantly Without Deliberation
It's generally agreed that an increasing stock price is a positive development, deserving of celebration. As the shares you own increase in value, so does your portfolio. However, a skyrocketing stock price might discourage you from investing further, as you may believe the company is overpriced or has reached its peak.
But view it differently. A rising stock price could be a result of the company reporting good earnings, introducing a promising new product line, or announcing an acquisition expected to boost profits. These events serve as catalysts for the stock price to climb, and should be seen as reasons to investigate these companies further to determine if they are worth holding for the long term.
Here are three stocks that have seen significant price increases recently, but are still worth considering for your portfolio.
1. Dutch Bros
Dutch Bros (BROS -1.53%) began as a pushcart by railroad tracks in Oregon in 1992. It has since grown into a national coffee chain with 950 stores in 18 states. The stock has surged 68% year-to-date as I write this, touching its 52-week high.
Dutch Bros showed impressive growth in the first nine months of the year, with revenue increasing 31.8% year over year to $938 million. Operating income doubled to $90 million, while net income skyrocketed tenfold to $31.6 million. The coffee chain also reported positive free cash flow of $5.2 million, going from negative free cash flow of $72.8 million in the previous year.
With 156 new store openings in the past year, Dutch Bros expanded its presence by 20%, ending the period with 645 company-operated stores and 305 franchised stores. For the third quarter, same-store sales and transactions increased 2.7% and 0.8% respectively.
The company is optimistic about its future, having refined its site selection process for new stores, leading to better results. Dutch Bros is increasing its investments in development and construction teams and expects to open 150 new stores by 2024.
This month, Dutch Bros appointed Venki Krishnababu as its new chief technology and information officer. Krishnababu previously worked as CTO at Lululemon Athletica. His expertise should help Dutch Bros grow and enhance its customer engagement initiatives. Technological advancements and a people-centric focus are crucial for the company's success, and this appointment should further its goals of creating a welcoming environment to strengthen customer loyalty and encourage repeat business.
Dutch Bros can leverage technology to improve beverage customization and offer customers opportunities to provide feedback, improving its offerings. Its app can also increase personalization for each customer, suggesting promotional items and new drinks, boosting revenue for the company.
2. Reddit
Reddit (RDDT -3.74%) is a social media platform where users curate content through a voting system. Its forums, called subreddits, cover a wide range of topics, fostering a community for discussion.
Reddit only went public in March at $34 per share, but the stock had climbed to $169 as of this writing. Reddit's revenue growth has accelerated all year, with revenue up 68% in the third quarter.
The social media company also reported an operating profit of $6.9 million and net income of $29.8 million, contrasting the operating loss of $19.6 million and net loss of $7.4 million a year ago. The company also reported positive free cash flow of $70.3 million, a sharp reversal from the previous year.
Operating metrics have also been encouraging, with global "daily active uniques" -- a user who visited a Reddit page or opened the Reddit app at least once during a 24-hour period -- increasing 47% year over year to 97.2 million, and global "weekly active uniques" surging 53% year over year to 365.4 million. Reddit's average revenue per "unique" improved by 14% year over year to $3.58, demonstrating rising engagement and increased spending by the growing user base.
In May, Reddit formed a partnership with OpenAI, the company behind generative AI software ChatGPT, to integrate AI tools into Reddit's content. OpenAI will also become a Reddit advertising partner.
More recently, Reddit begun testing its own conversational AI feature, known as Reddit Answers. This feature allows users to ask questions and receive summaries of responses and threads across the platform, helping them find the topics or answers they're looking for without having to manually browse different posts and communities.
These improvements should help the social media company improve user retention and increase its daily and weekly active users. Monetization will come through advertising based on user engagement, and Reddit's prospectus estimates a total addressable market from advertising (excluding China and Russia) of around $1.4 trillion, creating significant growth opportunities.
3. Twilio
Twilio (TWLO -0.82%) operates a customer engagement platform that helps businesses connect with their customers. The company uses communications and data to allow businesses to better engage with their customers, building personalized relationships.
Twilio's share price has rocketed by 48% since the beginning of the year, hovering near its 52-week high of $116. The company's earnings have been on an upward trajectory, with revenue increasing from $2.8 billion in 2021 to $4.2 billion in 2023. Gross profit also saw a significant boost, rising from $1.4 billion to $2 billion during the same period. In 2023, Twilio managed to turn its free cash flow from negative to positive, marking a shift after two consecutive years of negative free cash flow in 2021 and 2022.
Twilio's impressive performance carried on into 2024, with the first three quarters of the year witnessing a 6% year-on-year increase in revenue and a 11% year-on-year boost in gross profit. Free cash flow showed an even more impressive surge, leaping over threefold year on year from $152.7 million to $564 million. As of September 30, 2024, Twilio's customer base had expanded by nearly 5% compared to the previous year, totaling 320,000. The company maintained a dollar-based net expansion rate above 100% for the past five quarters.
Twilio has extended its integration with Amazon Web Services to create customized solutions for Amazon's clientele. The corporation is anticipated to reveal more about its strategy and total market potential at its forthcoming 2025 investor day, scheduled for January 23. Given the consistent growth in Twilio's financials and the notable increase in free cash flow, it seems likely that the company will report promising prospects for future growth, making it a stock worth considering, even given its current price increase.
Investing in Dutch Bros, Reddit, or Twilio could be a wise financial decision due to their recent significant price increases. Dutch Bros' impressive earnings, new product introductions, and strategic appointments have boosted its stock price and profitability, making it a strong long-term investment opportunity. Reddit's accelerated revenue growth, increasing user engagement, and strategic partnerships are driving its share price higher while also opening up substantial monetization opportunities. Twilio's continuous growth in revenue, gross profit, and free cash flow, along with its collaboration with Amazon, indicates a robust future for the company and its investors.
