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2 great growth stocks that have outperformed the Nasdaq in 2024 and can continue to rise

The Nasdaq Composite has delivered a total return of around 20% since the start of 2024, and some companies have significantly exceeded this return in terms of share price performance. However, the performance of any stock in one year should never be the sole reason why you decide to buy or sell.

Instead, there should be a clear business thesis underlying every stock you buy, and the company should align with the overall growth goals and risk tolerance levels you’ve established for your personal portfolio. If you’re looking for stocks that are already booming this year and have intriguing businesses that could drive long-term growth, here are two names to consider the next time you go stock shopping.

1.Netflix

Netflix (NASDAQ:NFLX) is trading about 40% higher as of early 2024. The streaming giant was one of the pandemic darlings that subsequently drew investor ire as growth slowed and profitability declined. But after this difficult period, profits are stable again.

While Netflix has seen its market share decline in recent years due to increased competitiveness in the space, at the time of this writing it still controls around 20% of the US streaming market. However, the company is still the best streaming platform in the world.

The company makes most of its money from recurring subscriptions. The recent launch of an ad-based tier for a cheaper monthly rate also introduced ad revenue into the mix. The company generates some additional revenue through partnerships with providers and other entertainment entities.

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Netflix’s efforts to tackle password sharing, diversify revenue streams and give subscribers more options have revitalized its balance sheet. In the first quarter of 2024, revenue rose 15% year over year to $9.4 billion, while operating income rose 54% to $2.6 billion. The company ended the quarter with 269.6 million global streaming memberships, a healthy 16% increase from the same quarter in 2023.

Netflix is ​​working to expand its membership base and make its platform more advertiser-friendly. Ad membership grew 65% sequentially in the first quarter of 2024, following sequential increases of approximately 70% in the previous two quarters. The company’s ad-based tier appears to be very popular: in markets where this tier is available, 40% of signups are for the ad plan.

Additionally, the company has a positive cash flow, generating free cash flow of approximately $2.1 billion in the most recent quarter alone.

Netflix is ​​still a streaming powerhouse. The continued innovation of content and the methods of delivering that content to subscribers enables solid growth after a difficult transition time. Investors may want to stay in the game or take a position in this top streaming stock.

2. Chipotle Mexican Grill

Chipotle Mexican Grill (NYSE: CMG) has seen its shares rise about 47% since the start of this year, as the strength of its underlying business has prompted investors to get a piece of the action. The stock has been in the news lately for several reasons, including its record-setting 50-for-1 stock split.

This will be one of the biggest splits in the history of the New York Stock Exchange. Shareholders of record as of June 26 will own a stake in Chipotle valued at the same amount as before the split, but the price of each share will be approximately one-50th of what it was before the split occurred. Looked at another way, as of June 26, shareholders will own 49 additional shares for every share they owned before the split.

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Stock splits do not affect a company’s value or market capitalization, but they do increase the number of shares outstanding and reduce the cost of each share. This can make a stock that has become quite expensive much more accessible to investors.

Chipotle has a unique model in fast-casual because it does not franchise any of its locations. Instead, all locations are owned and operated by the company. Its business model is simple: it generates revenue from sales through its restaurants and continues to leverage several competitive factors to expand its business position, including fresh ingredients from quality sources, a relatively small menu, reasonable prices and a growing digital presence.

By 2023, 37% of food and beverage revenues would come from digital sales. Total revenue last year was just under $10 billion, up 14% from 2022.

Chipotle opened 271 new restaurants last year, and most had Chipotlanes, the newer drive-through locations that allow customers to order online and pick up the order from the comfort of their vehicle. Total profits for the twelve-month period were $1.2 billion, up 37% from the previous year.

In the first quarter of 2024, total revenues rose 14% year over year to $2.7 billion, while net income rose 23% to $359 million. Restaurant-level operating margins were 27.5% in the quarter, up 190 basis points year-over-year.

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There’s a lot to like about this stock, its simple business model and ongoing value proposition to the end consumer. While Chipotle stock is about to become much more accessible after the stock split, this seems like a top restaurant stock to buy and hold for the long term that could deliver generous returns for years to come.

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Rachel Warren has no positions in any of the stocks mentioned. The Motley Fool holds positions in and recommends Chipotle Mexican Grill and Netflix. The Motley Fool has a disclosure policy.

2 Great Growth Stocks That Outperformed the Nasdaq in 2024 and Could Keep Rising was originally published by The Motley Fool

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