The stock market has fallen sharply over the past month, but some companies are showing improving fundamentals that could deliver substantial price gains in the coming years. Here are two promising comeback stocks to buy for 2025.
1. Carnival
Carnival (NYSE: CCL) is the leading cruise ship operator and continues to see significant improvement in earnings that could support stock price gains in the coming year. The stock trades at a low forward price-earnings ratio of just 13.5, which seems unjustified given the favorable cruise demand trends looking ahead to 2025.
Management has made great strides in improving operations and retooling the fleet to boost margins. Despite higher fuel costs, the company reported record operating profit of $560 million in the second quarter, a five-fold increase from 2023.
These trends should continue. Carnival is experiencing strong cruise demand through 2025 without any capacity increases, which should keep ticket prices high, which is great for the bottom line. The launch of Celebration Key next year, a Carnival-exclusive destination, is a major growth catalyst that should deliver a strong return on investment for the company.
Over the long term, the company is clearly positioned for balanced revenue and profit growth. Carnival is benefiting from favorable demand trends in the cruise market, which is growing faster than the $1.9 trillion global travel industry.
Investors have the opportunity to invest in this leading brand at a very attractive valuation. As Carnival continues to report strong demand and increases in operating profit, investors should expect the stock to reach new heights in the coming year.
2. Roku
Roku (NASDAQ: ROKU) is one of the leading streaming platforms, with a user base of over 83 million households. It continues to see solid growth and user engagement, which bodes well for the platform’s ability to monetize through digital advertising.
The stock is down 86% from its 2021 peak but now trades at a reasonable price-to-free cash flow ratio of 29. Roku generated adjusted free cash flow of $317 million over the past 12 months on revenue of $3.7 billion, showing the company is starting to build a profitable operation after running into trouble a few years ago.
Wall Street is underestimating Roku’s growth in customer accounts and future opportunities to rake in lucrative ad revenue. In the second quarter, the platform’s streaming households grew 14% year-over-year, very strong growth for a stock trading at such a cheap valuation.
Roku’s total revenue grew in line with household growth. The upcoming general election should lead to higher ad spending on the platform and faster revenue growth in the fourth quarter. Looking ahead to next year, management plans to use the Roku home screen to drive more ad sales, which is viewed by 120 million people across all households every day.
Roku is poised to have significant momentum heading into 2025. With millions of households on board, the company is well-positioned to welcome more ad buyers as it continues to grow its installed base. The stock appears to be an outsider to positively surprise with significant gains for investors next year.
Should You Invest $1,000 in Carnival Corp. Now?
Before you buy Carnival Corp. stock, consider the following:
The Motley Fool Stock Advisor team of analysts has just identified what they think is the 10 best stocks for investors to buy now… and Carnival Corp. wasn’t one of them. The 10 stocks that made the cut could deliver monster returns in the years to come.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $662,392!*
Stock Advisor offers investors an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks each month. The Stock Advisor has service more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns as of September 9, 2024
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Roku. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.
2 Stocks That Could Surge in 2025 was originally published by The Motley Fool
