The market has not been kind to some of my favorite stocks. Celsius holdings (NASDAQ: CELH), Roku (NASDAQ: ROKU)And Disney (NYSE: DIS) are trading lower this year — but 2024 isn’t over yet.
I believe all three can bounce back and beat the market in the last few months of the year, and the rise should continue into 2025 and beyond.
These growth stocks are out of favor now, but certainly not out of taste. Here’s a closer look at why all three names could soar after a slow start to the year.
1. Celsius
Growth has slowed significantly for the functional beverage specialist, whose product accelerates calorie and fat burning when consumed right before cardio. I still think Celsius could heat up again. The same company that saw revenue more than double for three years in a row has proven deadly this year, with shares down a whopping 62% since their March peak.
The slowing of revenue to a 37% increase in the first three months of this year was tough. The 23% year-on-year increase the company posted in the second quarter last week is understandably worse. Celsius, however, initially rallied after its last financial update. The results even beat the 20% revenue growth analysts had been looking for. The profit win was even more impressive.
|
Quarter |
EPS Estimate |
EPS Current |
Defeat |
|---|---|---|---|
|
Q1 2023 |
$0.07 |
$0.13 |
86% |
|
Q2 2023 |
$0.09 |
$0.17 |
89% |
|
Q3 2023 |
$0.16 |
$0.30 |
88% |
|
Q4 2023 |
$0.15 |
$0.17 |
13% |
|
Q1 2024 |
$0.27 |
$0.19 |
42% |
|
Q2 2024 |
$0.24 |
$0.28 |
17% |
Data source: Yahoo! Finance. EPS = earnings per share.
Profitability has increased in this scalable business. The 65% increase in EPS in the latest quarter is just the latest double-digit percentage victory. The market typically rewards companies that consistently beat expectations, but like a Celsius-powered workout, the stock price is getting smaller and smaller.
The short-term challenges remain. Celsius’ share of the country’s energy drink market has risen to 11% from 9.6% a year earlier, but it has declined sequentially. There is no new rival to challenge the company’s functional footprint, but after years of monstrous growth by simply expanding its reach, it is clear that the company’s days of triple-digit growth are over.
The stock is trading at a reasonable 30 times analysts’ earnings target for next year. International sales are still part of the overall revenue mix, but they outpaced growth in North America, which rose 30%. Some have also speculated that the unusually warm summer has shifted consumption to traditional water for hydration.
Fall and cooler weather are just around the corner. Despite recent setbacks, Celsius remains one of the fastest-growing beverage stocks. It could be time for another sip.
2. Roku
The streaming TV pioneer keeps getting better, even as its stock continues to get worse. Roku shares have fallen by half since hitting a near-peak in December of last year.
Roku is checking all the right boxes and TV boxes, and its losses are shrinking. It has extended its double-digit revenue growth streak to five quarters, and engagement continues to climb. The market is unimpressed, choosing instead to channel into other growth opportunities.
Despite competing with some of the most valuable companies in the consumer technology space, Roku remains the undisputed leader in usage. A spring survey from Comscore CTV Intelligence found that Roku’s operating system accounted for a 47% share of U.S. viewers’ time spent on smart TVs.
The Roku Channel, its own offering, has seen audience growth of 75 percent over the past year. This week, it launched The Roku Sports Channel, which, like the flagship, is a free, ad-supported way for users to watch a wide variety of sports programming.
3. Disney
Let’s close with a media company that has been around for over 100 years now. Disney may not seem like a growth story, as revenue growth has not exceeded 6% for the past five quarters. Even its iconic theme park business has taken a dip. There is a bigger story going on here with the master storyteller.
Disney announced a long list of attractions that will revamp its theme parks over the weekend for years to come. The film studio is back after releasing two of the summer’s biggest movies in back-to-back months. Disney+ is finally profitable, and its streaming business is growing more than enough to offset the gradual decline of its linear media networks.
Analysts are cutting earnings estimates for the next fiscal year in light of Disney’s heavy investments to fuel future growth, but that’s the price it must pay to accelerate growth. It’s a story worth telling, and with an expected earnings multiple in the high teens, it’s an attractively priced story with a potential fairytale ending.
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Rick Munarriz has positions in Celsius, Roku and Walt Disney. The Motley Fool has positions in and recommends Celsius, Roku and Walt Disney. The Motley Fool has a disclosure policy.
3 Growth Stocks That Could Surge in 2024 and Beyond was originally published by The Motley Fool
