The S&P 500 index is up 21% over the past year and has already set several new all-time highs in 2024. While the market overall is growing well of late, some individual growth stocks are still trading at low valuations that could set the stage for big returns over the next few years.
Let’s find out why three Motley Fool contributors believe Toast (NYSE: TOST), Walt Disney (NYSE: DIS), and Coupang (NYSE: CPNG) are due for a rally in the new year.
An early-stage opportunity at a great price
Jennifer Saibil (Toast): It’s hard to find great early-stage opportunities. Investors often pounce on great stocks before the general public has a chance to hear about an initial public offering, and top stocks can reach high valuations before they hit many people’s radars. So when a great stock’s price tanks, it can be a blessing in disguise.
That’s what’s been happening with Toast. Toast is a catchy name for a disruptive tech stock in the restaurant industry. That may not be the place investors expect to find the next big thing, but Toast is making waves with its software-as-a-service (SaaS) platform that exclusively serves the restaurant industry. It has set out to distinguish itself as a leader by focusing on one specific niche and offering the most comprehensive suite of solutions to fill that niche, with any kind of hardware or software a client could need.
It has been reporting incredible growth despite the sour economic climate. Annualized recurring revenue increased 40% year over year in the 2023 third quarter, and it added more than 6,000 new locations in the quarter for a total of 99,000. If that sounds like a lot, it’s still a small percentage of what it perceives as its serviceable addressable market today, and a tiny fraction of the overall global restaurant industry, where it envisions expanding.
However, Toast is one of those high-growth, unprofitable tech stocks that investors have grown wary of. Although gross profit increased 50% year over year in the third quarter, and net loss was about a third of what it was in 2022, the loss still came in at $31 million.
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