You will probably agree that a rising share price is a happy occasion worthy of celebration. As the stocks you own rise in price, your portfolio's value increases. However, a soaring stock price may also deter you from buying shares as you believe the company is becoming too expensive to own or is reaching its peak.
But that's not the way to look at it. A stock may rise because the business reported a good set of earnings, launched a promising new product line, or conducted an acquisition slated to boost its profits. These events act as catalysts for the stock price to head upward, and should be viewed as a great reason to look deeper into these companies to determine if they are worth owning for the long term.
Here is a trio of stocks that recently shot up that are still worth considering for your portfolio.
Image source: Getty images.
1. Dutch Bros
Dutch Bros(NYSE: BROS) started as a pushcart beside railroad tracks in Oregon back in 1992, but it has now expanded into a national coffee chain with 950 stores in 18 states. The stock is up 68% year to date as I write this, and is just short of its 52-week high.
Dutch Bros demonstrated impressive growth through the first nine months of this year with revenue climbing 31.8% year over year to $938 million. Operating income doubled to $90 million over the same period, while net income soared tenfold to $31.6 million. The coffee chain also generated positive free cash flow of $5.2 million, reversing the year-ago period's negative free cash flow of $72.8 million.
With 156 new store openings in the past year, Dutch Bros has increased its footprint 20%, ending the period with 645 company-operated stores and 305 franchised stores. For the third quarter, same-store sales and transactions rose 2.7% and 0.8%, respectively.
The company is optimistic about its momentum as it has refined its site selection process for new stores, thus helping to generate better results. The business is increasing its investments in its development and construction teams and anticipates that 2024 should see a total of 150 new stores opened.
And this month, Dutch Bros appointed Venki Krishnababu as its new chief technology and information officer. Krishnababu used to work at Lululemon Athletica as its chief technology officer, and his expertise should help Dutch Bros grow and enhance its customer engagement initiatives. Technology, along with a people-centric focus, are critical success factors for the company, and this new hire should advance its objectives toward creating a welcoming environment that strengthens customer loyalty and keeps them coming back.
The company could leverage technology to improve customization of beverages and create opportunities for customers to provide feedback to help the organization to improve its offerings. Dutch Bros' app could also increase personalization for each customer by saving their preferences and providing suggestions for promotional items and new drinks, thereby boosting revenue for the company.
2. Reddit
Reddit(NYSE: RDDT) is a social media company where users curate the platform's most popular posts through a simple voting system. With forums called subreddits covering a large variety of topics, the platform fosters a vibrant community for discussion.
The company only went public in March at $34 per share, but the stock had soared to $169 as of this writing. Reddit's revenue growth has been accelerating all year with the top line up 68% in the third quarter.
The social media company also posted an operating profit of $6.9 million and net income of $29.8 million, reversing the operating loss of $19.6 million and net loss of $7.4 million a year ago. Positive free cash flow of $70.3 million also marked a sharp reversal from the previous year.
Operating metrics have also been encouraging, with global "daily active uniques" -- a user who visited a page on Reddit or opened a Reddit application at least once during a 24-hour period -- jumping 47% year over year to 97.2 million and global "weekly active uniques" surging 53% year over year to 365.4 million. What's more, Reddit's average revenue per "unique" improved by 14% year over year to $3.58, demonstrating rising engagement and increased spending by its burgeoning user base.
Back in May, Reddit forged a partnership with OpenAI, the company that developed generative AI software ChatGPT, to bring the latter's AI tools into Reddit's content. At the same time, OpenAI will also become a Reddit advertising partner.
More recently, Reddit has begun testing its own conversational AI feature. Known as Reddit Answers, the feature allows users to ask questions and receive summaries of responses and threads across the company's platform. This conversational interface will assist users in finding the topics or answers they are looking for without having to manually browse through different posts and communities.
Such improvements should help the social media company improve user retention and increase its daily and weekly active users. Monetization will be through advertising based on user engagement, and Reddit's prospectus estimates that its total addressable market from advertising (excluding China and Russia) is around $1.4 trillion, opening up significant opportunities for further growth.
3. Twilio
Twilio(NYSE: TWLO) operates a customer engagement platform that helps to connect its clients with their customers by building personalized relationships . The company uses communications and data to help businesses to better engage their customers.
Twilio's share price has surged 48% year to date as of this writing, and is trading close to its 52-week high of $116. The company has seen steady growth in revenue, which went from $2.8 billion in 2021 to $4.2 billion in 2023. Gross profit also increased from $1.4 billion to $2 billion over the same period. The business also saw free cash flow turn positive in 2023 after two years of negative free cash flow in 2021 and 2022.
Twilio saw its strong performance continue into 2024, with the first nine months of this year registering a 6% year-over-year growth in revenue and an 11% year-over-year increase in gross profit. Free cash flow did even better, soaring more than threefold year over year from $152.7 million to $564 million. Customer count increased by nearly 5% year over year to 320,000 as of Sept. 30, 2024, and the business maintained a dollar-based net expansion rate above 100% for the past five quarters.
Twilio recently expanded its integration with Amazon Web Services to build personalized solutions for the latter's customer base. The company is expected to share more of its strategy and total addressable market at its upcoming 2025 investor day, to be held on Jan. 23. Judging from the steady growth seen in Twilio's financials and the sharp increase in free cash flow, the company should report good potential to continue growing in the future, and it's definitely a stock worth considering even though it's already jumped.
Should you invest $1,000 in Dutch Bros right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Royston Yang has positions in Lululemon Athletica. The Motley Fool has positions in and recommends Amazon, Lululemon Athletica, and Twilio. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.
