The S&P 500(SNPINDEX: ^GSPC) has soared nearly 26% higher so far across 2024's trading, and its level sits quite near a record high. The stock market has benefited from improving macroeconomic conditions, excitement surrounding artificial intelligence (AI), and the possibility that next year could bring a new round of corporate tax cuts.
But while many high-profile stocks have managed to reach new highs this year, some high-quality companies still trade at substantial discounts compared to previous valuation highs. If you're looking for investment opportunities that look poised to bound higher over the long term, read on to see why two Fool.com contributors think that adding these stocks to your portfolio would be a smart move right now.
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This small coffee shop chain has big ambitions
Jennifer Saibil:Dutch Bros(NYSE: BROS) stock still trades about 30% off of its all-time highs, but it's up 68% year to date. The company has been demonstrating phenomenal performance for quite some time, and many of the risks the market was factoring into its stock price are being alleviated.
Revenue increased 28% year over year in the third quarter. Most of that comes from new stores, and the company has a long growth runway in new store openings, which should lead to continued high revenue growth for the foreseeable future. It has 950 stores right now and plans to open 150 stores total in 2024, and expects to have as many as 4,000 stores by around 2035. For perspective, that's still only a fraction of coffee giant Starbucks(NASDAQ: SBUX), which has more than 18,000 stores in North America alone.
Stores are still concentrated on the West Coast, where Dutch Bros is headquartered, but it's been entering new states at a steady clip. It now has stores in 18 states, including some lower East Coast states, and it's going to travel upward.
The opportunities in new stores are extremely compelling because customers love its beverages. It has developed a differentiated approach to coffee, which helps it stand out from a crowded market of what aren't really very different products -- coffee is coffee, after all. But at Dutch Bros, customers get their customized drinks from "broistas," and there's a dedicated culture of speed and service. Many of the chain's locations have drive-thrus, or even double drive-thrus, and runners can take and deliver orders even before a car gets to a window.
That's why Dutch Bros' same-store sales are on the rise despite the tough environment, demonstrating that this brand is developing loyalty and taking off.
Dutch Bros has experienced strong success despite not having a mobile program, but it just rolled out mobile ordering throughout nearly all of its locations. That could be a game changer for the company, leading to even higher sales and stronger loyalty.
Dutch Bros has now reported positive net income for three straight quarters, and as inflation cools and people go back to splurging on their favorite coffee, Dutch Bros is well-positioned to keep up its solid growth.
Take-Two stock is ready for the next level
Keith Noonan: Take-Two Interactive (NASDAQ: TTWO) is a leading publisher of video games for consoles, PC, and mobile platforms. The company is best known for its Grand Theft Auto (GTA) franchise, which is one of the most successful series in the entertainment industry. Within the franchise, Grand Theft Auto V actually stands as the most profitable entertainment release in history.
Despite first releasing in 2013, GTA V and its online multiplayer mode have continued to be major performance drivers for Take-Two. The game has now shipped more than 205 million copies worldwide, and its online mode continues to serve up high-margin revenue through in-game purchases made by players.
Thanks in large part to the ongoing success of GTA V, Take-Two stock is now up more than 570% over the last decade. On the other hand, the stock is also down roughly 12% from the high that it reached in 2021. With the company on the verge of a major new performance catalyst, the stock looks like a smart buy right now.
Next fall, Take-Two is scheduled to release Grand Theft Auto VI -- the long-awaited sequel to the most successful game ever made. Expectations are high, but it's almost certain to be a massive hit. The game will likely generate more than $1 billion in revenue within its first week on the market, and it will just be getting started.
While matching GTA V's 205 million in unit shipments would be an absolutely incredible achievement, there's a very good chance that the upcoming sequel will be able to ship more than 100 million units. The game will be even more focused on generating revenue through its online multiplayer mode than its predecessor.
With GTA VI due for release next year and the rest of the business looking quite strong as well, Take-Two stock appears to be on the verge of a powerful new growth phase. For long-term investors, I think the stock presents an attractive upside at current prices.
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Jennifer Saibil has no position in any of the stocks mentioned. Keith Noonan has positions in Take-Two Interactive Software. The Motley Fool has positions in and recommends Starbucks and Take-Two Interactive Software. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.
