Sweet green(NYSE: SG) is a salad restaurant chain that went public in 2021. At the beginning of 2024, it was down almost 80% of its price when it went public. The investor community seemed to have no appetite for this salad stock. But 2024 was a completely different story. By November, the stock had more than tripled in 2024.
Sweetgreen stock gave up some gains to end the year. But he still had an impressive run. Moreover, shares of Reddit(NYSE: RDDT) a IonQ(NYSE: IONQ) have had similarly impressive runs, with both of those stocks more than tripling in value in 2024.
Here's why these three stocks did so well in 2024 and which one I think will do the best in 2025.
Sweetgreen was a high-growth business when it went public, but its losses were too much for investors' liking. Management began to address this concern at the end of 2023 by looking at the vision for its Infinite Kitchen model. And investors seem to be buying into that 2024 vision.
The Infinite Kitchen is all about automation. Through kitchen technology, salad bowls can be prepared mainly by robotic machines. And this is a big deal.
Consider that through the first three quarters of 2024, the company spent 28% of its revenue on labor and related expenses – its biggest operating expense. If robotics can lower this cost, it would have a profound impact on profits.
Infinite Kitchen's vision has only just reached an early inflection point. Sweetgreen started its third quarter with just two a restaurant locations out of 225 with the automation improvements. But by the end of the third quarter, he had 10 restaurants with the Infinite Kitchen. As this increases in 2025 and beyond, investors are hopeful that profits will rise, which is why the stock jumped in 2024.
Revenue growth is slowing as the company focuses on profits – it is opening new restaurants more slowly. But its earnings before interest, taxes, depreciation and amortization (EBITDA) are already increasing, and the Infinite Kitchen tailwind hasn't even really begun yet.
The 224% jump for Reddit stock is especially impressive given that it didn't have a whole year to work with — its initial public offering (IPO) was in March. But the company's financial position is too impressive to ignore.
Over the past two years, the social networking company's top-line growth has been accelerating – that's a relatively rare investment opportunity. In the third quarter, revenue grew 68% year over year to $348 million. In short, millions of new users have been added and the demand for advertising is up, leading to the big growth.
It's more than just top-line growth. The already impressive gross margin has improved further and exceeded 90% in the third quarter. And with higher revenue and gross profit, the company's free cash flow is also increasing, as the chart below shows.
One of the keys to Reddit's growth has been its expansion into international markets. And the company achieves this by making good use of artificial intelligence (AI) to translate existing content into other languages, driving adoption in those markets.
It is relatively new. And with only 49 million users in international markets, it's something that could continue to drive growth for some time.
After a jump of more than 400% in the last three months of the year, IonQ stock tripled in value during 2024, along with several other quantum computing stocks. On the one hand, it's reasonable to view IonQ stock with some skepticism given that the entire space is hot right now. But on the other hand, the company had some positive developments of its own in 2024.
The problem with a quantum computing stock like IonQ is that few investors are experts in the field. Therefore, it is difficult to know whether the company's products are objectively worth investing in. For example, there are different methods of using quantum computing with associated advantages and disadvantages – for its part, IonQ uses the trapped ion method.
When first-hand knowledge is not sufficient to know which method is best, it is useful to look for third-party verification. And IonQ has.
For starters, its hardware is available on all major cloud computing platforms, putting it in a class of its own. Moreover, the company's products have advocates, including within the US government. For example, the Air Force Research Laboratory recently signed a $55 million contract with IonQ to essentially address some of the practical considerations of using large-scale quantum computers.
Many analysts believe that the quantum computing industry will one day be valued in the hundreds of billions of dollars. If IonQ is truly at the forefront of the revolution, then it could well have significant long-term benefits.
For its part, Reddit is growing rapidly and has barely tapped into potential users in international markets. In fact, with only about 100 million active users, it's certainly possible to fifth that number or more in the long run.
I don't want to say that IonQ stock or Reddit stock don't have upside potential for 2025. But I think the path to the end in 2025 is more straightforward with Sweetgreen stock because of valuation.
Trading at 5 times sales, Sweetgreen isn't necessarily cheap for a restaurant stock with slower growth. That said, the company's growth has slowed as it has put more emphasis on profitability. If its Infinite Kitchen model improves its unit economics, management will likely lean back into new openings, implementing its robotic automation. In short, I expect his outlook to improve.
In the past, the company has indicated that it could one day have 1,000 locations compared to less than 250 today. The key is to reduce operating costs to make the model work, which it may be close to achieving. That's why Sweetgreen stock is my top stock for 2025 of the three mentioned here.
Before you buy stock in Sweetgreen, consider this:
The Motley Fool Stock Advisor a team of analysts just noted what they believe is the top 10 stocks for investors to buy now… and Sweetgreen was not one of them. The 10 stocks that made the cut could generate monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $885,388!*
Stock Advisor gives investors an easy-to-follow blueprint for success, including guidance on portfolio construction, regular analyst updates, and two new stock picks every month. TheStock Advisorservice has more than four S&P 500 return since 2002*.
