As this year draws to a close, it's time to start thinking about 2025. What stocks should investors consider as new buys for the new year?
Well, if you ask me, there are two stocks that I think are no-brainer buys as we head into the new year. Let's take a look at them.
Image source: Getty Images.
1. Reddit
First up is Reddit (RDDT -1.81%).
Reddit is a relatively new public company, having debuted via an initial public offering (IPO) less than a year ago. Nevertheless, Reddit investors have been handsomely rewarded, with the stock up more than 215% since its IPO.
At any rate, Reddit is certainly not a young company. Founded nearly 20 years ago, Reddit hosts arguably the most popular series of message boards around, and overall, it is one of the most widely visited websites on the internet. In fact, in its most recent quarter (the three months ended Sept. 30), Reddit reported more than 97 million daily active uniques (DAUq), representing 47% year-over-year growth in the category.
Moreover, the company is increasingly focused on improving its financial fundamentals. Revenue in its most recent quarter hit an all-time high of $348 million, up 68% from a year earlier. Similarly, the company also reported a modest -- but symbolically significant -- profit of $29 million.
In a nutshell, Reddit is a no-brainer choice because of its growth potential. Advertisers love it because they can micro-target ads on its platform to particular affinity groups. In turn, Reddit will likely carve out a meaningful -- and lucrative -- niche within the fast-growing digital advertising ecosystem. Growth-seeking investors should take notice.
2. Tesla
Next, there's Tesla (TSLA -4.95%).
Without a doubt, one thing is clear: Tesla's stock is back. After three years of more or less sideways movement, Tesla stock has soared by more than 80% in just the last three months.
So what gives?
In short, the stars are aligning for the electric vehicle (EV) maker after several years of disappointments.
First, it must be said that CEO Elon Musk's close relationship with President-elect Donald Trump has obviously played a big role in Tesla's stock resurgence. Since Trump's election win, Musk has appeared by Trump's side on numerous occasions, including a SpaceX launch in Texas, multiple events at Trump's Mar-a-Lago residence, and the reopening of Notre Dame cathedral in Paris. In turn, investors are banking on Musk having the ear of the incoming Trump administration.
That's important for Tesla because the company is entering a phase where clearing regulatory hurdles will be crucial. To roll out full self-driving capabilities, for example, Tesla will need approval from various federal agencies, such as the Transportation Department and National Highway Traffic Safety Administration. In addition, it may be necessary, or at least preferable from Tesla's point-of-view, for the government to pass legislation that sets guidelines for autonomous driving. With Musk having a key role inside the administration, it's likely he will have a larger role in crafting and implementing rules favorable for the company.
Second, Tesla's financials have improved. Specifically, the company's gross margin increased to around 20% in its most recent quarter (ended Sept. 30). That was the second straight increase after several years of declining profitability.
TSLA Gross Profit Margin (Quarterly) data by YCharts
In summary, Tesla is worth considering as investors head into 2025. The company is well positioned to capitalize on a favorable regulatory environment -- particularly if it can successfully roll out a significant update to its full self driving software. Indeed, 2025 could be the year Tesla investors have been waiting for. What's more, that could be just the start for a company that has ambitious plans that stretch many years into the future.
