Stocks are set to close out 2024 with one of their best performances this century.
Through Dec. 16, the S&P 500 is up 27.5%, driven by the artificial intelligence (AI) boom, the resilience of the broader economy, and falling interest rates. No one knows what will happen in 2025, but Wall Street expects the bull market to continue. The average analyst is calling for the broad-market index to gain another 10%, building on strong results over the last two years.
However, while the broad market looks pricey now, there are some stocks that have serious breakout potential for next year. Keep reading to see three stocks that could double next year.
Image source: Getty Images.
1. Roku
Roku (ROKU -3.08%) has been a disappointment to investors since the end of the pandemic's height, despite the company's evident strengths.
Roku is the leading streaming distribution platform in the U.S. and the world, giving it ownership of a key piece in the relationship between audiences and streaming services. The company now has more than 85 million households using its devices, and streaming hours continue to grow steadily, up 20% in the third quarter to 32 billion.
However, Roku has struggled to turn that advantageous position into profits. The company overexpanded during the pandemic, and has lost money as its streaming has suffered since then. There are signs that the company is turning the corner. In Q3, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $98.2 million, which more than doubled from the $43.4 million it reported in the quarter a year ago. On a generally accepted accounting principles (GAAP) basis, Roku narrowed its net loss to $9 million, or just $0.06 per share.
That puts the company in a good position to turn profitable next year. Additionally, Roku should benefit from a recovery in the streaming industry. Legacy media companies should eventually return to growth and spend on advertising, which is key to Roku's business model. The launch of the flagship ESPN streaming service could be a watershed moment for Roku and the streaming industry. Finally, its enhanced integration with online ad space manager The Trade Desk bodes well for the coming quarters.
2. Upstart
Another high-flying pandemic winner that crashed in 2022 is Upstart (UPST -5.62%). Upstart is a fintech company that originates consumer loans, and it uses its proprietary AI technology to determine consumer creditworthiness. It claims its algorithms are significantly more accurate than the FICO score, allowing it to sell more loans with a lower default risk.
Upstart struggled in the aftermath of the pandemic as interest rates jumped, weighing on demand for loans. Anticipating a recession, its funding partners also pulled back on buying its loans, as Upstart doesn't tend to hold its loans on its balance sheet.
However, as we close out 2024, Upstart's prospects seem to be changing as interest rates have started to come down and fears of a recession have subsided. Revenue in Q3 rose 20% to $162 million, its fastest growth in several quarters, and it returned to positive adjusted EBITDA at $1.4 million.
Upstart delivered double-digit profit margins during the pandemic's height, and there's potential for the company to get back there, especially as it continues to see strong growth ahead and interest rates are expected to continue coming down.
3. Opendoor Technologies
Opendoor Technologies (OPEN -2.34%) is the third candidate to double next year, and the company has the kind of business model that can easily turn.
Like the stocks above, Opendoor has struggled in the post-pandemic era as the housing market has slowed. The company, whose business is based on flipping homes and collecting fees, is closely tied to the housing market. The stock has continued to flounder as home sales have remained weak.
Even after multiple rounds of layoffs, Opendoor is still unprofitable. It reported an EBITDA loss of $38 million, an improvement from a loss of $49 million a year ago.
However, the Federal Reserve has started to lower interest rates, which should help support a recovery in the housing market -- and, therefore, an improvement in Opendoor stock. The good news is that Opendoor stock has fallen far enough that a double is reasonably within reach here. The stock now trades under $2 a share and is down 95% from its all-time high.
For shares to climb to $4 would only require a modest housing recovery and another $1.4 billion on Opendoor's market cap. If interest rates continue to fall, mortgage rates will eventually follow, and that should lift Opendoor stock.
