You will probably agree that a rising share price is a happy occasion worthy of celebration. As growth stocks rise in price, your portfolio's value will also steadily increase, putting you on track for a comfortable retirement. However, a soaring stock may also hold you back from buying, as you believe the company is becoming more expensive to own.
When it comes to selecting great stocks, good news can be an excellent catalyst. A positive earnings report, consistent growth, or a rising dividend can propel the stock's price higher. In such cases, the rise in the share price is justified and acts as a great filter in separating stocks with faster growth versus those that demonstrate more pedestrian growth rates. If the business has the right attributes that justify a purchase, its shares can continue to rise and create lasting wealth for those who own it.
Here is a trio of stocks that recently shot up that you can consider including in your portfolio.
Image source: Getty images.
1. Dutch Bros
Dutch Bros (BROS -4.41%) started as a pushcart beside the railroad tracks in Oregon back in 1992, but has now expanded into a national coffee chain with 950 stores across the country. The company saw its share price leap 65% year to date and is just off its 52-week high of $56.
Dutch Bros has demonstrated impressive growth in the first nine months of this year, with revenue climbing 31.8% year over year to $938.2 million. Operating income doubled year over year to $90.3 million, while net income soared tenfold year over year to $31.6 million. The coffee chain also generated a positive cash flow of $5.2 million for the period, reversing the prior year's negative free cash flow of $72.8 million.
Dutch Bros opened a total of 156 new stores in the past year, a 20% year-over-year increase, and ended the period with 645 company-operated stores and 305 franchised stores. For the third quarter alone, same-store sales and transactions rose 2.7% and 0.8%, respectively.
CEO Christine Barone is optimistic about the company's momentum as the company refined its site selection process for new stores, thus helping to generate better store productivity. 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.
Just last week, 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 will assist Dutch Bros growth 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.
2. Reddit
Reddit (RDDT -1.81%) is a social media company where users submit content that is voted up or down, allowing the most popular posts to rise to the top. The company also provides forums with a wide variety of topics that users can discuss and ask questions on, thus fostering a vibrant community of content creators.
Reddit only went public in March this year at an IPO price of $34 but its share price has already shot up close to fivefold, to around $160. This stunning performance is unsurprising if you consider that Reddit's revenue shot up nearly 68% year over year for the third quarter of 2024.
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 in the prior year. Operating cash flow was also strongly positive for the quarter at $71.6 million, with a positive free cash flow of $70.3 million, a sharp turnaround from the previous year's negative operating and free cash flow.
Operating metrics have also been encouraging, with global daily active uniques 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 forums and communities.
Such improvements will endear users to Reddit's platform and increase user loyalty, thus helping the social media company improve user retention and increase its daily and weekly active uniques. Monetization will be through advertising solutions 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 (TWLO -1.97%) operates a Customer Engagement Platform (CEP) 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 and is trading close to its 52-week high of $116. The company saw 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 engagement solutions for the latter's customer base. The company will share more of its strategy and total addressable market at its upcoming 2025 Investor Day, to be held on Jan. 23, 2025. 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.
