Sweetgreen (SG 3.27%) is a salad restaurant chain that went public in 2021. At the start of 2024, it was down nearly 80% from its price when it went public. It seemed that the investor community had zero appetite for this salad stock. But 2024 was a different story entirely. By November, the stock had more than tripled in 2024.
Sweetgreen stock gave up some gains to end the year. But it still had an impressive run. Moreover, shares of Reddit (RDDT 7.13%) and IonQ (IONQ 10.84%) 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 that I believe will do the best in 2025.
Sweetgreen: up 184%
Sweetgreen was a high-growth business when it went public, but its losses were too much for investors’ liking. Management began addressing this concern at the end of 2023 by casting vision for its Infinite Kitchen model. And investors seem to be buying into that vision in 2024.
The Infinite Kitchen is all about automation. Through kitchen tech, salad bowls can be mostly prepared 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 largest operating expense. If robotics can lower this expense, it would have a profound impact on profits.
The Infinite Kitchen vision is only just now reaching an early inflection point. Sweetgreen started its third quarter with only two restaurant locations out of 225 equipped with the automation enhancements. But by the end of the third quarter, it had 10 restaurants with the Infinite Kitchen. As this scales up 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’s opening new restaurants more slowly. But its earnings before interest, taxes, depreciation, and amortization (EBITDA) are already going up, and the Infinite Kitchen tailwind hasn’t even really started yet.
SG operating revenue (quarterly YoY growth); data by YCharts; TTM = trailing 12 months.
Reddit: up 224%
The 224% jump for Reddit stock is particularly impressive considering it didn’t have the entire year to work with — its initial public offering (IPO) was in March. But the company’s financials are simply 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, it grew revenue by 68% year over year to $348 million. In short, it’s added millions of new users and advertising demand is up, leading to the outsize growth.
It’s more than just top-line growth. The already impressive gross margin has further improved and surpassed 90% in the third quarter. And with higher revenue and gross margins, the company’s free cash flow is similarly surging, as the chart below shows.
RDDT operating revenue (quarterly YoY growth) data by YCharts. Chart doesn’t reflect third-quarter results.
One of the keys to Reddit’s growth has been expansion into international markets. And the company is accomplishing this by making good use of artificial intelligence (AI) to translate existing content into other languages, driving adoption in those markets.
It’s relatively new. And with only 49 million users in international markets, it’s something that could keep driving growth for some time.
IonQ: up 237%
After a greater than 400% jump in the final three months of the year, IonQ stock tripled in value during 2024, along with several other quantum computing stocks. On one hand, it’s reasonable to view IonQ stock with some skepticism considering the entire space is hot right now. But on the other hand, the company did have some positive developments of its own in 2024.
The problem with a quantum computing stock such as IonQ is that few investors are experts in the field. Therefore, it’s hard to know if the company’s products are objectively worth investing in. For example, there are different approaches to quantum computing with associated pros and cons — for its part, IonQ uses the trapped ion approach.
When first-hand knowledge isn’t adequate to know which approach is best, it’s helpful to look for third-party validation. And IonQ has it.
For starters, its hardware is available on all of the major cloud computing platforms, putting it in a class of its own. Moreover, the company’s products have advocates, including within the U.S. government. For example, the Air Force Research Lab recently signed a $55 million contract with IonQ to basically tackle some of the practical considerations of deploying quantum computers at scale.
As investors smell an opportunity with quantum computing, IonQ has emerged as one of the most promising businesses in the space, thanks to this third-party validation.
And my pick for 2025 is…
Many analysts believe that the quantum computing industry will be valued in the hundreds of billions of dollars someday. If IonQ is truly at the forefront of the revolution, then it could indeed still have substantial long-term upside.
For its part, Reddit is growing fast and has barely tapped potential users in international markets. In fact, with only around 100 million active users, it’s certainly possible for that number to quintuple or more in the long term.
I don’t wish to say that IonQ stock or Reddit stock don’t have upside potential for 2025. But I believe that the path to upside in 2025 is more straightforward with Sweetgreen stock due to valuation.
Trading at 5 times sales, Sweetgreen isn’t necessarily cheap for a restaurant stock with slowing growth. That said, the company’s growth has slowed as it has placed a greater 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 its outlook to improve.
In the past, the company has indicated it could have 1,000 locations someday as compared with fewer than 250 today. The key is bringing down operating expenses to make the model work, which it could be close to achieving. That’s why Sweetgreen stock is my top stock for 2025 of the three mentioned here.
GIPHY App Key not set. Please check settings