The S&P 500 last month reached a new record high, officially confirming that we are in a bull market. This environment may feel new, but the index actually has been in bull territory ever since it started to rebound from bear market lows 16 months ago.
Bull markets always are declared well after they've begun -- but this doesn't mean we've lost out on an opportunity to benefit from them. That's because these periods of expansion generally last for years, offering us plenty of time to invest in stocks that thrive against such a backdrop.
A bull market particularly favors growth stocks, and even though many have soared in recent months, some players have been left behind. Let's check out three beaten-down stocks that could take off in the new bull market.
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1. Toast
Toast (TOST 3.42%) powers the operations of some of your favorite restaurants through its suite of software as a service products and financial technology solutions. The company's offerings help restaurants, bakeries, and even other related businesses like food trucks with everything from payment processing to menu management.
About 99,000 restaurant locations use the company's services now, up from 79,000 at the end of 2022 -- and at that time, Toast had processed more than $92 billion in gross payment volume over the trailing 12 months. These numbers are impressive, but Toast still has plenty of room for growth considering that it's only captured about 2% of the $55 billion U.S. addressable market.
Toast does face competition from others that offer point of sales and related services, such as Block's Square, but Toast may stand out since it only serves the restaurant industry -- so can truly hone in on the needs of chefs and restaurant managers.
The company increased gross payment volume, revenue, and gross profit in the double digits in recent quarters, and a strengthening of the economy moving forward could keep this trend going.
Today, down about 70% from their trading debut, Toast shares have plenty of room to run -- even if the competition gains some market share.
2. Chewy
Chewy (CHWY 2.99%) offers everything you need for your pet -- from food and toys to medicine and pet insurance -- all through its e-commerce platform. And the company now is even expanding into veterinary care through the launch of the first Chewy clinics.
The company reached the big milestone of profitability in the last fiscal year and has continued to grow sales this past year even in a difficult economy. Importantly, Chewy's built up a loyal customer base, and customers keep coming back month after month and spending more.
We know this thanks to the company's Autoship service, which automatically reorders and sends your favorite products directly to you. Autoship sales make up more than 75% of Chewy's overall sales, and net sales per active customer have climbed in the double digits in recent quarters.
Chewy also has started expanding into Canada, a market that it says is similar to the U.S. in terms of market share and profitability. And this expansion hasn't required a major investment thanks to Chewy's existing technology infrastructure.
Chewy's stock has remained in the doldrums, but all of that could change in the bull market if the company continues to progress successfully in its expansion projects.
3. Novavax
There's no denying it: Novavax (NVAX 3.54%) is the riskiest of these three stocks. The biotech company reached the market late with its coronavirus vaccine and missed out on the biggest revenue opportunity -- and investors haven't let the company forget that.
The stock has declined a jaw-dropping 98% from its peak back in 2021. On top of this, Novavax still faces significant challenges, including a dispute with major customer Gavi, the Vaccine Alliance, declining demand for coronavirus vaccines, and the need to continue along with its cost cutting plan.
Still, Novavax could rebound, especially during bull market times as investors look for recovery stories and potential growth stories. The company has made progress with costs cuts, reducing current liabilities by $1 billion since September and cutting its workforce more than 20%. The company is on track to meet further cost cutting goals, such as slashing expenses by more than 55% this year compared to 2022.
And Novavax continues to bring in some revenue thanks to its vaccine and is developing a combined coronavirus/flu candidate that could become a source of significant recurring revenue as of 2026 if all goes well. A combined vaccine may appeal to the population that generally goes for an annual flu vaccine -- that's about half of Americans.
So, Novavax is a high-risk stock -- and not right for everyone -- but if the company surmounts today's challenges this beaten-down player could soar in a bull market.
