The stock market has sold off over the last month, but some companies are showing improving business fundamentals that could support substantial share price gains over the next year. Here are two promising comeback stocks to buy before 2025.
1. Carnival
Carnival (CCL 2.30%) is the leading cruise ship operator, and it continues to see significant improvement in profits that could support share price gains over the next year. The stock trades at a low forward price-to-earnings ratio of just 13.5, which seems unjustified given the favorable demand trends for cruises looking ahead to 2025.
NYSE: CCL
Key Data Points
Management has made great progress in improving operations and adjusting its fleet to boost margins. Despite higher fuel costs, the company reported record operating profit of $560 million in the second quarter -- up fivefold over 2023 levels.
These trends should continue. Carnival is experiencing high demand for 2025 cruises without any increases to capacity, which should keep ticket pricing up, and that's great for profits. The launch of Celebration Key next year, an exclusive destination from Carnival, is a major growth catalyst that should drive strong returns on investment for the company.
Over the long term, the company is clearly positioning for balanced revenue and earnings growth. Carnival is benefiting from favorable demand trends in the cruise travel market, which is growing faster than the $1.9 trillion global travel industry.
Investors have an opportunity to invest in this leading brand at a very attractive valuation. As Carnival continues to report strong demand and increases in operating profit, investors should expect the stock to break out to new highs over the next year.
2. Roku
Roku (ROKU +2.26%) is one of the leading streaming platforms, with a user base of more than 83 million households. It continues to see solid growth and engagement from users, and this bodes well for its ability to monetize the platform through digital advertising.
NASDAQ: ROKU
Key Data Points
The stock has fallen 86% from its 2021 peak, but now trades at a reasonable price-to-free cash flow multiple of 29. Roku generated adjusted trailing-12-month free cash flow of $317 million on $3.7 billion of revenue, which shows the company starting to build a profitable operation after struggling a few years ago.
Wall Street is significantly undervaluing Roku's growth in customer accounts and future opportunities to rake in lucrative ad revenue. In the second quarter, the number of streaming households on the platform grew 14% year over year, which is very strong growth for a stock trading at such a low valuation.
Roku's total revenue grew consistent with its household increase, and the upcoming general election should drive strong ad spending on the platform and accelerate revenue growth in the fourth quarter. Looking ahead to next year, management wants to leverage the Roku home screen to drive more ad sales. The home screen is viewed by 120 million people across its households every day.
Roku will have great momentum heading into 2025. With millions of households onboard, the company is in a prime position to welcome more ad buyers as it continues to grow its installed base of users. The stock looks like a dark horse candidate to surprise to the upside next year with significant gains for investors.
