Investors have enjoyed a decent start to 2025 as the major stock market indexes have advanced in unison so far. As of this writing, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average are up 2.9%, 2.3%, and 3.6%, respectively.
Yet, over the past 12 months, some individual stocks have logged returns that far exceed the benchmark indexes. Today, three Motley Fool contributors highlight some of their top picks right now: Reddit (RDDT 3.35%), Sea Limited (SE 3.67%), and Meta Platforms (META 2.33%).
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Reddit's stock has more than tripled in less than a year.
Jake Lerch (Reddit): For me, Reddit is a stock that remains at the top of my watch list.
Since their initial public offering (IPO) in March 2024, Reddit shares have advanced by more than 270%. That's about 16 times the S&P 500's 17% return over the same period.
Reddit, which operates one of the most visited websites, specializes in topic-based message boards. That makes it a hit with advertisers, which can tailor their ad purchases based on the topics and interests that relate to their products and services.
The company continues to grow its user base. In its most recent quarter (ended Sept. 30, 2024), it reported 97 million daily active users (DAUs), up 47% from one year earlier.
NYSE: RDDT
Key Data Points
And engagement increased as well. Conversion page views, an ad performance metric, increased by 40% year over year. Revenue grew 68% to $348 million for the quarter.
That impressive growth is expected to continue. According to data compiled by Yahoo! Finance, analysts predict the company will generate $1.75 million in sales in 2025, up 37% year over year.
As for risk, the stock's price-to-sales ratio of nearly 24 puts it out of reach for value investors, but in the world of fast-growing tech, its valuation remains reasonable, if still on the expensive side.
In summary, Reddit is well-positioned to deliver excellent revenue growth thanks to its steady rise in users and its ad-based business model. Investors looking for a solid tech stock with room to grow should consider it.
Don't ignore the growth in this Southeast Asian conglomerate
Will Healy (Sea Limited): Amid the focus on places like the U.S. and China, investors often ignore the nearly 640 million people in Southeast Asia. The region includes top-tier markets like Singapore and developing countries such as Thailand and Vietnam. In the case of Sea Limited (SE 3.67%), capitalizing on those markets helped spark a 226% increase in the stock price over the last year.
For those who do not know Sea Limited, it is a conglomerate encompassing three businesses.
It operates a fintech enterprise in Southeast Asia called Sea Money, which has performed consistently well. The company's e-commerce arm, Shopee, is the region's leading online retailer. Lastly, Sea Limited began as an online gaming company. This segment, called Garena, claims Free Fire, one of the world's leading mobile games, as its best-known offering.
NYSE: SE
Key Data Points
Thanks to these businesses, the stock grew massively in 2020 and 2021 as the pandemic increased activity for all three segments. But it pulled back in 2022 as pandemic gains reversed. And Shopee's failed attempts to expand outside of Southeast Asia and a ban on Free Fire in its largest gaming market, India, contributed heavily to the declines.
Amid the sharp drop, Shopee decided to follow the lead of Amazon and other peers by investing in logistics in its home region. Moreover, according to news reports, a relaunch of Free Fire in India is "imminent," which should boost Garena's recovery.
The successes have bolstered Sea's financials, and in the first nine months of 2024, its nearly $12 billion in revenue was up 26% compared to the same period in 2023. Growth in all three of its businesses drove this increase.
In the first three quarters of 2024, net income fell to $207 million versus $260 million in the year-ago period. However, the company also increased its spending on e-commerce and other services during the period by $1.5 billion, an investment which should help cement its competitive advantage in its core markets.
Finally, on the valuation front, a relatively recent return to profitability has left it with a high price-to-earnings ratio (P/E). But its forward earnings multiple is 31, and given the company's considerable potential for continuing growth, that valuation could help draw more investors to the stock in 2025.
Meta's ambitious AI efforts could soon start paying off.
Justin Pope (Meta Platforms): It can feel like you've missed the boat on Meta Platforms. The stock is up over 60% in the past 12 months and even more over the past two years. Yet, there is still room for newcomers to hop aboard.
The company has conflicted investors over the past few years by pouring billions of dollars into artificial intelligence (AI) and virtual reality via its Reality Labs, which has only resulted in billions of dollars in losses.
However, there are emerging signs that the AI push could soon start paying off. According to a recent Bloomberg report, the company is developing multiple products to get users off their smartphones, including at least three new models of smart glasses, a wrist device, and earbuds. Its Quest brand has succeeded with its augmented reality headset, fending off Apple's Vision Pro, which seems like a failed product thus far.
NASDAQ: META
Key Data Points
Meta was among the first major AI companies to open-source its AI model (Llama), making it freely available to developers. This could expand Llama's use in enterprise and government applications as it competes with closed AI ecosystems such as OpenAI. It's still early to know what impact these factors may have on the business, but fortunately, Meta is already worth buying.
The social media giant continues to grow its user numbers, and the ongoing uncertainty over TikTok's future could funnel more engagement to the company's Facebook, Instagram, WhatsApp, and Threads platforms. Management has unleashed generative AI for advertisers, helping them craft more effective ad campaigns, which only reinforces Meta's advertising strength and pricing power.
Today, the stock trades at a P/E of 29. That's a reasonable valuation for a company that analysts expect to grow earnings at an 18% annual rate over the long term. Investors can confidently buy Meta stock today for its strong core business and what may come in the future.
