It's difficult to see upside for stocks when pessimism is pervasive, but as investors were reminded in 2022, buying shares of growing companies amid fear on Wall Street can earn you monster returns later on. Worries over tariffs are gripping Wall Street right now, but there are stocks ready to soar based on their business opportunities.
Uber Technologies (UBER +5.99%) and Chewy (CHWY +4.94%) are seeing strong momentum in their businesses. Here's why these stocks are poised to take off sooner or later.
1. Uber Technologies
Uber stock has been flat over the last year, but the business has been on fire. Revenue surged 20% year over year in the fourth quarter, and recent rating upgrades from Wall Street analysts suggest the company is poised for continued momentum in 2025.
Analysts from Wells Fargo and Truist recently maintained a "buy" rating and raised the price target on the shares. The average price target on Wall Street is $89, implying 27% upside from the recent $70 share price.
NYSE: UBER
Key Data Points
As a long-term investor, I don't normally give much weight to Wall Street's short-term price target estimates. But analysts might be on the money with this one. Uber is demonstrating strong demand for its ride and delivery services. Monthly active platform consumers grew 14% year over year in Q4 to 171 million.
Moreover, the stock is trading at a reasonable 21 times this year's earnings estimate. The consensus Wall Street estimate has the company's earnings growing at an annualized rate of 35% over the next several years, so investors are potentially looking at doubling their money within the next three years.
It's easy to see how Uber could deliver on those growth estimates. The company has a lot of leverage in its cost structure, since it benefits from service fees while drivers are responsible for the costs of their vehicles. As demand grows for Uber's services, margins are expanding. Operating income more than doubled to $2.8 billion last year, and management expects further profit expansion in Q1 2025.
Long term, Uber appears well positioned to quickly scale and profit from the growth in the autonomous vehicle (AV) market. Its reliance on third-party AV makers like Alphabet's Waymo could allow it to reap the rewards of a $1 trillion opportunity without the burden of investing to build its own AV fleet.
If you're looking for a reasonably priced growth stock with a favorable chance of outperforming in 2025, Uber is worth considering.
2. Chewy
Chewy stock doubled over the last year and could offer more upside based on recent business momentum. Following single-digit growth for most of 2024, revenue accelerated to 15% year over year in Q4.
Improving growth and opportunities for margin expansion have Wall Street analysts raising their near-term price targets. The average price target is currently $39.87, implying 21% upside from the recent $33.30 share price.
NYSE: CHWY
Key Data Points
Pet owners are not going to stop taking care of their furry family members. Millennials are making up a larger percentage of pet owners in the U.S., according to Statista, as younger generations view pets as their children. This is a powerful growth driver for Chewy, especially since 80% of its $11.8 billion in trailing revenue comes from its autoship program.
Repeat purchases from loyal customers can help the business drive higher margins. Free cash flow reached $452 million last year, up from $343 million in fiscal 2023. This improvement comes as Chewy invests in high-margin services like pharmacy, advertising solutions, and veterinary care.
The stock trades at 27 times this year's earnings estimate, while analysts project improving margins to grow earnings 23% annually in the coming years. With management anticipating further market share gains in the near term, the stock is poised to move higher over the next few years, if not this year.
Long term, Chewy has ample opportunities to grow in a pet industry projected to reach $157 billion this year, according to the American Pet Products Association.
