With Halloween around the corner this week, it's easy to see why you might have monsters on your mind. I want to talk about a different kind of beast. There are monster stocks out there that can deliver the kind of outsized gains to turn nightmares into daydreams of market-thumping gains.
Figma (FIG 0.41%), Dutch Bros (BROS +5.20%), and Celsius Holdings (CELH 1.81%) aren't growth stocks for the squeamish. They trade at lofty multiples, and therefore come with lofty growth expectations. But I think they can still deliver monster returns. Let's learn more about these three "monster" opportunities that could deliver more treats than tricks over the next three years.
NYSE: FIG
Key Data Points
1. Figma
One of the most ferocious market debutantes this summer is Figma. The provider of design tools for the enhancement of websites, smartphone apps, and other digital platforms hit the market at $33 on the final trading day of July. It was a hot IPO, skyrocketing to as high as $142.92 on its second day of trading.
Figma enters this new market week trading 63% lower than its short-lived peak, but it's no broken IPO. It's still a healthy 62% for those lucky enough to score shares at $33 from the offering underwriters.
The appeal for developers and digital designers is clear: Figma offers free starter accounts to get new users aboard its cloud-based platform. They get a taste of how Figma leans on artificial intelligence (AI) to do the heavy lifting in improving websites and app designs. You have to subscribe to unlock the full power of Figma, but even those subscriptions are reasonably priced for as little as $3 a month (to as high as $90 a month).
The appeal for investors is even more clear. Revenue rose a hearty 46% and 41% through the first two quarters of this year, respectively. This follows a 48% jump for all of last year. You don't find too many digital design platforms growing this quickly.
The bad news is that the gradual deceleration in revenue is expected to get even worse. Analysts see top-line jumps continuing to slow through the balance of this year, easing even more with a 23% revenue growth target come 2026. They have also pared back profit targets for next year, now modeling a decline on the bottom line.
Don't fret too much about the near-term profit trajectory. With a triple-digit P/E ratio, this is a company that is rightfully investing in growing its user base and improving its platform. This is a revenue growth story, and don't be surprised if the 23% top-line increase that Wall Street pros are currently modeling moves higher over time. It wouldn't be the first time that a company's successful IPO results in an unexpected surge in tire kickers that eventually become premium accounts.
Figma investors can see how sticky the platform is becoming. The company's net dollar retention rate for its largest customers -- those with annual recurring revenue north of $10,000 -- is currently 129%. This means that those businesses with various employees on Figma are spending 29% more over the past year than they did the year before.
Being at the forefront of design with an AI bent in a growing market is a good place to be. The stock should put up big gains if it succeeds in boosting market growth projections.
NYSE: BROS
Key Data Points
2. Dutch Bros
Dutch Bros isn't a new offering. It's had four years of seasoning in the public markets. A lot has happened in that time, as the fast-growing chain builds out its empire. There are now 1,043 of its small-box locations across the country, serving a wide range of beverages.
Coffee-based drinks account for half of its business, but the other half includes energy drinks, teas, flavored lemonades, and even milkshakes. This means it reaches a much broader base of potential customers than traditional coffee chains.
With attractive unit economics and lean operations that drive 90% of their business through the drive-thru lane, this isn't your typical beverage stock play. Unlike other retail restaurants and coffee specialists that are slowing these days, store-level comps have stayed above 5% so far this year. Throw in expansion -- and it recently boosted its addressable market from 4,000 stores to at least 7,000 locations -- and you have clear upside.
Investors are paying more than 50 times forward earnings for Dutch Bros. The runway is long enough to make it worth that kind of premium. It also expects to enter the consumer packaged goods market next year, expanding its retail presence, and more importantly, its brand awareness.
NASDAQ: CELH
Key Data Points
3. Celsius Holdings
Let's stay in the beverage space for the third monster. This is a reformulated monster, because it was a rock star a couple of years ago when it delivered three consecutive years of triple-digit revenue growth. It saw its sales and stock get slammed last year as top-line gains slowed and then turned negative.
It then made a great deal to acquire Alani Nu at a steep discount to its own valuation. The acquisition gave it a fast-growing brand catering to a different slice of the energy drink space. It clearly worked, with the stock already more than doubling this year. Revenue shot 84% in its latest quarter, padded almost entirely by the addition of Alani Nu. However, after three quarters of negative year-over-year revenue growth, even its flagship brand turned positive.
Trading for 42 times forward earnings, Celsius is the cheapest of the three stocks in this list using that measuring stick. Growth will look a lot slower by the second quarter of next year as it laps the Alani Nu purchase, but it's still in a strong position to succeed after last year's stumble.
