Investors have had a decent start to 2025, as the most important stock market indices have risen in lockstep so far. At the time of this writing, the S&P 500, NasdaqComposedAnd DowJonesIndustrialAverage increased by 2.9%, 2.3% and 3.6% respectively.
Still, some individual stocks have delivered returns well above benchmark indices over the past 12 months. Today, three Motley Fool contributors share some of their current top picks: Reddit(NYSE:RDDT), seaLimited(NYSE:SE)And MetaPlatforms(NASDAQ:META).
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Jake Lerch (Reddit): For me, Reddit is a stock that remains at the top of my watchlist.
Since its initial public offering (IPO) in March 2024, Reddit shares have risen more than 270%. That’s about 16 times the S&P 500’s return of 17% over the same period.
Reddit, which runs one of the most visited websites, specializes in topic-based message boards. That makes it a hit with advertisers, who can tailor their ad buys to the topics and interests related to their products and services.
The company continues to expand its user base. In the most recent quarter (ended September 30, 2024), 97 million daily active users (DAUs) were reported, an increase of 47% year over year.
And engagement also increased. Conversion page views, a measure of ad performance, increased 40% year-over-year. revenue rose 68% to $348 million in the quarter.
This impressive growth is expected to continue. According to Yahoo! Financial analysts expect the company to generate revenue of $1.75 million in 2025, up 37% from the previous year.
In terms of risk, its price-to-sales ratio of nearly 24 puts the stock 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 consistent user growth and advertising-based business model. Investors looking for a solid tech stock with growth potential should consider this.
Will Healy(Sea Limited): With a focus on places like the US and China, investors often ignore the nearly 640 million people in Southeast Asia. The region includes premier markets such as Singapore and developing countries such as Thailand and Vietnam. In the case of Sea Limited (NYSE:SE)Leveraging these markets has helped the share price rise 226% over the last year.
For those who don’t know Sea Limited, it is a conglomerate of three companies.
It runs a fintech company called Sea Money in Southeast Asia that is consistently performing well. The company’s e-commerce division, Shopee, is the region’s leading online retailer. Eventually, Sea Limited started out as an online gaming company. This segment called Garena claims Free fireone of the world’s leading mobile games, as its best-known offering.
Thanks to these companies, the stock grew massively in 2020 and 2021 as the pandemic increased activity in all three segments. However, it declined in 2022 as pandemic gains reversed. And Shopee’s failed attempts to expand outside Southeast Asia and a ban on Free fire in its largest gaming market, India, contributed heavily to the declines.
Amid the sharp decline, Shopee decided to follow the example of Amazon and other competitors by investing in logistics in its home region. In addition, according to media reports, a relaunch of is planned Free fire in India is “imminent,” which should boost Garena’s recovery.
The successes have strengthened Sea’s financial position, with revenue of nearly $12 billion in the first nine months of 2024 up 26% compared to the same period in 2023. This increase was due to growth in all three business areas.
In the first three quarters of 2024, net income fell to $207 million from $260 million in the same period last year. However, the company also increased its spending on e-commerce and other services by $1.5 billion during the period, an investment that should help solidify its competitive edge in its core markets.
Finally, as far as valuation is concerned, the relatively recent return to profitability has resulted in the company having a high price-to-earnings (P/E) ratio. However, the expected earnings multiple is 31, and given the company’s significant potential for further growth, this valuation could help attract more investors to the stock in 2025.
Justin Pope (Meta Platforms): It can feel like you’ve missed the boat on meta platforms. The stock is up over 60% in the last 12 months and even more in the last two years. However, there is still room for newcomers to enter.
The company has confounded investors in recent years by pouring billions of dollars into artificial intelligence (AI) and virtual reality through its Reality Labs, which has only resulted in billions of dollars in losses.
However, there are growing signs that the AI push could soon pay off. According to a recent Bloomberg report, the company is developing several products to keep users away from their smartphones, including at least three new models of smart glasses, a wrist device and earbuds. The Quest brand was able to assert itself with its augmented reality headset Appleis Vision Pro, which so far appears to be a failed product.
Meta was one of the first major AI companies to publish their AI model (Llama) as open source, making it available to developers free of charge. This could expand Llama’s use in enterprise and government applications as it competes with closed AI ecosystems such as OpenAI. It’s still too early to know what impact these factors might have on the business, but fortunately, Meta is already worth buying.
The social media giant continues to grow its user base, and continued uncertainty over TikTok’s future could lead to more engagement on the company’s Facebook, Instagram, WhatsApp and Threads platforms. Management has unleashed generative AI for advertisers, helping them create more effective advertising campaigns, which only strengthens Meta’s advertising strength and pricing power.
Today the stock trades at a P/E ratio of 29. That’s a reasonable valuation for a company that analysts expect to grow earnings at 18% per year over the long term. Investors can confidently buy Meta stock today because of the company’s strong core business and what might happen in the future.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jake Lerch has positions at Amazon and Reddit. Justin Pope does not hold a position in any of the stocks mentioned. Will Healy holds positions with Sea Limited. The Motley Fool has positions in and recommends Amazon, Apple, Meta Platforms and Sea Limited. The Motley Fool has one Disclosure Policy.
