We recently compiled a list of the 12 Best Multibagger Stocks to Buy Right Now. In this article, we are going to take a look at where Sweetgreen, Inc. (NYSE:SG) stands against the other multibagger stocks.
The US equities continued their upward movement in 2024 and fueled the S&P 500 to record highs. Much of this optimism in the broader market was backed by the strong US economy and the Federal Reserve’s stance to cut interest rates. As per PBS News, 2024 saw several familiar winners, like big technology stocks. These stocks got even bigger due to continuous increases in their stock prices. Apart from certain tech giants, strong momentum was also seen in Bitcoin, gold, and other investments.
Performance of US Equity Markets in 2024- A Recap
Ameriprise Financial reported that 2024 had a strong start, with the S&P 500 Index concluding the Q1 on a high note due to a healthy US economic backdrop, moderating inflation, improvement in profit conditions, and anticipations of rate cuts from the US Fed.
The strong growth momentum continued in Q2 as the S&P 500 Index saw its strongest three-quarter run since mid-2021. Ameriprise Financial highlighted that an AI boom again drove healthy gains throughout IT and communication services. However, increased rates and a pause by the US Fed capped broader market gains. In September, the US Fed reduced its policy rate for the first time since 2020, concluding its aggressive rate-hiking cycle to control inflation. Therefore, it began a new monetary policy stance that supported economic growth and the labor market. Additionally, since the election, investors’ confidence has been further boosted towards risky assets, including equities.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What to Expect in 2025?
For the S&P 500, J.P. Morgan Research projects a price target of 6,500 next year, with EPS of $270. The US is expected to remain a global growth engine with the expansionary business cycle, healthy labor market, broadening of AI-associated capital spending, and the prospect of strong capital markets and dealmaking activity.
Furthermore, BlackRock sees several factors expected to support stocks in 2025. The decisive election result removed key uncertainty hanging over the broader US market. The rally that was seen after the results might continue into the start of 2025 primarily because of prospects of tax cuts and deregulation throughout key industries. While the impact of some policies remains uncertain, history has a long-term record of positive returns in 1st year of a Presidential term. The firm also believes that earnings and valuations hint at healthy potential for a continued broadening of the market. Its analysis of the S&P 500 data reflects that earnings for Mag 7 stocks outperformed the broader market by 37% in 2023. This earnings gap was narrowed across 2024. Now, it expects it to decline to 7.5% in 2025.
Our Methodology
To list the 12 Best Multibagger Stocks to Buy Right Now, we used a screener to shortlist the stocks that have gained over 100% over the past year and have healthy average upside potential. Finally, the stocks are arranged in ascending order of their average upside potential, as of 30th December 2024. We also mentioned the hedge fund sentiment around each stock, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Sweetgreen, Inc. (NYSE:SG)
Number of Hedge Fund Holders: 25
One-year Return: ~186%
Average Upside Potential: ~37.2%
Market Cap as of 30th December: $3.70 billion
Sweetgreen, Inc. (NYSE:SG) operates fast-food restaurants in the United States that serve healthy foods on a large scale.
Wall Street believes that Sweetgreen, Inc. (NYSE:SG)’s innovation is its proprietary “Infinite Kitchen” technology. This robotic assembly line system is focused on improving operational efficiency and customer experience. Sweetgreen, Inc. (NYSE:SG) successfully retrofitted its first location in New York City and aims to open more “Infinite Kitchen” locations within the year. “Infinite Kitchen” is an innovative concept that uses robotic automation technology to streamline and optimize food preparation processes.
Analysts opine that this technology should drive significant improvements in restaurant-level margins. Moreover, the “Infinite Kitchen” can potentially lower prices, which can expand the company’s market reach. Apart from reduced labor costs, this technology enables faster service times and increased throughput. Collectively, these can contribute to improved restaurant-level margins.
The technology’s ability to optimize ingredient usage and reduce food waste can result in cost savings and improved sustainability practices. As a result of increased efficiency and potential for lower prices, Sweetgreen, Inc. (NYSE:SG)’s offerings will be accessible to a broader customer base. This will result in an expansion of its total addressable market. As a result, this can accelerate Sweetgreen, Inc. (NYSE:SG)’s unit growth and market penetration, fueling long-term revenue growth and profitability.
Meridian Funds, managed by ArrowMark Partners, sees material upside to the company’s stock on the back of Sweetgreen, Inc. (NYSE:SG)’s investment in automation technology. Here’s what the firm said in its Q1 2024 letter:
“Sweetgreen, Inc. (NYSE:SG) operates restaurants serving fresh and healthy foods in the United States. The salad-focused restaurant concept has invested heavily to develop a captive network of growers that help ensure the freshness of its produce, a distinct competitive advantage. Additionally, management’s investment in automation technology, known as the “Infinite Kitchen,” has shown strong promise of significant labor cost savings, a reduction of order fulfillment errors, and increased restaurant throughput. While Infinite Kitchen has only been tested in a handful of stores to date, initial data supports the potential for automation technology to significantly improve both margins and average unit volumes. The stock rose in the quarter on accelerating same-store sales growth and better than expected guidance from management. In addition, investors took notice that material margin improvements could quickly reduce Sweetgreen’s cash burn, a prior source of concern. Sweetgreen was a new position for the Fund in the quarter.”
Overall SG ranks 10th on our list of the best multibagger stocks to buy right now. While we acknowledge the potential of SG as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than SG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.