As we enter 2025, the stock market landscape will surely surprise us. Some of this year’s top dogs will fall, and some underdogs will stage an incredible comeback. The S&P 500 ended the year with a 24% rise, despite the recent slip from the Federal Reserve’s interest rate decisions. So, with the new year comes the possibility of new winners. Among the most promising rebound stocks, there are names like Roku (NASDAQ: ROKU), Wayfair (NYSE: W), and Peloton Interactive (NASDAQ: PTON), which look promising. This blog discusses why you should invest in these three stocks in 2025 for long-term gains.
Which stocks should you invest in for 2025?
Roku: More Viewers, More Revenue Potential
It’s been a rollercoaster for Roku. After hitting new heights during the pandemic, the stock plummeted hard and fell 83% from its all-time highs. Yet in the past six months, the stock rebounded almost 50%. But will it keep on going in that direction?
Roku has a couple of aces up its sleeve. The company maintained steady growth in both users and revenue while tightening its belt and delivering five consecutive quarters of positive adjusted EBITDA and free cash flow. The elusive milestone of positive net income could be within reach.
A key driver is its ad-supported platform. Inflation is easing, which has allowed advertisers to loosen their budgets. Viewing hours on Roku’s free channel surged 80% year-over-year in the third quarter, fueling optimism. Since its ad business is high-margin, this growth directly impacts profitability. Trading at a price-to-sales ratio of under three, Roku has significant room to grow as we look to 2025.
Wayfair: Waiting on the Housing Market’s Turnaround
Wayfair’s pandemic boom has given way to tough times, with falling revenue and shrinking demand. Still, the online home furnishings retailer is positioning itself for better days ahead. While revenue fell in recent quarters, Wayfair managed to trim operating losses and reduce its net loss by cutting costs. It has also focused on increasing revenue per customer, which rose 1.3% over the past year.
The housing market is a key driver for Wayfair and remains a challenge. Buyers don’t want to furnish houses they haven’t bought. If interest rates continue their decline in 2024, the housing market might rebound, giving Wayfair the boost it needs.
The stock trades at 0.5 times trailing 12-month sales. That’s very low in valuation. The risks involved are high, but it might pay off for the investor who is willing to ride out the short-term volatility.
Peloton: Fall from Grace
Peloton is the ultimate fall from grace story. Once considered a pandemic darling, its shares have dropped by 94% from the peak. With overexpansion and lack of management, it was left out in the post-pandemic world. However, the company has taken good steps toward recovery.
Peloton’s new CEO, Peter Stern, has experience with subscription businesses. With subscriptions now constituting 73% of its revenue, the company is looking to optimize the high-margin business. Gross margin expanded to 51.8% in the fiscal first quarter of 2025, while gross profit grew 6%. The firm has also looked to shave costs by outsourcing and cutting over-the-top advertising, thereby helping to reduce losses.
Although revenue remains weak, Peloton’s improved profitability suggests that it could turn things around eventually. If Stern can execute a successful turnaround, the stock might surprise investors in 2025.
Should You Invest Now?
A new year means new opportunities. Of course, Roku, Wayfair, and Peloton are not without risk. But in each of them, one can identify a certain degree of resilience and growth potential. Market conditions and the execution on the part of management will be key in determining if these companies fly again, but for risk-tolerant investors, these could be stocks worth watching for in 2024 and beyond.
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