The stock market has surged to new highs, yet some growth stocks remain well below their peaks and look increasingly attractive. As Wall Street’s attention has centered on megacap tech, several consumer-facing companies have been left behind despite strong financial results to start the year.
For investors looking for long-term compounders that could outperform over the next five years, here’s why Shopify (SHOP +2.87%) and Dutch Bros (BROS +2.22%) stand out.
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Shopify
Shopify is putting up strong results. Revenue grew 34% year over year in the first quarter, marking the second straight quarter in which Shopify merchants topped $100 billion in total sales.
That’s a clear sign of a business with a major advantage. Shopify generates revenue through subscription fees and merchant solutions (shipping, lending, payments, etc.), with merchant solutions making up about three-quarters of the business. This has made Shopify a highly profitable business, generating $2.2 billion in annual free cash flow — a healthy 17% margin on revenue.
The stock is down 40% this year amid concerns about competitive threats from potential artificial intelligence (AI)-driven disruptors. But that concern overlooks the company’s entrenched position at the center of e-commerce.
Today’s Change
(2.87%) $2.80
Current Price
$100.22
Key Data Points
Market Cap
$130B
Day’s Range
$96.03 – $101.43
52wk Range
$94.00 – $182.19
Volume
663K
Avg Vol
11M
Gross Margin
47.80%
A crucial detail Wall Street is overlooking is that Shopify’s merchant catalog is searchable through ChatGPT and other top AI models. In Q1, AI-driven traffic rose 8 times year over year, and Shopify says AI-powered searches are converting new buy orders at twice the rate of traditional search channels. In other words, AI is helping people find what they are looking for, ultimately benefiting the many online stores that use Shopify to power their e-commerce businesses.
I think Shopify is just getting started. The emergence of autonomous shopping through AI agents could drive a surge in transaction volume. Shopify’s integrations with leading AI models position it well to benefit from that shift. Bain & Company estimates that agentic commerce could be worth at least $300 billion by 2030, growing 15% to 25% annually.
The stock still trades at a high multiple of earnings and free cash flow, but it’s easier to justify given Shopify’s competitive position and the AI tailwinds that could benefit the company. Analysts expect earnings to rise about 25% annually in the coming years, which could translate into market-beating returns through 2030.
Dutch Bros
For decades, investing in emerging restaurant brands expanding nationwide has been a rewarding strategy. Dutch Bros appears to be following the growth path of several successful brands before it, particularly Starbucks. Dutch Bros. stock is down 18% year to date, as a temporary spike in coffee costs could weigh on earnings. But the company continues to resonate with customers, providing a timely buying opportunity for long-term investors.
Today’s Change
(2.22%) $1.11
Current Price
$51.11
Key Data Points
Market Cap
$8.2B
Day’s Range
$49.36 – $51.95
52wk Range
$44.58 – $77.88
Volume
97K
Avg Vol
4.5M
Gross Margin
25.01%
With 1,177 locations across just 25 states, many investors may not be familiar with the brand. But it’s gaining traction, especially with younger customers. While Starbucks has cycled through CEOs and is working through a turnaround, Dutch Bros has continued to post positive same-store sales in a challenging consumer-spending environment.
In the recent quarter, revenue grew 31% year over year, driven by 41 new shop openings and strong same-store sales growth of 8.3%. The business is building loyal, repeat customers, with 74% of transactions coming through the Dutch Rewards program.
Management sees a path to 2,029 shops by 2029. As it opens more locations, brand awareness should continue to rise, and analysts expect earnings to grow at an annualized rate of 33% in the coming years.
A forward price-to-earnings multiple of 54 looks expensive, but Dutch Bros is still early in its expansion and margin-building phase. Its price-to-sales ratio of about 3.5 is in line with where Starbucks and Chipotle Mexican Grill traded during their early growth years. This coffee stock has the ingredients to beat the market over the next five years.
