Back in the year 2016, a moment in time when artificial intelligence (AI) was still a distant dream for most investors, the co-founder of Nvidia, Jensen Huang, delivered an AI supercomputer to the doors of OpenAI. Fast forward to 2022, OpenAI set loose the popular ChatGPT chatbot, ushering in an era of generative AI innovation. And today, Nvidia rides the gust of tailwinds like a seasoned sailor at the helm of a magnificent ship.
The journey of Nvidia stock over the past half-decade has been nothing short of extraordinary, with gains of approximately 2,700%. Yet, this surge isn’t just the byproduct of unchecked investor exuberance. The company’s coffers have swelled with the tide of AI demand, propelling its earnings per share (EPS) over 2,000% during this epoch.
As of the latest tally, Nvidia’s stock has soared over 160% in the year 2024, a feat monumental for any stock, particularly one already valued north of $3 trillion. Yet, despite these stratospheric feats, Nvidia isn’t the soaring star of this financial galaxy in the current year.
Contrary to expectations, AppLovin, Carvana, and Cava, three behemoths valued at $10 billion or more, the titans of the large-cap realm, have outshone Nvidia stock in this epoch. Let us delve deeper into this unexpected turn of events.
The Rise of AppLovin
As of the latest update, AppLovin’s stock has scaled an impressive 255% in the year 2024. Surprisingly, the bedrock of the business fortifies the meteoric rise of its stock price. In the second quarter of 2024 (concluding on June 30), revenue surged by 44% year over year, crossing the $1 billion mark, while net income witnessed a staggering 286% leap to $310 million.
AppLovin’s ascension is predicated on the dual pillars of high-margin and high-growth software ventures – Q2 software revenue mounted by 75% year over year. Adam Foroughi, the CEO, exudes confidence in the continuation of this growth trajectory. He envisions a software revenue surge of over 20% annually in the long haul.
Foroughi’s vision paints a compelling picture. Presently, AppLovin’s software finds application mainly in mobile gaming ventures. Catering to the burgeoning demands of its customers is a challenge, as its AI software continues to learn the art of user acquisition for these apps. The anticipation is that the software will evolve continuously, not only meeting but exceeding current demand. The anticipated enhancements might even pave the path for diversification beyond gaming realms in due course.
Thus, while the ascent of AppLovin’s stock has been a spectacular odyssey, the horizon might hold even further promise, should the business expand as envisaged by Foroughi.
Carvana: The Comeback Kid
Enter Carvana, whose stock has surged a formidable 243% in 2024. Hounded by towering debt and uncertain vistas of profitability, the stock languished in the throes of despair in 2022, only to resurrect itself vigorously in 2023 and the current year. In a twist of fate, the company finally notched a net profit, prompting a sweeping reassessment by investors.
Ernie Garcia, the co-founder and CEO of Carvana, unearthed 22 opportunities, each capable of augmenting gross profit by $100 per used car sold. While the fruition of all 22 remains a work in progress, this relentless pursuit of enhancement acted as the lynchpin in elevating overall profitability.
Granted, the profit margin stood at a modest 1.4% in the second quarter of 2024, a figure that doesn’t set any bells ringing. Yet, Garcia envisions this as a mere starting point in the grand scheme of things.
Garcia and his team are fervently seeking out more avenues to amplify profitability at Carvana. One promising avenue is leveraging existing infrastructure to boost car sales – with aspirations to triple their sales from current levels. Initially sounding audacious, the endeavor appears less far-fetched considering Carvana holds a mere 1% market share. Tripling sales might not be an insurmountable task after all.
Despite still being saddled with a colossal long-term debt exceeding $5.4 billion, which translated to an interest outlay of $173 million in Q2 alone, Carvana’s journey of progress might just be beginning. Should they upscale sales and refine profitability, the naysayers could be left eating their words.
Cava: A Culinary Conquest
Lastly, Cava, the culinary sensation, has emerged as a prime performer post its foray into the public domain, entrancing the market with a 198% surge in 2024. A flourishing restaurant chain, the revenue in the first half of 2024 witnessed a 31% uptick compared to the corresponding period in 2023. The surge in same-store sales signifies a burgeoning appeal in established markets. With a footprint of merely 341 locations by the close of the second quarter, the company’s potential for expansion seems boundless.
What has truly piqued the investor interest in Cava is its average unit volumes (AUV), denoting the average annual sales per location. As of Q2, the company’s AUV stood at a commendable $2.7 million, affirming a mounting appetite for its Mediterranean-inspired fare.
The robust sales figures serve as a springboard for heightened profitability at Cava. The restaurant industry, notorious for slender profit margins, might witness a refreshing change with Cava’s success story.