The tech-fueled Nasdaq rally hasn’t benefited all stocks. Some leading consumer brands that saw their share prices drop in the market sell-off a few years ago are still trading at more than 50% off their previous peak.
Shares of leading cruise operator Carnival (NYSE: CCL) and beverage chain Dutch Bros (NYSE: BROS) are down 77% and 52%, respectively, from their previous peak. Here’s why these stocks could outperform the broader market over the next few years.
1. Carnival
Carnival shares have doubled since bottoming out in 2022. This leading cruise line continues to see strong booking trends, and it has an exciting project in the works that could drive strong demand for years.
The company posted record first-quarter revenue of $5.4 billion, driven by double-digit growth in passenger ticket sales. Carnival also outperformed expectations on the bottom line, with operating income of $276 million, reversing last year’s loss.
Carnival has a plan to further distinguish its brand in a competitive market. It is launching an exclusive destination in the second half of 2025. Celebration Key is expected to drive growth in revenue and, importantly, profits.
Celebration Key should drive strong margins for the company, since it will be the closest destination from Carnival’s ports. This will help lower fuel costs and potentially boost margins.
Carnival is seeing demand from new guests but also growth in its repeat-customer base. Investments in private beaches and exclusive destinations like Celebration Key could become an important competitive advantage.
Wall Street analysts expect strong bookings and improving margins to drive earnings up to $1.72 in 2026. If Carnival stock is trading at a price-to-earnings ratio of 18, consistent with its pre-pandemic valuation range, the share price could reach $30 within two years, implying upside of 85%.
2. Dutch Bros
Identifying up-and-coming restaurant brands can be one of the most rewarding investment strategies. Dutch Bros looks like a promising candidate that is still in the early stages of expanding across the U.S.
Dutch Bros ended the first quarter with 876 “shops” across 17 states. It experienced soft traffic trends last year that sent the stock down, but the stock is up 24% year to date after a strong earnings report to start the year.
Dutch Bros was founded three decades ago and is following in the footsteps of Starbucks with a focus on coffee, but it also offers a variety of other beverages, like energy drinks, smoothies, shakes, and sparkling sodas.
Dutch Bros saw a slump in sales growth during a period of high inflation in 2022, but it’s returning to form. It reported a solid 10% increase in same-shop sales, which measures the performance of existing shops open at least 15 months, in Q1.
Management credited its improving growth to improved traffic, new menu items, loyalty rewards, and increased advertising spend. It’s also a great sign that its first shops in Florida, which is  geographically opposite the brand’s Oregon roots, are seeing a strong customer response. This is telling of its long-term potential to become a mainstream beverage chain similar to Starbucks in the U.S.
With the company’s growth improving as inflation cools off, the stock’s discount from its previous high makes it a timely buy right now. The company should continue to deliver strong sales growth as it expands to more states, laying the foundation for market-beating returns.
Should you invest $1,000 in Carnival Corp. right now?
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John Ballard has positions in Dutch Bros. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.
2 Growth Stocks Down Over 50% to Buy Right Now was originally published by The Motley Fool
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