Up 84% and down 53%! 2 innovative growth stocks on my ISA watchlist

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13 hours ago

Like most investors, I have a watchlist of shares that I'm keeping an eye on. These might be high-quality growth stocks that are overpriced, and I'm waiting for them to come back down to earth (Palantir, for example). Or smaller firms where I'm still learning more about them.
Here, I want to revisit two shares on my watchlist that have trodden very different paths this year. One has lost half its value, while the other has surged by over 80%.
Which one looks more attractive to me right now? Let's find out.
Robotic kitchens
Let's start with the underperformer, which is Sweetgreen (NYSE: SG). The stock is down 53% year to date and around 72% since its 2021 IPO.
Sweetgreen is a salad restaurant chain, with over 251 locations across the US. It sources the best quality ingredients from farmers and local suppliers, prioritising organic produce where possible.
One thing I find interesting about the company is its Infinite Kitchens, which are restaurants where machines assemble salad bowls. Sweetgreen says these can produce 500 bowls per hour, about 50% faster than traditional human preparation.
However, the stock plunged 31% in May after the firm released its Q1 earnings. In this, it reported slowing sales growth (a 5.4% rise to $166.3m). Same-store sales growth declined 3.1% year on year.
For context, quarterly revenue and same-store sales growth was 26% and 5%, respectively, the year before.
The problem here is that Sweetgreen isn't yet profitable (it lost $25m in Q1), so this sudden slowdown has spooked investors.
In some ways, slowing sales isn't that unexpected. There's a lot of economic uncertainty and many consumers are eating out less due to budget constraints. Things might get worse, especially if food inflation takes hold.
Still, management is aiming for 40 net new restaurant openings this year, with 20 featuring an Infinite Kitchen.
High as a kite
In contrast to Sweetgreen, Rocket Lab (NASDAQ: RKLB) shares have skyrocketed 84% year to date, and 1,150% since April 2024!
Two developments have been pushing the rocket company's shares higher. First, there's growing excitement about its Neutron rocket, which is due for its debut launch later this year. This is a medium‑lift, partially reusable rocket that may compete with SpaceX's Falcon 9.
Second, investors are betting that Rocket Lab will benefit from the spectacular fallout between SpaceX CEO Elon Musk and President Trump. It could be a direct beneficiary if SpaceX misses out on new contract awards.
My Foolish takeaway
Stepping back, there's a lot of daft valuations around right now, which reminds me of 2021. With a price-to-sales (P/S) ratio of 51, Rocket Lab stock is clearly partaking in this speculation.
It could fall back to earth spectacularly if the Neutron launch fails or the global economy enters a recession. If so, I'll take another look.
Market cap
2024 revenue
P/S ratio
Rocket Lab
$22.5bn
$436m
51.6
Sweetgreen
$1.7bn
$677m
2.4
Meanwhile, Sweetgreen stock has fallen from $44 in November to $14 today, giving it a P/S multiple of 2.4. I think it could be a big winner from its current level, assuming the disruptive company can kickstart growth and use its robotic automation to become profitable.
On this basis, it might be worth considering. But with declining comparable sales, I personally need a bit more convincing before I add it to my portfolio. Sweetgreen reports Q2 on 7 August.
The post Up 84% and down 53%! 2 innovative growth stocks on my ISA watchlist appeared first on The Motley Fool UK.
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Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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