My 3 Favorite Growth Stocks to Buy in May

The article highlights three growth stocks as attractive buys: Dutch Bros, e.l.f. Beauty, and MercadoLibre. Dutch Bros is described as trading at a 3.3x forward sales multiple despite better restaurant-level contribution margins of about 30% versus Starbucks' roughly 16% in North America, while e.l.f. Beauty's Rhode brand is expected to benefit from expanded distribution after reaching $200 million in sales in under three years. MercadoLibre is growing revenue 49% in Q1 and is investing heavily in Latin American e-commerce and fintech expansion, including logistics and financial services for the unbanked.

Analysis

The common thread is not “consumer strength” so much as capital allocation intensity. Each of the three names is effectively buying future share with current margin pressure: BROS through store count expansion, ELF through distribution breadth, and MELI through logistics/fintech infrastructure. That creates a near-term earnings optical drag, but it also raises the probability of a sustained multiple premium if execution stays clean, because all three are shifting from product stories to platform stories.

The second-order beneficiary is the ecosystem around them. For BROS, aggressive unit growth pressures smaller regional coffee chains first, but also forces Starbucks to defend convenience-led occasions with more discounting and faster format iteration. For ELF, Rhode’s physical rollout is likely to crowd shelf space in prestige beauty, which can compress other indie brands’ sell-through before it ever shows up in reported market share. MELI is the most consequential: every basis point of take-rate sacrificed to win merchants can expand total transaction volume and pull more payments, credit, and fulfillment activity onto the platform, creating a flywheel that is hard for local fintechs to match.

The market may still be underpricing duration risk on all three. If rates stay elevated for longer, the present value of these long-run expansion stories compresses even if fundamentals remain strong; that matters most for MELI and BROS, where reinvestment-heavy models rely on a long runway. By contrast, SBUX looks like the clearest relative loser if unit-level economics are truly inferior, because slower growth plus a mature store base leaves less room to offset any traffic weakness with expansion.

Contrarian view: the bullish case assumes the market rewards reinvestment before it rewards earnings. If same-store sales decelerate for even one or two quarters, investors may punish the “growth at any price” setup harder than expected, especially in ELF where post-acquisition distribution gains can take longer than headline excitement suggests. The best risk/reward is to own the names where operating leverage can surprise to the upside once the buildout matures, but avoid paying up for proof that is still several quarters away.

Key Decisions for Investors

• Long BROS vs short SBUX for 3-6 months: thesis is superior unit economics and faster store productivity growth, with upside if the market re-rates BROS on store-level profitability; stop if BROS same-store sales or traffic inflect down for two consecutive prints.
• Buy MELI on weakness over the next 1-2 quarters: the market is still discounting reinvestment, but the payoff is a larger payments/credit flywheel; target a 15-20% upside over 12 months if logistics and fintech growth stay above revenue growth.
• Use ELF as a medium-term call option on Rhode distribution expansion: initiate only on pullbacks, with a 6-9 month horizon; the risk/reward improves if broader retail rollout becomes visible before the market fully prices in assortment expansion.
• Pair long MELI / short a basket of regional LATAM e-commerce or payments names for 6-12 months: captures platform consolidation while isolating execution risk to the category leader.
• Avoid chasing SBUX here; if anything, use it as a relative short against higher-growth coffee concepts until the market proves Starbucks can defend margins without heavier discounting.