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2 Explosive Growth Stocks to Buy in 2022 and Beyond

By John Ballard – Dec 16, 2021 at 3:40AM

Key Points

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Investing in proven winners that have plenty of opportunities for more growth is a recipe for success.

Stock prices can go up and down for all kinds of reasons in the near term. But if you stick with growing companies that still have opportunities to expand, you're stacking the odds in your favor for long-term success in investing.

Two proven winners that are still great buys heading into 2022 are Roku (ROKU -3.77%) and Unity Software (U -0.28%). Both companies are capitalizing on megatrends in digital entertainment that could lead to explosive gains down the road. Let's find out a bit more about each of these explosive stocks.

A person browsing shows on a streaming service at home.

Image source: Getty Images.

1. Roku

Roku is the leading TV operating system and its stock has delivered a 716% return to shareholders over the last five years. It generates revenue by monetizing users through ad-supported video content, revenue-sharing agreements with third-party content providers, and various other services. It ended the third quarter with 56 million active accounts, up 23% over the year-ago quarter. 

The main reason to buy the stock is that Roku is starting to draw a lot of interest from advertisers looking to make the switch from traditional media to digital platforms. Roku is operating in the sweet spot of the digital advertising market. eMarketer expects ad spending on connected TV platforms, such as Roku, to more than double to $24 billion by 2024. 

Roku is already making tremendous progress to grow advertising revenue. Average revenue per user, a key metric that measures how well Roku is monetizing its users, grew 49% year over year in the third quarter. The growth of The Roku Channel, which was one of the top five channels on the platform last quarter, has been instrumental in driving higher user monetization through ad placements on the platform.

The stock price has fallen sharply in recent months, which can be blamed on a soft fourth-quarter outlook due to supply shortages affecting TV sales, but this is a great opportunity to buy shares of this top streaming stock at a discount to what the business might be worth in another five years.

A software developer working on a computer.

Image source: Getty Images.

2. Unity Software

Unity is a leading provider of 3D software tools, which will come in handy in the coming decades as millions of software designers around the world start creating experiences for the metaverse. This could have significant implications for different aspects of the economy, such as e-commerce and communication, which could mean massive growth potential for this tech stock.

Unity has posted consistent high growth rates in revenue since going public in 2020. Consistent with prior quarters, revenue jumped 43% year over year in the third quarter, and there's another growth catalyst emerging in the near term. 

Unity just acquired Weta Digital, which will advance Unity's ability to deliver more sophisticated graphics tools to artists and expand its addressable market. Above all, it significantly boosts Unity's position as a top software provider for graphics artists working on metaverse projects.

Weta Digital alone could justify buying the stock right now, since management said that the acquisition expands the company's revenue opportunity by $10 billion. Unity made just $1 billion in revenue over the last year. 

If your portfolio needs a tune-up, Unity offers enough long-term upside to improve your returns in 2022 and beyond.

John Ballard owns Unity Software Inc. The Motley Fool owns and recommends Roku and Unity Software Inc. The Motley Fool has a disclosure policy.

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