After beating the market in 2020, Cathie Wood underwhelmed in 2021. Her focus on disruptive tech stocks meant that her company, Ark Invest, was susceptible to a pullback as that sector tumbled last year due to economic instability and wildly high valuations. This is continuing into 2022 with falling prices that may be entering bear territory.
Some investors may be feeling the urge to hit the pause button while some stock prices deflate, and that's understandable. But such is the nature of the stock market. There are ebbs and flows, and we can't predict with accuracy when the mood will change. At some point, the tide will turn. That means now, when prices are low, is a great time to invest. If you have $500 available after paying your bills and saving for an emergency fund, Roku (ROKU -1.98%) and Sea Limited (SE -0.43%) are two stocks to consider.
Streaming is still growing
The shift to streaming when the pandemic started made Roku a household name. It continued in 2021, and Roku's model is a long-term growth generator.
Image source: Getty Images.
Roku has two businesses: its player segment, comprising sales of its streaming devices, and a platform business, which includes ad revenue and partnerships with third-party streaming networks. The player business has been challenged lately due to difficult sales to match from 2020 as well as supply-chain issues. The platform business, though, is still soaring with an 82% year-over-year increase in the third quarter. The platform business is also much bigger, accounting for 86% of total revenue in the third quarter. And that's why you can count on Roku to be a big winner for the next few years.
Traditional television networks are supported by advertising revenue. But "cord-cutting" -- that is, viewers leaving traditional TV in favor of streaming -- is an increasing phenomenon, and advertisers are following them. That's why Roku's model is so compelling. Its streaming hours were up 21% year over year, and even though that was a slight dip over second-quarter hours as people go outside their homes again, it demonstrates an overall shift toward streaming. Active accounts increased both sequentially and year over year in Q3 as more people want streaming to become a part of their lifestyle.
Roku has over 200 channels now, including 17 added more recently to provide further content, tempt more viewers, and showcase a competitive model for advertisers. And it has also been investing in its own free Roku channel, which offers original programming. Streaming is a huge market opportunity, and Roku is well-positioned to keep increasing ad spending on its network.
Yet Roku stock is down nearly 60% over the past year. Look at it as a buying opportunity, but keep the long-term picture in mind and don't expect gains overnight.
A winning suite of businesses
Sea Limited is a Singapore-based e-commerce and gaming company that's been quickly entering and dominating new markets. Its gaming platform, Garena, publishes Free Fire, the most-downloaded game in 2019 and 2020. It's still hugely popular, coming in second place for monthly active users in Google Play in the third quarter.
Image source: Getty Images.
Its e-commerce brand is called Shopee, and it's the leading e-commerce name in all of Southeast Asia. It was also the third-most-downloaded shopping app globally in 2020. E-commerce revenue soared 134% in the third quarter, and gross merchandise volume jumped 81%. Shopee was launched in Brazil in 2019 and was the most downloaded shopping app in that market in the third quarter. Last year, it launched in Poland, France, India, and Spain.
The company's third segment is called Sea Money and offers fintech services such as card processing and digital wallets. Total payment volume increased for this segment by 111% year over year in the third quarter, and paying users increased 120% to 39.3 million.
Looking at the overall business, total revenue increased 122% year over year in the third quarter. All of this growth comes at a price as the company's net loss increased to a steep $576 million. However, Sea Limited has huge potential in its array of services and strong growth strategy. Its stock is also down 23% over the past year. While it may continue to struggle in the near term along with the broader tech sector, it's a great long-term pick.
