After a stumbling start to 2022, the Nasdaq Composite is still trading well into correction territory. The tech-heavy market index is down 14%, highlighting the punishment many tech stocks have endured recently. Of course, many growth tech stocks have been slammed even worse during this period.
It often makes sense for investors to peruse sectors of the market that have been beaten down to see if there are any potential buying opportunities. After all, some companies' shares unjustifiably get caught up in sell-offs. Additionally, some stocks simply fall too far as fear takes hold of investors and leads to irrational selling. Two potential stocks that may be worth taking a closer look at after their recent declines are streaming service platform provider Roku (ROKU 1.38%) and social network Meta Platforms (META 0.57%).
Here's a look at both of these potential buying opportunities.
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Roku
Shares of Roku have been punished lately for the company's decelerating growth. The company's top line grew 33% year over year in Q4, down from 81% in the second quarter of 2021 and 51% growth in Q3. Worsening the narrative, management guided for revenue to grow just 25% year over year in Q1. To be fair, the company said that it expected full-year 2022 revenue to increase 35%. But Roku first has to make it through some challenging year-ago comparisons and temporary headwinds related to the low supply of Roku-powered TVs and more fickle TV ad budgets from some marketers amid global supply shortages.
But investors may want to zoom out. Consider that only an estimated 18% of TV ad budgets went toward streaming in 2021 even though adults aged 18 to 49 spent approximately 45% of their time watching TV via streaming, according to TV viewership measurement firm Nielsen. "This gap illustrates the long runway left to increase [average revenue per user]," said Roku in the company's fourth-quarter letter to shareholders.
As consumers continue to shift to streaming, there should be a tipping point in which the bulk of TV ad budgets need to shift over to streaming, following consumer attention. With Roku shares down more than 40% year to date, now is a good time for investors to take a closer look at the growth stock and get in on this important secular advertising trend.
Meta Platforms
Shares of social network giant Meta Platforms have been getting beat down due to the same narrative: decelerating top-line growth. Recent changes to Apple's iOS have made ad tracking and measurement more difficult, challenging the Facebook parent. In addition, the rising popularity of Meta Platforms' Reels content format across its social network properties has pressured monetization since the product is still early in its product life and hasn't been fully optimized for monetization yet.
But Facebook expects to overcome both headwinds.
Regarding its Reels content format, Meta Platforms CEO Mark Zuckerberg said:
I'm confident that leaning harder into these trends is the right short-term trade-off to make in order to get long-term gains. We've made these types of transitions before with mobile feed and Stories, where we took on headwinds in the near term to align with important trends over the long term.
In addition, though Meta admitted that it take several years for the company to optimize its ad business in a way that fully recovers from the negative impacts of iOS changes, management did seem confident it can get there. In the meantime, the market leader trades at just 15 times earnings.
Considering both Meta's cheap valuation and management's expectations that the company can overcome these near-term challenges, the tech stock is a good investment for investors to take a closer look at today.
