The S&P 500 currently sits 8.4% below its high and the tech-heavy Nasdaq Composite has fallen 16% from its peak. High inflation is among the biggest reasons cited for the drops. With prices on the rise, consumer spending is likely to slow, putting a dent in corporate revenue growth and profits. Not surprisingly, that has many investors feeling nervous.
But long-term investors should remember that market downturns have historically been a great time to buy stocks. That's because headwinds like inflation will come and go, but temporary macroeconomic turbulence doesn't change the long-term trajectory of the economy. For instance, industries like e-commerce and streaming entertainment are still growing quickly, and both offer plenty of upside for investors.
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Knowing this, I think beaten-down stocks like Shopify (SHOP 3.33%) and Roku (ROKU +2.51%) -- which have fallen about 61% and 75%, respectively, from their highs -- will eventually rebound, then go on to hit new highs. Let's take a closer look at why these are two unstoppable stocks.
1. Shopify
Shopify's mission is to make commerce better for everyone. Its portfolio of hardware and software helps merchants manage sales across physical and digital stores. That includes custom websites, online marketplaces like Amazon, and social media like Meta Platforms' Instagram. Shopify also provides value-added services like payment processing, discounted shipping, and money management tools, and the Shopify App Store includes 8,000 additional integrations.
In short, the company offers a comprehensive solution for omnichannel commerce, and its easy-to-use products have become indispensable to many merchants. Shopify has doubled its client base since 2019, and it now powers 2.1 million businesses around the world. Better yet, Shopify ranks No. 2 in U.S. e-commerce sales. Its market share hit 10.3% in 2021, up from 8.6% in 2020.
NASDAQ: SHOP
Key Data Points
Not surprisingly, Shopify has been a financial machine. In the past year, gross merchandise volume (GMV) jumped 47% to $175.4 billion. Thanks to increased adoption of value-added services like Shopify Payments, revenue grew even faster, rising 57% to $4.6 billion. Additionally, Shopify generated $504.4 million in cash from operations, up 19% from 2020.
Looking ahead, the company puts its market opportunity at $160 billion, and management is working on an ambitious growth strategy, including the construction of a nationwide network of warehouses. Once complete, the Shopify Fulfillment Network will lean on collaborative robots and artificial intelligence to help merchants deliver packages more quickly and cost-effectively across the U.S. Additionally, the company launched Shopify Markets in 2021, a product that simplifies cross-border commerce by helping merchants localize their storefronts in international geographies (e.g., translating the webpage into local languages).
Shopify's share price currently sits 61% below its all-time high, due in part to a post-earnings sell-off fueled by cautious guidance. Fortunately, Wall Street's knee-jerk reaction creates an opportunity for long-term investors. With the shares trading at 18.2 times sales -- significantly cheaper than their five-year average of 30.6 times sales -- this growth stock is a screaming buy.
2. Roku
Roku has become the gateway to streaming entertainment. In 2021, it once again ranked as the most popular connected TV (CTV) operating system in both the U.S. and Canada. Its platform accounted for an industry-leading 31.8% of global streaming time, up from 31.1% in the prior year. Amazon Fire TV ranked second, though its market share fell nearly three percentage points to 16.5%.
To reinforce its edge, Roku has invested aggressively in its ad-supported streaming service, The Roku Channel. It debuted dozens of original titles last year, including its first feature-length film, and the company has more content in the works for 2022. So far, that strategy has been successful, as The Roku Channel ranked among the top five streaming channels on its platform in the U.S. in the third and fourth quarters of 2021.
NASDAQ: ROKU
Key Data Points
To monetize that popularity, Roku's demand-side platform (OneView) helps ad buyers create targeted campaigns across CTV, desktop, and mobile devices, both on and off Roku. And monetized video ad impressions nearly doubled in 2021. To that end, revenue surged 55% to $2.8 billion, and the company posted a generally accepted accounting principles (GAAP) profit of $1.71 per diluted share, up from a loss of $0.14 per diluted share in 2020.
Going forward, Roku has a long runway for growth. The shift away from legacy TV is still in its early stages, but traditional content providers (e.g., cable, satellite) are expected to lose 29% of their annual revenue between 2021 and 2025 as more viewers turn to streaming content. With CTV ad spend set to hit $100 billion by 2030, according to BMO Capital Markets, Roku's position as the most popular streaming platform should help the company grow its top and bottom lines quickly. That's why this beaten-down growth stock is a smart buy right now.
