During the first few months of 2022, the stock market bashed high-growth tech stocks over the head with both hands. The sell-offs were so severe that just a couple of weeks ago the iShares S&P 500 Growth ETF was down more than 20%.
Growth stocks like Fiverr International (FVRR -2.22%), Roku (ROKU -1.64%), and Roblox (RBLX -0.76%) have recovered from some heavy losses. According to the average analyst who follows these stocks on Wall Street, they could climb a lot further. The average price target on these stocks at the moment predicts an upside of 44% or better just up ahead.
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Fiverr International
Shares of Fiverr International fell by nearly half this year but recovered somewhat. Wall Street analysts who follow the freelancer marketplace think it could climb by another 44% once more investors see Fiverr's business in the same light as they do.
Fiverr's stock soared in the early stages of the pandemic as surging demand for freelance tech workers shot through the roof. In 2021, total revenue soared 57% year over year.
The stock is way down this year because the forward outlook management shared in February was weaker than analysts following the company had expected. In 2022, management expects revenue to grow around 26% to a range between $373 million and $379 million.
Fiverr's stock price might be suffering from a condition affecting a lot of COVID-19 stocks that I call "pandemic pull forward," but it probably won't last. Last year, average spending per buyer grew 18% to $242, and the number of active buyers soared 23% to a whopping 4.2 million.
Roku
Roku stock fell by more than half earlier this year. Shares of America's leading television streaming business are still down around 45% in 2022, but Wall Street analysts expect a strong recovery. The consensus price target for Roku represents a 47% premium over its recent prices.
Like Fiverr, Roku, a huge beneficiary of pandemic-related lockdowns, expects less growth in 2022 than investors were hoping for. Fewer office workers watching daytime television between Zoom meetings isn't Roku's only problem at the moment. Supply chain issues are causing the expense of Roku equipment to skyrocket.
Roku makes its money selling ads, not the TVs and streaming sticks that deliver those ads. In the fourth quarter, the cost of producing Roku players exceeded sales of those players by a staggering $45.9 million.
The complex web of supply chains that used to allow Roku to break even on 4K $300 televisions didn't spring into existence overnight. Luckily, its streaming business is lucrative enough to absorb temporary losses on equipment sales. At the end of 2021, the company was able to report that average revenue per user grew 43% year over year to an impressive $41.03 per user.
Roblox
Roblox shares have been beaten down by almost two-thirds from a peak the stock reached last November. Wall Street analysts think it could produce some impressive returns in the near term. The average analyst following Roblox thinks this metaverse stock is worth around 49% more than recent prices.
Roblox has around 55 million daily active users who can earn a currency called Robux by creating their own experiences or spend Robux on someone else's creation. The stock has been tanking because the company's outlook regarding monthly Robux purchasing subscriptions, or "bookings," was much weaker than expected when the company reported Q4 earnings.
In February, the company told investors that January bookings rose about 2.5% year over year. That's better than sliding backward, but it's still a long way from the 45% increase the company reported in 2021 and the amazing 171% gain reported in 2020.
Despite decelerating subscriptions, investors with an eye on the long term would do well to add some Roblox shares to their diversified portfolios. Last year, over 1,900 of the experiences on Roblox generated more than 1 million hours of engagement. These experiences are generated by users who only get paid if other users spend Robux on their creations, and they're extremely profitable for Roblox.
Last year, Roblox reported $558 million in free cash flow. Since it doesn't have to pay for content, a lot of that cash could be returned to investors in the form of share buybacks.
