Everybody loves a great discount, right? In lieu of coupon-clipping, opportunistic investors like to look for great companies whose stocks are on fire sale. More specifically, the stock needs to be cheap for temporary reasons while the company pursues tremendous business opportunities in the long run.
That's exactly what is happening to Roku (ROKU 2.11%) and Coinbase (COIN 7.00%) right now. These are two great companies with fantastic growth prospects, but market makers have tossed their stocks in Wall Street's bargain bin anyhow.
Here's why it's high time to take advantage of these incredible buying opportunities.
NASDAQ: ROKU
Key Data Points
Roku
Media-streaming technology expert Roku has been a great deep-discount investment for months. However, Thursday's second-quarter report brought the market hammer down on Roku's shares and the stock is even cheaper now. The market-moving concerns should fade out over the next few quarters and nothing has changed in the company's long-term business trajectory. That's why Roku is a no-brainer buy in my book.
The bears focus on Roku's struggling advertising business. Advertisers are holding back their marketing budgets because of inflationary budget pressures and widespread market uncertainty. Therefore, Roku's ad sales are slowing down at a time when investors expected the ad service to skyrocket instead.
This situation might merit a mild haircut, but market makers shaved Roku's stock down to the ankles. Share prices fell 86% over the last 52 weeks, as if Roku was teetering on the edge of bankruptcy. To underscore how overdone this market reaction is, let me point out that PayPal (PYPL 3.53%), the worst-performing stock on the S&P 500 (^GSPC 1.67%) market index dropped just 72% lower over the same period. A $10,000 investment in PayPal one year ago would be worth $2,855 today. An identical Roku investment would be down to $1,388.
A short-term slowdown in ad-based revenues and TV sales shouldn't overshadow the fact that video content is moving online globally. Most of this media revolution should happen over the next decade or so, and Roku is a leader and an innovator in that explosive market sector.
This discount is simply too great to ignore. Roku is poised to regain its former market footprint -- and to keep going much higher from there.
NASDAQ: COIN
Key Data Points
Coinbase
Cryptocurrency trading veteran Coinbase has taken punch after punch in 2022 as the crypto market buckled under inflationary pressure. Furthermore, the Securities and Exchange Commission (SEC) is investigating the company, alleging that Coinbase allows users to trade digital coins that really should be registered as securities. There's also an insider trading case hanging over this company like a dark cloud. It seems reckless to invest in Coinbase under these circumstances, right?
Well, I don't think so. The crypto market is still in its infancy, and cyclical asset prices should be expected in this early stage. Today's downturn will surely be followed by another upswing as cryptocurrencies find their place in the worlds of business and consumer finances.
As for the SEC investigation and insider trading scandal, both of these cases might just be part of the process to establish a proper regulatory framework around crypto. You see, both proceedings hinge on the idea that cryptocurrencies should be treated more like stocks than currencies. The SEC and Department of Justice could be on their way to setting an important precedent here. And even if the verdicts and the resulting crypto-regulation model come out on the draconian side, that would still remove a lot of uncertainty from the cryptocurrency market.
I can't say that the only way is up, because Coinbase shares may very well keep falling in the short term. But the stock has already fallen 75% year-to-date and trades at the ultra-low valuation ratio of 6 times trailing earnings. The road ahead may be bumpy but a Coinbase investment from this affordable starting point should serve you well in the long run.
