September was brutal for the markets as more worrying economic news, including a hawkish Federal Reserve raising interest rates to get a handle on inflation, was processed by investors.
The S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite are all in bear market territory, trading down over 20% from their highs. Many individual stocks are trading down even worse. The brutal sell-off weighed heavily on tech stocks like Roblox (RBLX 1.60%) and Skyworks Solutions (SWKS 1.81%). Roblox stock has lost two-thirds of its value so far in 2022. Apple (AAPL 0.52%) supplier Skyworks, meanwhile, saw its stock price drop 44% this year.
Investors who think it might be time to dip their toes back in the market with small-scale buys -- let's say $100 -- should take a closer look at Roblox and Skyworks. These two stocks are sitting on solid catalysts that could help them regain their mojo. Let me explain.
1. Roblox
Roblox stock is trading at the lower end of its 52-week range at around $35 a share. The company's online platform enables creators and developers to create, publish, and operate 3D virtual experiences that might include games, concerts, or virtual reality (VR) stores. The platform could be a big long-term beneficiary of the growing adoption of the metaverse.
Roblox operates an online gaming platform that it monetizes with a virtual currency known as Robux. Users can buy Robux and spend it on in-game items such as their virtual avatars or upgrades. The company is now expanding its expertise to other areas in a bid to tap the metaverse, and the good part is that it is already gaining traction while doing so.
The likes of Walmart, Spotify, Paramount Global's MTV, Tommy Hilfiger, and Kering's Gucci are some of the names that have opted for Roblox's platform for their metaverse presence, having built their 3D digital experiences with the company's help.
Investors should note that 3D is going to form the backbone of the metaverse. Avatars of people from across the globe are going to interact with one another in 3D worlds in the metaverse.
So the demand for the virtual experiences that Roblox provides should take off in the long run. More importantly, the company is focused on maximizing its opportunities within the metaverse by finding more ways of generating revenue. For instance, the company plans to sell virtual real estate (billboards, for example) that will allow advertisers to showcase their products or services.
The metaverse is expected to grow at an annual rate of 47% through 2029, which means Roblox is on track to take advantage of a terrific growth opportunity. But the company has run into short-term troubles this year as spending on its virtual currency has dropped following a year of rapid growth in 2021. The good news is that the latest metrics show that the platform continues to attract new users and drive incremental spending even in an inflationary environment.
For August 2022, Roblox saw a 24% year-over-year increase in daily active users to nearly 60 million. The company's bookings, which refers to the money collected from sales of its virtual currency, increased 6% year over year to a midpoint of $235 million. Roblox engaged users for 4.7 billion hours during the month, an increase of 18% over August 2021.
As the metaverse gains traction and the demand for Roblox's services increases, it won't be surprising to see these metrics head higher. Analysts, for instance, are already anticipating solid revenue growth from the company for the next couple of years.
RBLX revenue estimates for current fiscal year. Data by YCharts.
So investors considering the metaverse and having $100 to spare might buy a couple of shares of Roblox and hold on to them for the long run given its impressive prospects.
2. Skyworks Solutions
If investors aren't convinced about Roblox while it tries to make the most of a nascent opportunity, they may want to spend their $100 on a share of Skyworks Solutions. The chipmaker's stock costs around $87, and it could go lower following reports that its largest customer, Apple, could be scaling back the production of its latest iPhones.
Apple is reportedly going to cut iPhone 14 production by 6 million units this quarter. The news sent Skyworks stock tumbling because the chipmaker got 59% of its revenue from supplying chips to Apple last fiscal year. But it may be a good idea to take advantage of the slide in the stock since it now trades at less than 11 times trailing earnings and 7.3 times forward earnings.
And the reported drop in Apple's production might not be as big a deal for the company as investors think right now. That's because Skyworks may have gained content in the iPhone 14 lineup over last year's models, and that could help it ward off any potential weakness arising from a drop in volumes.
According to a teardown of the iPhone 14 Pro Max by the website iFixit, Skyworks could be supplying the antenna switch and the power amplifier module to Apple this time in addition to the two front-end modules that it was supplying last time. So Skyworks could be generating more revenue per iPhone this time.
Also, Apple reportedly produced 80 million iPhone 13 units in 2021 after cutting its production estimate due to a supply crunch, which means the 2022 estimate will still be an improvement from last year.
All this indicates that Skyworks could spring a surprise and deliver stronger-than-expected results in November. As such, it won't be surprising to see this semiconductor stock close the year on a high and head higher in 2023 and beyond, especially considering that it is sitting on additional catalysts such as the Internet of Things and wireless connectivity infrastructure that form a part of its fast-growing broad market segment.
