The last time the S&P 500 started of a year as poorly as it did in 2022, pet rocks, mood rings, and CB radios were on the cusp of becoming the next big thing. It hasn't gotten any better as the year has dragged on, with stocks now firmly entrenched in bear market territory.
After two consecutive quarters of economic contraction, all eyes will be on the Federal Reserve's third-quarter report on Oct. 26. Yet even if it shows growth, high inflation and rising interest rates will serve as a damper. The one silver lining is that market downturns are excellent times for investors to buy stocks.
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History shows that after every bear market, a bull market follows. And where bear markets are measured in months, bull markets tend to go on for years. It's a perfect synthesization of the old investing adage to buy low and sell high.
For patient investors with money to put to work right away -- cash that won't be needed to pay bills or for an emergency -- the following pair of growth stocks could potentially double your money in the coming year.
Roku's leadership position will help it power through
According to Hub Entertainment Research, most households have either a streaming video device like a Roku (ROKU -10.29%) box or an Amazon Fire TV stick, or a smart TV, and almost half (44%) have a combination of these devices.
Roku also notes its operating system (OS) was the No. 1-selling smart TV OS in the U.S. and it was No. 2 in Mexico, with nearly one out of every four smart TVs sold being a Roku TV model.
While Roku has yet to recover from its earnings miss last quarter, business is still growing. Revenue was up 18% year over year to $764 million, while the number of active accounts jumped 14% to 63.1 million. People were streaming more hours, and Roku's average revenue per user was soaring 21% to $44.10.
Wall Street sees that trend continuing. Revenue is expected to double in the next few years, growing from $3.1 billion in 2022 to nearly $6.6 billion in 2026 when the losses it has been producing turn to profits. Roku's stock has fallen hard this year, having lost over three quarters of its value, but it is expected to make back all of that lost ground as analysts have set a one-year price target of $128 per share, an implied 144% gain. If the most bullish analysts turn out to be correct, Roku shares could quadruple from there, going as high as $410 a share.
Even if this current quarter proves challenging, Roku's streaming platform and leading smart TV positioning has the potential to double this company's valuation in 2023 and well beyond, too.
Advanced Micro Devices is set for a comeback
The global computer chip shortage has wreaked havoc on the semiconductor industry, but there are signs it is finally easing. Bloomberg reports data from Susquehanna Financial Group shows chip delivery times have decreased by four days, which is the biggest drop in years. Lead times now average 26.3 weeks from order date to when they're delivered, compared to 27 weeks last month.
That bodes well for Advanced Micro Devices (AMD 2.37%), one of the world's largest chip designers, which was already sidestepping most of the problems plaguing the rest of the industry because it buys chips from major suppliers such as Taiwan Semiconductor Manufacturing and GlobalFoundries.
Unlike rival Intel, for example, which has its own state-of-the-art manufacturing facilities to manufacture its chips, AMD creates central processing unit (CPU) designs based on spec sheets its partners provide who then go and manufacture the chips for it. It's what's known as a fabless designer. And because it purchases these chips at volume, AMD is essentially put at the head of the line and is able to get the chips it needs.
Moreover, it says it forecasts months and years in advance what demand will be, and because of its long-standing relationship with its suppliers, it didn't need to scramble when the pandemic struck and caused supply chain upheavals.
While the personal computer market has suffered from soft consumer demand, which hurt AMD last quarter, sending its stock tumbling, its enterprise business remains robust, which has analysts forecasting the chipmaker will grow revenues at a 10% compounded annual rate through 2026.
Because AMD's stock has fallen some 60% this year, it is trading at an attractive discount of just 14 times next year's earnings estimates while going for a fraction of its projected long-term earnings growth rate. Wall Street might not see it growing at the same meteoric rates it does Roku, but the consensus estimate pegs its one-year price gains to be 75%. And if consumer demand for PCs manages to turn around, that could significantly add to its upside potential in the years ahead.
