The 2022 technology bear market left numerous tech stocks reeling. Many of these companies lost most of their value over a short time frame, and some may never again reach their all-time highs.
Still, other tech stocks may have found a path to recovery, even some that lost more than 80% of their value. Ultimately, low valuations, improving profits, and new products should take stocks like Advanced Micro Devices (AMD 1.26%), Palantir (PLTR 2.06%), and Roku (ROKU 1.35%) back to all-time highs and beyond.
AMD's long-term growth prospects look good, even though the current PC market stinks
Jake Lerch (Advanced Micro Devices): Shares of semiconductor powerhouse AMD are already up 40% this year. So is it too late to jump on board? I don't think so. Consider this: Shares remain more than 43% off their all-time high.
What's more, AMD's long-term growth prospects remain excellent. The demand for the company's cutting-edge chips should grow by leaps and bounds in the coming years as artificial intelligence (AI), cloud computing, and autonomous driving really take off.
In the meantime, the weak personal computer market will likely weigh on AMD's share price. Analysts expect little to no revenue growth in 2023. However, Wall Street estimates climb to 17% in 2024.
Until the PC market recovers, AMD's management -- led by longtime Chief Executive Officer Lisa Su -- can lean on the outstanding growth coming from the company's Data Center unit. Strategic partnerships, including an alliance with Microsoft, demonstrate that AMD's chips remain essential to the high-performance computing (HPC) landscape.
In addition, this year's enormous rally in Bitcoin -- the virtual currency has nearly doubled in value since the start of the year -- could spark increased demand for AMD's GPUs, which can be used for mining Bitcoin.
Lastly, a reminder that since Su was named AMD CEO in October 2014, AMD shares have risen by 2,710%. That means a $10,000 investment made in 2014 would have grown to $280,690 today. In short, investors who have put their trust in Su have been handsomely rewarded. And I wouldn't start betting against her now.
This company credits AI with driving a long-awaited turnaround
Will Healy (Palantir): One might assume it is too late to buy Palantir stock, as it has risen over 40% from its December low. But that assumption is likely wrong. Despite the recent surge, Palantir still sells at an 82% discount from its all-time high.
The recent resurgence occurred as investors took a greater interest in AI, a key component of powering Palantir's software. Its Gotham and Foundry platforms utilize AI to drive their analyses, applying the technology to upstream and downstream operations and improving its models continuously through machine learning.
Additionally, CEO Alex Karp disclosed in his April 7 letter that it will release a new artificial intelligence platform, otherwise known as the AIP. It combines its proprietary machine learning technology with the newest large language models, of which OpenAI's ChatGPT is a likely example.
Palantir expects to release AIP in late May. While the company cannot guarantee its success, the product could help cement its place as one of the leading AI companies.
Moreover, Karp credited AI with increasing sales in the most recent earnings call. With the help of AI, its revenue of $1.9 billion rose 24% year over year. And while the company lost $371 million for the year, income figures point to hope. In the fourth quarter, Palantir achieved profitability, reporting a $33 million profit. Although $45 million in net gains from investments made the difference, operating losses fell to less than $18 million, an indication it could achieve both generally accepted accounting principles (GAAP) and non-GAAP profitability in 2023.
Furthermore, during 2021, its price-to-sales (P/S) ratio rarely dipped below 24 and even reached a high of 46 at one point. Today, it sells for 9 times sales, below its valuation on its September 2020 IPO day. With its deeper push into AI, improving financials, and discounted sales multiple, its recent move higher could easily signify the beginning of a long-awaited comeback.
Roku stock is primed to roar back with gusto
Justin Pope (Roku): Wall Street loved the streaming platform during the pandemic, but shares have fallen in spectacularly painful fashion to the tune of 87% from their former high. The below chart paints a pretty clear picture of the stock's struggles -- Roku's growth has virtually flatlined. Investors don't like investing in companies that aren't growing.
ROKU Revenue (Quarterly YoY Growth) data by YCharts.
However, a closer look gives hope for a recovery. Roku's platform segment, which contributed 86% of total revenue in 2022, relies heavily on ad sales. Advertising is a cyclical industry, and brands won't spend to advertise their products if they don't feel that consumers can afford them. Consumer sentiment is low; many economists believe the U.S. is headed for a recession. In other words, it's a bad time to be Roku.
But that doesn't mean people aren't using Roku's platform -- quite the contrary. Roku had 70 million users at the end of 2022, up 16% from the prior year. It had 36.9 million users entering 2020, meaning that many people got Roku devices during the pandemic, and that number keeps growing. It's reasonable to expect Roku's growth to resume when advertising spending picks up because Roku will be advertising to a much bigger audience than before.
Meanwhile, Roku's stock has become a flat-out bargain. The stock trades at a P/S of just 2.6, a far cry from what was once higher than 30. Investors shouldn't expect a P/S of 30, but even a modest uptick to a P/S of five could make this stock a market-beater. Watch for signs of an eventual rebound in advertising, and hold tight for liftoff.
