While it might be too early to call it a bull market, the Nasdaq Composite is surging this year, up 27% year to date. A combination of rock-bottom valuations at the beginning of the year, excitement over artificial intelligence, and signs that the worst of the downturn has passed are all lifting tech stocks.
If you're looking to capitalize on the rebound, it's not too late. Keep reading to see two Nasdaq stocks that still have a lot of room to run.
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1. Roku
Roku (ROKU +1.96%) stock has collapsed since the pandemic-driven boom in streaming. The stock is down more than 80% from its peak as the digital advertising market has dried up, and its ramp-up in investments was poorly timed.
However, it's a mistake to think that Roku is a broken stock. It's still the leading streaming distribution platform in the U.S. and other parts of the world, and usage on the platform is increasing rapidly.
The number of active accounts reached 71.6 million in the first quarter, up 17% from the year-ago quarter, and streaming hours jumped 20% to 25.1 billion.
NASDAQ: ROKU
Key Data Points
Like other digital advertising platforms, including Alphabet and Meta Platforms, Roku is suffering from the downturn in advertising. But over the long term, the future for connected TV, or ad-based streaming looks strong.
Walt Disney and Netflix launched ad-based streaming late last year, and now Amazon seems set to join them as the e-commerce giant is reportedly holding discussions about launching an ad tier. If it does so, that will mean every major streaming service in the U.S. offers an advertising option.
Connected TV is also appealing to advertisers, because it offers the targeting capabilities of digital advertising with the engagement of video.
The advertising market will eventually recover, and when it does, Roku looks primed to be a big winner. With a market capitalization of just $9 billion right now, the stock could easily be a multi-bagger, since streaming will continue to take share from linear television, which will drive growth at Roku. Profits should return, too, thanks to the operating leverage in its ad-driven business model.
2. PayPal
Like Roku, PayPal (PYPL 0.06%) is another pandemic winner that has fallen sharply in the aftermath of the health crisis as the boom in e-commerce and other online spending has faded. The stock has fallen nearly 80% from its peak in 2021, and that sell-off has set up a buying opportunity since PayPal is still solidly profitable.
Investors sold the stock off following the first-quarter earnings reports, which revealed that revenue grew 9% but branded volume, or the core PayPal business, was sluggish, and management trimmed its margin guidance.
However, the company's unbranded business, led by Braintree, delivered strong results. Braintree is a payment processing platform that helps merchants accept online and mobile payments.
NASDAQ: PYPL
Key Data Points
The company also delivered strong profit growth in the first quarter, with adjusted earnings per share jumping from $0.88 to $1.17, and PayPal has called for the full-year number to grow 20% to $4.95, which makes the stock a steal at a forward price-to-earnings ratio of less than 13.
Investors have bailed from the stock as PayPal faces increasing competition from Apple, and there's uncertainty about the next CEO of PayPal. CEO Dan Schulman said he's leaving the company at the end of the year.
Still, PayPal's size and scale should reassure investors that it can defend its market share from Apple. The company has about 400 million active customer accounts and 35 million merchant accounts. It continues to make improvements to its product, and its payment service provider is gaining market share, recently partnering with the likes of Uber, Booking Holdings, and Shopify.
With a rock-bottom valuation, a well-known brand, and likely tailwinds from the economic recovery, PayPal looks like a great buy right now.
