Tech stocks took a beating last year, but a new bull market could already be in the works.

The Nasdaq is soaring in 2023, up nearly 35% year to date, paced by investor interest in artificial intelligence, but not every tech stock has bounced back. In fact, there are still some drop-dead bargains on the market.

Keep reading to see why Roku (ROKU 4.10%) and Upstart (UPST -1.79%) could be big winners from here. 

Unleashing long-term growth in a global cord-cutting market

Anders Bylund (Roku): Media-streaming technology expert Roku may not look terribly undervalued right now. The stock has nearly doubled in 2023, after all.

But then you're missing a few important details:

  • 2023 looks good, but last year was brutal. Despite the large year-to-date gain, Roku's stock is still down by nearly 20% in 52 weeks.
  • That's not even the worst of it. Looking back to the true peak from two years ago, you'll see Roku trading more than 80% below its all-time high.
  • At the same time, Roku's trailing sales increased by 54% in two years. Not too shabby for a business that was supposed to have hit a brick wall in 2021, right?

And the digital advertising market, whose weakness led directly to Roku's plunging stock chart, is getting back on its feet.

The inflation crisis appears to be over. The ad-buying departments of major brands and retailers should have access to meaningful budgets again. When they do, Roku offers a highly targeted ad platform with 72 million active accounts and rising viewer engagement.

So Roku's stock comes with a ton of pent-up ad spending that is ready to break loose. That's a nice short-term growth catalyst to have in your back pocket, but the bigger story is that Roku has only just begun to nibble on a massive global market. Consumers around the world will surely transition from cable and broadcast TV to digital streaming services over time. Those 72 million active accounts could grow into hundreds of millions or more in the long run.

The company acts like a hungry upstart, cheerfully sacrificing short-term profits in order to keep the pedal to the long-term growth metal. Despite the challenging market environment, Roku boosted its R&D budget by 34% year-over-year in the first quarter. Its selling and marketing expenses rose 60%.

That's why I keep pounding the table for Roku. It isn't some short-lived gadfly but an undervalued long-term growth story still in its early chapters. Roku's buying window is still wide open.

A high-leverage play for the next bull market

Jeremy Bowman (Upstart): Is there a stock on the market that's been more erratic than Upstart over the last 2.5 years?

The consumer lending platform went public in Dec. 2020 at $20 and rocketed out to more than $400 per share by late 2021. When the market crashed in 2022 and interest rates surged, Upstart fell all the way back to $12 per share, shedding about 97% of its peak value.

Now, with the economy seemingly on the mend, the stock is rebounding again, up past $50. That kind of volatility might scare away some investors, but there's a good reason for it. Demand for loans dried up last year amid fears of a recession and high inflation. Upstart's lending partners grew skittish as well, but that should start to change as the economy becomes more stable.

Upstart has a solid business model. The company uses artificial intelligence technology to rate creditworthiness so it can originate and service consumer loans, reaching demographics that have been left out by traditional lenders. Its algorithm does a much better job than conventional FICO scores. For example, the company says its models achieve 53% fewer defaults than large U.S. banks at the same approval rate or 173% more approvals at the same default rate, almost triple what large banks are able to do.

Once the credit market starts loosening, Upstart should return to growth, and that's likely to be soon as the Federal Reserve seems nearly finished with raising interest rates and fears of a recession have receded.

Upstart is also expanding beyond the consumer and auto loan markets into home loans, with plans to launch a home equity line of credit product later this year, showing there are still large, untapped markets for it to penetrate.

The stock doesn't have to return to $400 to be a winner. If the economy continues to improve, expect Upstart to keep marching higher.