Tech investing can sometimes feel like trying to catch a falling knife -- exciting but risky, especially for the long haul. Keep grabbing exciting but uncertain opportunities long enough, and you'll end up with a few scars on your hands. In investing lingo, catching a falling knife means purchasing an asset whose value is crashing, a move often considered hazardous by some investors and exciting by others.
But you don't have to get every idea right when a single winner more than makes up for several falling-knife scars. Some of the best investments I ever made involved undervalued stocks whose long-term value wasn't obvious to everybody yet. And the current market offers a plethora of long-term investment opportunities in that style.
So I've done the legwork to find two tech stocks that are not just surviving but thriving in their sectors. These aren't your fly by-night operations; they're the real deal, with plenty of room to grow. Yet, Mr. Market has slapped a bargain-bin discount on each one. Tremendous growth prospects and low stock prices, all rolled into the same ticker -- what's not to love?
Read on to see why I'm downright excited about the money-making prospects I see ahead for Fiverr International (FVRR +1.04%) and Roku (ROKU +2.62%). Feel free to do your own research and perhaps follow my footsteps in buying these incredible growth stocks.
NYSE: FVRR
Key Data Points
1. Fiverr
Many investors saw Fiverr as a direct bet on the lockdown policies of the early coronavirus crisis. The freelance services marketplace would surely run into a brick wall of shrinking sales and negative profits as soon as people got back to their desk jobs. So the stock peaked in 2021 and currently trades at a 93% discount from the temporary record price.
But the business growth didn't stop there. Fiverr's trailing revenues have grown by 81% since the end of 2020 and the company never stopped collecting cash profits. Yes, the growth slowed down during the inflation-based crisis of 2022, but has picked up speed again in recent quarters. Revenues are expected to increase by 8% this year and jump 16% higher in 2024. Fiverr's reported earnings have exceeded the consensus analyst targets by an average of 32% in the last five quarters.
More recently, Fiverr's bears considered artificial intelligence (AI) a serious threat to this company's business. Why pay a human to do a job just as easily performed by a publicly available computer service, right? However, AI platforms like the ChatGPT chatbot and the DALL-E 3 image creator won't do anything without some human input. The best results from these generative AI systems also require reviews and editing by human experts. As a result, companies hoping to make the most of tools like ChatGPT are now looking for human freelancers specializing in effective instructions and reviews for generative AI productions. And Fiverr is one of the best places to find these experts.
So Fiverr is turning supposed business challenges into revenue-generating opportunities. The market-making forces of Wall Street are paying closer attention to the bearish arguments so far. I expect that tune to change as Fiverr's sputtering growth hits a new groove over the next couple of years. This has been one of my favorite buys all year long, and I will continue recommending it as long as the stock looks ridiculously underpriced.
NASDAQ: ROKU
Key Data Points
2. Roku
The media-streaming market is a global growth story. Roku was there for chapter one, as the streaming hardware division of Netflix (NFLX +1.35%) when that company started delivering movies online as a free add-on to the DVD-mailer service. Spun off as a separate business in 2009, the company never stopped developing and refining its streaming content experience, though the business has largely moved from Roku-branded set-top boxes to software licenses for smart TV makers.
This leading platform expert dominates the North American market already and is now expanding its reach on a global scale. The target market is expected to quadruple in size over the next seven years. And I expect digital advertising to hit its stride over the next couple of years, recovering completely from the inflation-driven downturn of 2022 and 2023.
The lack of ad-space sales in recent quarters has driven Roku's stock price 82% lower in two years. That struggling sector is still stealing market share from traditional ad channels such as TV, radio, and billboards. In the long run, the vast majority of ad sales should move to the highly targeted online advertising segment, and Roku is carving out a significant stake in that sector.
So Roku is chasing a large and growing target market, expanding its market share on a global scale, and leading the charge of cost-effective marketing services. The company added 10.4 million active accounts over the past four quarters (a 16% increase) and top-line sales increased by 11% in the recently reported third quarter.
Yet you can grab shares at the beyond-reasonable valuation of 2.6 times sales. Like Fiverr, Roku's business is poised for a dramatic comeback as the global economy gets back on its feet. The stock shouldn't be far behind.
