The stock market was recently a difficult place to be for yesteryear's high-growth market darlings. Yet every downturn in history has been followed by another upswing, and the next bull market is either around the corner or already underway.
You know the old adage about buying low and selling high, right? Well, the days of deeply discounted growth stocks may soon be behind us. This is a good time to dive into the bargain-priced side of Wall Street, hoping to snag some great companies while their stocks are cheap.
On that note, two Motley Fool tech contributors have selected their best ideas for buying the dip in December 2023. Read on for the full analysis.
Don't worry; Roku is in full control of this swan dive
Anders Bylund: Media-streaming platform developer Roku (ROKU -10.29%) holds a unique position in the entertainment industry these days. It's a market-defining innovator, heading into a massive global market with years of stellar growth ahead -- and the stock is an absolute bargain.
Why is Roku's stock such a hidden gem in an entertainment world where streaming is king? It's high time to take advantage of this red-tag sale before the market comes to its senses.
The company created its own target market more than a decade ago, when it was the hardware division of Netflix in its early exploration of digital streams. It still dominates the space, claiming a 51% global market share of connected TV advertising and 49% of North American streaming devices, according to Pixalate and Muvi reports. And streaming video is replacing old-school cable, satellite, and broadcast TV everywhere as the cord-cutting trend heats up. It's still early, leaving lots of market space to steal in the coming years.
Yet market makers largely left Roku for dead in recent years. The golden age of streaming growth in the early part of the coronavirus pandemic was followed by slower growth amid a rickety global economy. In particular, Roku bears saw advertising dollars fading out due to low interest in large marketing campaigns when consumers held their wallets in a nervous iron grip.
Critics saw these challenges pile up and Roku's stock price dropped as much as 82% below the 2021 all-time record price. Even now, after a spirited comeback in 2023, Roku still trades 79.3% below those (admittedly lofty) peaks.
Roku's stock can deliver game-changing returns without climbing all the way back to the fading record price. And I see no reason why this company won't thrive in 2024 and beyond.
You see, much of the financial pain Roku recently suffered was under the company's direct control. Management saw rivals raising prices on their hardware, software, and services to protect their profit margins in an inflationary market -- and refused to follow suit.
By holding prices steady instead, Roku became an anti-inflationary alternative and boosted its user count from 56.4 million names in the fall of 2021 to 75.8 million users two years later. That's a 34% increase. I think it was well worth two years of falling bottom-line profits, and this user-friendly move speaks volumes about Roku's strict focus on sustainable long-term growth. Moreover, the company continued to collect cash profits during this difficult period, and used some of it to pay off the last remnants of its long-term debt.
So Roku is still an incredible growth story with plenty of untapped growth opportunity, and the stock looks like a high-growth wolf in a midrange value investment sheep's clothing. The next bull market should boost Roku's global expansion effort while restoring the digital advertising opportunity to full health.
As I said earlier, this stock shouldn't be cheap for much longer. This is the time to add Roku to your portfolio, if you're into innovative and user-friendly media companies whose stocks are in Wall Street's bargain bins today.
Roblox has turned a corner and could skyrocket
Keith Noonan: Roblox (RBLX 1.35%) operates a platform that allows users to participate in thousands of different games and social activities. The service also allows users to create their own games, events, characters, costumes, and other content.
Even better, users can actually monetize the content they make within the Roblox world and earn some serious money for their creations. Developers on the platform have earned roughly $590 million across this year's first three quarters -- up roughly 33.5% year over year.
Thanks to the incentive structure that the company has put in place, new content is being added to the Roblox platform all the time. This means that a steady flow of new games, social events, and other experiences is available for players, and it helps to keep engagement levels high and attract new users to the platform.
The company closed out the period with 70.2 million average daily active users -- a new all-time best for the platform and up 20% compared to last year's quarter. With average bookings per daily user holding steady at $11.96, Roblox managed to sustain impressive levels of monetization even with a sizable influx of new players joining the platform. Meanwhile, revenue jumped 38% year over year to reach $713.2 million in Q3.
After posting some uneven business performance as it navigated pandemic-related trends, Roblox is back to recording awe-inspiring levels of growth. Even more promising, the company is still in the early stages of taking advantage of some potentially massive opportunities in digital advertising and generative artificial intelligence.
With the stock still trading down 68.5% from its high, Roblox has the potential to deliver massive wins for long-term investors.
