There's potentially a monster bull market brewing, as the major indices hit new highs recently. Many top tech stocks are trading at high valuations, but there are still plenty of growing companies trading at discounted share prices that could outperform over the next few years.
Unity Software's (U -1.95%) and Roku (ROKU -0.10%) are two discounted stocks that still offer growth potential that isn't reflected in their valuation right now.
If you have $1,000 set aside for a long-term investment strategy, here's why you might consider adding these stocks to your portfolio.
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1. Unity Software
Unity Software's growth opportunity in the gaming and real-time 3D software market is starting to regain the spotlight under new leadership. The company has a new CEO and CFO in place, and after plunging from its previous peak a few years ago, the stock is up 54% year to date.
The company is known for its Unity game engine, which is one of the most widely used software platforms for creating video games. But Unity Software also generates revenue through in-app advertising on mobile and other services.
Since CEO Matthew Bromberg took over last year, the improvement in the company's profitability stands out. Bromberg has focused on reducing costs and refocusing Unity on its core products. While Unity is still not reporting a quarterly profit, its net losses narrowed significantly, from $291 million in Q1 2024 to $78 million in Q1 2025. Continued progress should fuel more returns for shareholders.
The company just transitioned its ad network to Unity Vector, a new technology that uses machine learning to boost ad targeting in mobile games and apps. Management expects Vector to benefit the company's financials later in the year, which is a catalyst.
The Unity 6 game engine is seeing solid adoption trends, with 4.4 million downloads since its launch. The 6.1 version release adds support for virtual reality and augmented reality. The long-term growth of the gaming industry looks favorable for Unity's core business, with the global player base for virtual reality and augmented reality expected to reach 216 million in 2025, according to NewGenApps.
Overall, Unity's revenue has increased from $1.1 billion in 2021 to $1.8 billion in 2024, and analysts are expecting the company's revenue to increase to $2.8 billion by 2029.
As this management team focuses on growing the company's software and advertising business and improves margins, the stock offers attractive upside after underperforming the past few years. The stock is currently trading at 16 times analysts' five-year free cash flow forecast.
Image source: Getty Images.
2. Roku
Another ripe field to look for bargains is the digital advertising market. Roku is a prime candidate. It has seen steady growth in active accounts on its platform, increasing from 36.9 million in Q4 2019 to 89.8 million in Q4 2024. This gives Roku growing clout to win its share of the $35 billion connected TV ad market.
Roku has invested to make it easier for advertisers to invest in the platform with new tools like Roku Ads Manager. It also just signed a deal with Amazon that will enable the reach of 80% of connected TV households in the U.S., according to ComScore data. This will allow advertisers to reach more users across these leading connected TV providers, while boosting their return on investment.
Roku is already seeing solid revenue growth. It reported a 16% year-over-year increase for Q1 2025, mostly driven by its platform segment that includes advertising revenue.
Wall Street is likely waiting on the company to show a profit before bidding the shares higher, but Roku might be on the verge of achieving this. Its loss from operations narrowed from $72 million in Q1 2024 to $58 million last quarter.
Management has spent the past two years investing in original content for The Roku Channel, which is now the No. 2 app on the platform, partnering with brands, and diversifying its ad products. It is continuing to see users sign up for premium subscriptions.
The stock is currently trading at 11 times analysts' free cash flow estimate for 2029. Assuming Roku meets those expectations, the stock could double in value, if not more, depending on how much the business is growing by then.
