2 stocks ready to bounce back
Everyone loves huge discounts, right? In lieu of coupon-clipping, opportunistic investors prefer to look for great companies whose stocks are on fire sale. More specifically, the stock should be cheap for temporary reasons while the company pursues tremendous business opportunities in the long run.
That’s exactly what is happening with Roku (ROKU -23.07%) and Coinbase (COIN 1.14%) right now. These are two great companies with great growth prospects, but market makers are throwing their shares into Wall Street’s bargain bin.
That’s why it’s time to take advantage of these incredible shopping opportunities.
Media-streaming technology specialist Roku has been a great deep discount investment for months. However, Thursday’s second-quarter report put the market down on Roku shares and the stock is now even cheaper. The market concerns will subside in the next few quarters and nothing has changed in the company’s long-term business. That’s why Roku is a thought-provoking purchase in my book.
The bears focus on Roku’s struggling advertising business. Inflationary budget pressures and widespread market uncertainty have led advertisers to hold on to their marketing budgets. So, Roku’s ad sales are slowing at a time when investors expected the ad service to skyrocket instead.
This situation may have deserved a lighter haircut, but market makers cut Roku’s stock down to the ankles. Share prices fell 86% over the past 52 weeks, as if Roku was on the edge of bankruptcy. To underline how much this market reaction is, I’d like to point out that PayPal (PYPL 0.78%), S&P 500 (^GSPC 1.42%) the worst performing stock on the market index just 72% over the same period become less. A $10,000 investment in PayPal a year ago would be worth $2,855 today. A similar Roku investment would be reduced to $1,388.
A short-term slowdown in ad-based revenue and TV sales shouldn’t be overshadowed by the fact that video content continues to grow online globally. Much of this media revolution should happen in the next decade, and Roku is a leader and an innovator in that explosive market segment.
This discount is simply too great to ignore. Roku is poised to regain its former market footprint — and a lot more to move from there.
Cryptocurrency trading giant Coinbase has taken punch after punch in 2022 as the crypto market remains mired in inflationary pressures. In addition, the Securities and Exchange Commission (SEC) is investigating the company, alleging that Coinbase allows users to trade digital coins that must in fact be registered as securities. Like a dark cloud, an insider trading case is also hanging over this company. Investing in Coinbase in these circumstances seems reckless, doesn’t it?
Well, I don’t think so. The crypto market is still in its infancy, and cyclical asset prices should be expected in this early stage. Today’s downturn is sure to be followed by another surge as cryptocurrencies find their way into the world of business and consumer finance.
As for the SEC investigation and the insider trading scandal, both these cases could be part of the process of establishing a proper regulatory framework around crypto. You see, both actions rest on the idea that cryptocurrencies should be treated more like stocks than currencies. The SEC and the Department of Justice may be on their way to setting an important precedent here. And even though the ruling and the resulting crypto-regulation model turn out to be on the harsher side, it will still remove a lot of uncertainty from the cryptocurrency market.
I can’t say the only way is up, as Coinbase shares could very well fall in the short term. But the stock has already fallen 75% and trades at an ultra-low valuation ratio of 6 times earnings. The road ahead can be tough, but investing from this affordable starting point should serve you well in the long run.
Anders Bylund holds positions at Coinbase Global and Roku. The Motley Fool has and recommends positions at Coinbase Global, PayPal Holdings and Roku. The Motley Fool has a disclosure policy.