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Down more than 50%: 2 strong-growth stocks to buy now

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in 3 sentences

  • Shopify’s plan to simplify logistics should further differentiate the company from the market.

  • Roku is the most popular streaming platform in the world based on usage time.

  • Roku’s focus on original productions should further increase engagement.

the S&P 500 is currently 8.4% below its peak and the Nasdaq Composite it is down 16% from its peak. High inflation is cited as one of the main reasons for the decline. With rising prices, consumer spending is likely to slow, negatively impacting revenue growth and corporate earnings. Unsurprisingly, this makes many investors nervous.

However, long-term investors should remember that corrections have always been a good time to buy stocks. Because headwinds like inflation come and go, but temporary macroeconomic turbulence will not change the long-term development of the economy. Industries such as e-commerce and entertainment streaming continue to grow rapidly, and both offer investors great potential.

So I think currently battered stocks like Shopify (WKN: A14TJP) and roku (WKN: A2DW4X), which are down 61% and 75% respectively from their highs, will recover and set new highs. Let’s take a closer look at why these two stocks are unstoppable.

1.Shopify

Shopify is dedicated to making commerce better for everyone. The company’s hardware and software portfolio helps merchants manage sales in physical and digital stores. This includes individual websites, online marketplaces like Amazon and social networks like Instagram by Metaplatforms. Shopify also offers services like payment processing, discount shipping, and other tools. The Shopify App Store includes an additional 8,000 integrations.

In short, the company offers a comprehensive solution for omnichannel commerce and its easy-to-use products have become indispensable for many retailers. Shopify has doubled its customer base since 2019 and now supports 2.1 million businesses worldwide. Even better, Shopify is #2 in US eCommerce sales. Its market share increased from 8.6% in 2020 to 10.3% in 2021.

It’s no surprise that Shopify is successful. Last year, gross merchandise volume (GMV) grew 47% to $175.4 billion. Thanks to increased adoption of value-added services like Shopify Payments, revenue grew even faster, rising 57% to $4.6 billion. Additionally, Shopify generated $504.4 million in cash flow from operations. An increase of 19% compared to 2020.

Looking ahead, the company estimates its market opportunity at $160 billion. Management is working on an ambitious growth strategy, which includes building a network of warehouses throughout the United States. When complete, the Shopify Fulfillment Network will rely on robots and artificial intelligence to help merchants deliver packages faster and more cost-effectively across the United States. In addition, in 2021 the company launches Shopify Markets, a product that simplifies international trade. Merchants can offer their products anywhere in the world (for example, by translating the website into the local language).

Shopify’s stock price is currently 61% below its all-time high, thanks in part to a drop after its earnings release. Fortunately, Wall Street’s knee jerk reaction presents an opportunity for long-term investors. The stock is trading at 18.2 times sales, significantly cheaper than the five-year average of 30.6, making it a bona fide buy.

2.Roku

Roku has become the gateway to streaming entertainment. In 2021, it was again the most popular operating system for connected televisions (CTVs) in both the United States and Canada. Its platform accounted for 31.8% of global streaming time, up from 31.1% last year. That makes it the industry leader. Amazon Fire TV took second place, but the market share fell to 16.5%.

To extend its lead, Roku has aggressively invested in its ad-supported streaming service, the Roku Channel. Dozens of original content has been released over the past year, including the first feature film. The company is planning more content for 2022. So far, this strategy has been successful, with the Roku Channel ranked among the top five most popular streaming channels on its platform in the US in Q3 and Q4 of 2021.

To monetize this popularity, Roku’s demand-side platform (OneView) helps advertisers create targeted campaigns across CTVs, desktop and mobile, both on and off Roku. The number of monetized video ad impressions nearly doubled in 2021. In addition, revenue increased 55% to $2.8 billion and the company reported GAAP earnings of $1.71 per diluted share versus a loss of $0.14 per diluted share for the year 2020.

Roku has a long growth outlook. The move away from traditional TV is just beginning, but legacy providers (eg cable, satellite) are expected to lose 29% of their annual revenue between 2021 and 2025 as more viewers turn to streaming content. With TV ad spending projected to hit $100 billion by 2030, according to BMO Capital Markets, Roku is likely to as the most popular streaming platform, rapidly increasing sales and profits. As such, this undervalued growth stock is a smart buy at this point.

The article Over 50% Down: 2 Strong Growth Stocks to Buy Now first appeared in The Motley Fool Germany.

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Trevor Jennewine owns A’s sharesAmazon, Roku, and Shopify. The Motley Fool owns shares of Amazon, Meta Platforms, Roku and Shopify and recommends Nasdaq. This article was published on 03/18/2021 on Fool.com and has been translated for our German readers.

Motley Fool Germany 2022

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