Situated at the convergence of technology and media trends, these businesses possess the qualities necessary to achieve significant success. Despite the Nasdaq Composite index’s notable rally this year, it remains approximately 19% below its peak, perilously close to a 20% drop that would officially return it to bear market status. Despite a broader market rebound, several excellent growth stocks continue to trade well below their highs from the last bull run.
If you’re searching for premier investment opportunities with tremendous growth prospects, consider these two undervalued stocks excellent buys for long-term holdings.
Roblox’s growth momentum accelerates Keith Noonan: After experiencing some uneven performance as the company surpassed periods marked by a pandemic-induced surge in engagement, Roblox (NYSE: RBLX) has regained strong growth in bookings and user engagement. With its stock price still approximately 70% below its November 2021 peak, it seems an appropriate time to acquire a stake in the leader of the metaverse.
Daily active users on Roblox’s platform increased 22% yearly in Q1 to 66.1 million, while total engagement hours saw a 23% rise to 14.5 billion. Despite bookings per user remaining flat compared to the same quarter last year, the growth in users propelled overall bookings up by 23% to $773.8 million. Sales, usually trailing bookings due to deferred revenue accounting, saw a 22% annual increase, reaching $655.3 million.
Although Roblox has rapidly grown and posted robust sales, it still has significant room for expansion and various strong growth catalysts. It’s starting to explore the expansion of its advertising system, which could potentially become a significant long-term revenue driver. With strong booking growth from in-game purchases and premium memberships, intensifying ad monetization could push Roblox’s growth to new heights.
While Roblox is yet to report profits, operating income grew by 11% yearly, amounting to roughly $173.8 million, with approximately $2.1 billion in cash and equivalents net of debt. Roblox’s strong user engagement, bookings, sales growth, and strong financial position make it an attractive investment for those seeking potentially high-growth tech stocks.
Netflix withstands robust competition Parkev Tatevosian: My current favourite growth stock is Netflix (NASDAQ: NFLX). The streaming service leader has weathered an influx of new competitors remarkably well. Though Netflix’s growth has slowed, its stock price fairly reflects this deceleration. Interestingly, competitive pressure among streaming services seems relaxing, even while the stock trades 45% below its high.
Disney, a key rival, recently announced multiple price increases, content budget reductions, and decreased marketing efforts. This is positive news for Netflix, as consumers facing higher prices everywhere may gravitate towards it. Lower costs and intense competition harm investors, resulting in tighter profit margins for streaming services.
In 2022, Netflix reported $5.6 billion in operating income on $31.6 billion in revenue. I anticipate a rise in these figures over the coming years. As more people abandon their cable and satellite subscriptions for streaming content, this industry shift, coupled with easing competition, bodes well for the market leader.
Further enhancing the investment appeal for Netflix is its attractive forward price-to-earnings ratio of approximately 26. The opportunity to acquire this high-growth stock at such a valuation may not last long.
The promising growth of tech and media intersection Even though both Roblox and Netflix have witnessed substantial valuation increases throughout 2023, their stocks continue to trade significantly below their recent peaks. The market may be undervaluing its competitive edge and growth potential. Adopting a buy-and-hold strategy with these two promising growth stocks could yield substantial returns for investors with a long-term perspective.
Roblox and Netflix present up-and-coming investment opportunities, particularly for investors focusing on long-term growth. The market may be underappreciating their potential right now, but with the competitive advantages they hold and their plans for future expansion, these stocks could likely deliver substantial returns for a patient, long-term investors. Now could be the time to seize the opportunity and invest in these tech and media powerhouses.
