The tech bear market of 2022 may now be a distant memory Nasdaq Composite has been setting new records for months. However, some tech stocks are still lagging the indexes, down significantly from their pandemic-era peaks.
As the economy begins to normalize, these laggards could have significant upside potential. Keep reading to see two stocks that could be prime-time buys right now.
Roblox stock looks like a great comeback game
Keith Noonan (Roblox): Roblox (NYSE: RBLX) is an online entertainment platform that hosts thousands of unique, user-created video games and social interaction hubs. Creators can create games and experiences in the virtual world and earn large amounts of money if their content becomes popular with other users.
A clear incentive structure ensures that quality content is continuously added to the Roblox metaverse. Engagement trends on the platform have been quite encouraging lately, but the company’s valuation is well below all-time highs.
As the world sheltered in place and adhered to social distancing guidelines due to the coronavirus pandemic, companies that offered opportunities for online socialization and entertainment saw their valuations rise. With these favorable tailwinds, Roblox’s stock price soared to nearly $142 in November 2021. That milestone was reached just months after the company went public in March of that year, but shares are now down about 77% from that peak .
That pandemic-fueled tailwind eventually lost steam, and Roblox briefly experienced periods of negative or otherwise uninspiring growth. On the other hand, the company has since returned to driving user engagement and sales momentum.
Total hours spent on the platform increased 15% year-over-year to 16.7 billion in the first quarter of 2024. Daily active users (DAUs) increased 17% year-over-year to 77.7 million. Meanwhile, average bookings per daily active user rose 2% year over year to $11.89. Average bookings per monthly unique payer also came in at $19.68, up 6%.
Thanks to these catalysts, Roblox’s first quarter revenue rose 22% year over year to $801.3 million. Meanwhile, bookings rose 19% year over year to $923.8 million.
Engagement and monetization trends remain promising. With plenty of room for international expansion, untapped digital advertising opportunities, and tailwinds associated with the rise of artificial intelligence (AI), Roblox looks like a great long-term buy.
A social media stock making a comeback
Jeremy Bowman (Pinterest): Like Roblox, much of the social media industry boomed during the pandemic as the stay-at-home period boosted industry engagement. Pinterest (NYSE: PINS) attracted users who turned to the platform for new ideas and activities when normal social activities were off-limits. However, as the global economy reopened, Pinterest lost some of those users and profits fell sharply.
The company has since stabilized and returned to growth, but the stock appears to offer more upside as it is still down 54% from its 2021 peak. In the company’s first quarter report, revenue rose 23% to $740.0 million and adjusted net income increased 142% to $139.5 million. Pinterest still ended the quarter with a generally accepted accounting (GAAP) loss of $24.8 million, although that was an 88% improvement from the prior year quarter.
Pinterest has also returned to user growth, with its number of monthly active users up 12% to 518 million. Additionally, users grew in all three regions and average revenue per user also increased in each region, showing that monetization is improving around the world.
Pinterest’s value proposition has always been simple. The platform is a natural fit for advertisers, as users often go there for inspiration. In other words, many of them go to Pinterest with the intention of purchasing something, and many of the users want to be able to shop from the platform.
The company has invested to make the site more searchable and shoppable, while leveraging the power of AI to improve usability and return on investment for advertisers. Given recent results, these investments appear to be paying off.
Pinterest could have a lot of room to expand margins and grow its profits as its user base expands and monetization improves. It is a unique and valuable asset on social media. If the company continues to execute, the stock could be a big winner.
Should you invest €1,000 in Pinterest now?
Consider the following before buying shares on Pinterest:
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Jeremy Bowman has positions on Pinterest. Keith Noonan has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Pinterest and Roblox. The Motley Fool has a disclosure policy.
2 Stocks Down 54% and 77% to Buy Now was originally published by The Motley Fool
