Buy These Beaten-Down Tech Stocks Now for Huge 2022 Upside?
The episode then turns its attention to a few beaten-down growth tech stocks--Snap (SNAP) and Roku (ROKU)--that might be worth buying at huge discounts for big growth beyond 2022...
Today’s episode of Full Court Finance at Zacks dives into the continued market turbulence and selling that revved up to start a Christmas-shortened trading week, as Wall Street assesses the possibilities of another round of covid lockdowns. The episode then turns its attention to a few beaten-down growth tech stocks—Snap (SNAP) and Roku (ROKU)—that might be worth buying at huge discounts for big growth beyond 2022.
Stocks tumbled on Monday, with all three major U.S. indexes down around 1.4% through early afternoon trading. The selling comes on the back of new covid restrictions in parts of Europe. Including today’s drop, the S&P 500 is now down around 4% from its records and the Nasdaq has fallen nearly 8%.
Alongside covid lockdown worries, the market was due for a broader pullback and Wall Street is currently in the midst of some profit taking with the tech-heavy index still up 17% in the past year and the S&P 500 23% higher. The recent wave of selling has pushed both the Nasdaq and the S&P 500 under their 50-day moving averages, which means there could be some more selling if buyers don’t step in soon.
That said, the overall earnings and interest rate environment is broadly bullish for U.S. equities markets, despite projected rate hikes in the back half of 2022 and rising prices. Plus, the strength of mega-cap technology stocks has covered up the fact that many growth-focused stocks and former covid stars have been crushed and are trading at or near 52-weeks lows heading into the new year.
Given this backdrop and the benefit of staying exposed to the market even amid volatility, investors might want to consider adding some beaten-down names. One of the stocks that might potentially fit the bill is Snap Inc. SNAP.
Snap shares tumbled over 20% in the blink of an eye after it warned investors on its Q3 earnings call that changes to Apple’s privacy policies are making it more difficult for its advertisers to “measure and manage their ad campaigns for iOS.” Snap’s statements impacted the broader digital ad world and it will hamper some of its profits and growth.
Nonetheless, Snap’s outlook remains strong because advertisers still have to reach consumers, even if they are more difficult to track. And Snapchat continues to make a compelling case for growth in the vital industry as it expands its reach with key younger demographic groups and bolsters its modern entertainment offerings. Plus, at $44 a share, Snap is trading where it was last fall and its consensus price target marks 70% upside from Monday’s price.
Roku, Inc. ROKU operates in a somewhat similar world as Snap and it stands to benefit from the massive shift away from traditional media to digital. The streaming TV company fell after Roku’s Q3 results and guidance highlighted near-term supply chain setbacks.
Those issues are still real, but Roku now makes around 80% of its revenue from advertising and it stands to grow for years to come no matter which major streaming TV platform has the most users. Like Snap, Roku shares have been hammered, down 52% from their records at the moment.
Roku's $395 a share Zacks consensus price target represents 70% upside from where Roku was trading Monday afternoon. And it’s worth noting the stock bounced back last week, as Wall Street appeared to shrug off possible patent issues.
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