It looks like a bull market is just around the corner. He S&P 500 It ended 2023 with a huge rally that brought the broad market index within a hair's breadth of an all-time high. While stocks retreated in the early days of the new year, the S&P 500 still looks set to hit record highs this year, starting a new bull market.
Even with the index near all-time highs, there are still a number of stocks that are down substantially from their highs and are worth buying right now. Read on to see two of them.
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This Category Leader Could Drive Huge Growth
Keith Noonan (Roblox): Roblox (RBLX -2.16%) operates a leading online entertainment platform and is at the forefront of the potentially explosive metaverse space. Users can access thousands of different games and social experiences through its hub, and it's even possible to create your own content and make substantial money in the real world if it's popular with other players.
Even after rising about 48% over the past year, Roblox stock is still down about 69% from the high it hit in November 2021. For long-term investors looking for potentially explosive stocks that could skyrocket With the upcoming bull market sustained, building a position in the metaverse leader could have a big reward.
Admittedly, the business posted uneven performance in recent years due to the ups and downs of pandemic-related tailwinds and headwinds. Sales growth slowed to a trickle in the second half of 2022 as the company faced comparisons to periods that benefited from higher engagement.
But even though sales and engagement growth went through a slow period, Roblox remained a prominent player in a section of the online media landscape that has incredible long-term promise. The metaverse leader has proven that it is no flash in the pan and is once again posting business momentum that should excite growth-focused investors.
In the third quarter of 2023, it again broke new participation records. Average daily active users increased 20% year over year to 70.2 million, and total hours spent on the platform reached $16 billion. Thanks to the increase in user activity, Roblox's revenue increased 38% year over year to $713.2 million.
As impressive as the company's recent performance has been, Roblox is still in the early stages of accelerating its digital advertising business, a potentially massive new growth engine. With the benefit of its platform's large and highly engaged user base, this has the potential to be a major driver of company performance.
Still well below its previous valuation peak, even as the business is soaring to new heights, Roblox stock could prove to be a bargain at current prices.
An e-commerce stock on the rebound
Jeremy Bowman (Etsy): The e-commerce sector has been slow to recover from the post-pandemic reopening, as consumer spending has shifted from goods to services such as travel and restaurants.
Etsy (ETSY -0.85%), the online marketplace known for selling vintage and handmade goods, has been especially slow to recover. Gross merchandise sales (GMS), or the total value of goods sold on its platform, rose just 1.2% in the third quarter, while revenue rose 7% thanks in part to a fee increase.
Poor performance and headwinds to growth have kept the stock down (Etsy stock is down 80% from its 2021 peak), but there is reason to believe the stock should begin to recover in 2024.
First, the gap between spending on goods and services, which has plagued other discretionary retailers, should begin to normalize as spending on travel and restaurants is no longer novel as it was in 2022 and 2023.
Additionally, active buyers and sellers on the platform have returned to growth after declines in 2022, showing that user interest is returning to Etsy. Active sellers, for example, rose 19% to 8.8 million in the third quarter, evidence that Etsy remains attractive to creators, while growth in active buyers was more modest, at 3.4%. .
Etsy should benefit from interest rate cuts expected this year, which will likely boost consumer spending and economic growth. The company also remains highly profitable with its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increasing 9% in the third quarter to $182.2 million, giving it an EBITDA margin of 28.6%. Etsy's margins are likely to expand as it laid off 225 employees, or 11% of its total workforce, in December.
Finally, the stock appears to be well priced at about 13 times EBITDA, meaning even a modest improvement in revenue growth should give the stock a jolt in 2024. Etsy stock may be down, but it's certainly They are not ruled out.
