The tech bear market of 2022 may be a distant memory now as the Nasdaq Composite has been setting new records for months. However, some tech stocks are still trailing behind the indexes, down substantially from their pandemic-era peaks.
Now that the economy is starting to normalize, these laggards could have significant upside potential. Keep reading to see two stocks that could be prime-time buys right now.
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Roblox stock looks like a great comeback play
Keith Noonan (Roblox): Roblox (RBLX -0.03%) is an online entertainment platform that hosts thousands of unique, user-created video games and social interaction hubs. Creators can make games and experiences in the virtual world and earn hefty amounts of real-world money if their content becomes popular with other users.
A clear-cut incentive structure helps ensure quality content is continuously added to the Roblox metaverse. Engagement trends on the platform have been quite encouraging lately, but the company's valuation sits far below its all-time high.
When the world was sheltering in place and adhering to social-distancing conditions due to the coronavirus pandemic, companies that provided avenues for online socialization and entertainment saw their valuations soar. With these favorable tailwinds, Roblox's share price rose to nearly $142 in Nov. 2021. That milestone arrived just months after the company went public in March of that year, but shares are now down roughly 77% from that peak.
Those pandemic-fueled tailwinds ultimately lost steam, and Roblox briefly went through periods that saw negative or otherwise uninspiring growth. On the other hand, the company has since returned to posting encouraging user engagement and sales momentum.
Total hours engaged on the platform rose 15% year over year to hit 16.7 billion in the first quarter of 2024. Daily active users (DAUs) rose 17% year over year to hit 77.7 million. Meanwhile, average bookings per daily active user rose 2% year over year to reach $11.89. Average bookings per monthly unique payer also came in at $19.68, up 6%.
Thanks to these catalysts, Roblox's revenue climbed 22% year over year in Q1 to reach $801.3 million. Meanwhile, bookings rose 19% year over year to hit $923.8 million.
Engagement and monetization trends continue to look promising. With lots of room for international expansion, untapped digital-advertising opportunities, and tailwinds connected to 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 sector soared during the pandemic as the stay-at-home period powered engagement for the industry. Pinterest (PINS -0.11%) attracted users who turned to the platform for new ideas and activities, while normal social activities were off limits. Once the global economy reopened, however, Pinterest lost some of those users, and its profits fell sharply.
The business has since stabilized and is back to growth, but the stock seems to offer more upside opportunity, as it's still down 54% from its peak in 2021. In the company's first-quarter report, revenue jumped 23% to $740.0 million and adjusted net income soared 142% to $139.5 million. Pinterest still finished the quarter with a generally accepted accounting principles (GAAP) loss of $24.8 million, though that was an 88% improvement from the year-ago quarter.
Pinterest has also returned to user growth as monthly active users were up 12% to 518 million. Additionally, users grew in all three of its regions, and average revenue per user was also up in every region, showing its monetization is improving around the world.
Pinterest's value proposition has always been straightforward. The platform is a natural fit with advertisers since users often go there for inspiration. In other words, many of them go to Pinterest with the intent to purchase, and many of its users want to be able to shop from the platform.
The company has been investing to make the site more searchable and shoppable while leveraging the power of AI to improve usability and return on investment for advertisers. Those investments seem to be paying off, given the recent results.
Pinterest could have a lot of room to expand margins and grow its profits as its user base expands and its monetization improves. It's a unique and valuable property in social media. If the company continues to execute, the stock could be a big winner.
