2 Top Bargain Stocks Ready for a Bull Run

Some companies have a great future. Some stocks are way too cheap. When these two qualities are found together in a single stock, that stock should be ready for a bull run.

On that note, I have unearthed two tech stocks in Wall Street's bargain bin that look ready to run. A media-streaming technology expert's stock is down more than 50% from its 52-week highs, and a business intelligence specialist's stock comes at an even steeper 73% discount. I would argue that both companies are widely misunderstood and stand on the brink of incredible turnaround stories.

Roku

Shares of Roku (ROKU 3.48%) have been falling for years, and I can't help buying more as the stock gets cheaper.

I agree that Roku was probably overvalued in the summer of 2021, but it sure didn't deserve an 89% price drop from that peak. These days, this former and future high-growth stock trades at merely 2.2 times trailing sales.

Revenue growth slowed down for a spell in the inflation crisis. Free cash flows (FCF) turned briefly negative in the same era. Now, both metrics are back in black. Top-line sales have increased by 56% in three years while FCF more than doubled.

And the company is dressed for success. Roku is just waiting for the digital advertising sector to get back on its feet. The inflation crunch caused a deep downturn in that industry -- what's the point of launching lavish advertising campaigns when no one is ready to buy your goods and services? Ad-buying interest is already getting back on track, based on fantastic earnings reports from ad giants such as Alphabet and The Trade Desk. In my eyes, it's only a matter of time before the market gives Roku full credit for the enormous business opportunity in front of it.

With recent platform launches in places like Latin America and Western Europe, Roku is applying the lessons learned in North America to a global market. Broadband internet connections are becoming widely available around the world, followed by reliable digital payment services. And the cord-cutting trend is converting cable, satellite, and broadcast media customers into streaming households everywhere.

While the stock's steep decline has been disheartening, Roku's fundamental business improvements and favorable industry trends suggest a triumphant comeback. Patient investors who recognize the long-term potential should find the current valuation an attractive entry point. As the digital ad market continues to recover, Roku's robust platform and strategic initiatives could lead to significant upside, rewarding those who stay the course in difficult times. Remember, the growth trend is back in action and Roku already generates hefty cash profits. If you build a great business, the investment returns will come.

BigBear.ai

BigBear.ai (BBAI 7.19%) has endured a brutal price decline since going public via a SPAC merger in December 2021. The stock now trades under $4 a share, a 90% drop from its all-time high. Despite the swoon, the company's potential in the artificial intelligence (AI) and data analytics spaces presents a compelling case for risk-tolerant investors.

The company initially projected a compound annual growth rate (CAGR) of 40% on the top line, aiming to grow from $140 million in 2020 to $388 million in 2023. However, full-year revenue only increased to $155 million in 2023, far short of its ambitious targets. Profitability has also been elusive, with negative profit margins over several years. These setbacks notwithstanding, BigBear.ai has strategically positioned itself for future growth by developing modular AI tools for data mining and analytics, serving both government and commercial clients.

Key moves include a partnership with Palantir (PLTR 4.65%) to integrate its Foundry data services and the acquisition of Pangiam, a near-field vision AI technology developer, in March 2023. This $70 million all-stock deal aims to boost revenue and enhance technological capabilities, although it will dilute existing shares.

Financially, the company has faced some headwinds. Along with broader economic challenges, major customer Virgin Orbit is going out of business.

But the turnaround story is real. Analysts currently expect modest revenue growth of 10% in 2024, alongside improving profit margins. Going further, BigBear.ai targets a total addressable market (TAM) expected to grow from $80 billion in 2024 to $272 billion by 2028. AI adoption is booming in the national security, supply chain management, and digital identity markets, setting BigBear.ai up for lasting success.

It's true that the company must contend with larger, more established players like Salesforce (CRM 3.99%) and Palantir. Debt is another concern, with $194 million in long-term debt and only $33 million in cash accounts. The $200 million convertible notes issued in December 2021, maturing in December 2026, could lead to further dilution if the company cannot repay them in cash.

Despite these challenges, insiders have been net buyers of BigBear.ai stock, indicating confidence in the company's future. With a price-to-sales ratio of 2.2, BigBear.ai appears undervalued compared to peers like Salesforce (6.7) and Palantir (22.7).

So BigBear.ai presents a high-risk, high-reward opportunity. The company is navigating significant challenges but strategic partnerships, acquisitions, and a growing addressable market offer a path to recovery and growth. This idea isn't for the faint of heart, but BigBear.ai's turnaround could be spectacular in the long run.