It has been a tough year for investors. The tech-heavy Nasdaq Composite is currently 24% off its high, putting the index in bear market territory, and many individual stocks have fallen even further. For instance, Roku (ROKU -6.60%) and Shopify (SHOP -3.29%) are down 68% and 74%, respectively.
However, investors can take comfort in one indisputable fact: The Nasdaq Composite has recovered from every past bear market, regardless of duration or severity. That means another bull market is almost certainly on the way, and Roku and Shopify are set to rebound when that turnaround takes place.
Here is why both stocks are worth buying today.
Roku: The top streaming platform
Roku is the most popular streaming platform in the U.S., Canada, and Mexicoas measured by viewing hours. In fact, it dominates those markets to such an extent that it powered nearly 31%of global TV streaming time in the second quarter of 2022, according to Conviva. The next closest competitor was AmazonFire TV with 16% market share.
Roku monetizes its platform through digital advertising and digital payments. Specifically, it sells ad inventory from its ad-supported streaming service (The Roku Channel), and it charges a fee to brands that use its ad buying platform (OneView). Additionally, Roku takes a cut of payments when viewers purchase subscription content on its platform. To that end, the company is well positioned to grow as the secular shift toward streaming continues.
That said, Roku has struggled with inflation over the past year. Consumers have pulled back on discretionary purchases, and advertisers have revised their budgets downward to compensate for softness in consumer spending. To that end, Roku saw revenue rise just 18% to $764 million in the second quarter, and it posted a GAAP loss of $0.82per diluted share.
As a shareholder, I'll be the first to admit those results are disappointing. But the inflationary headwinds are a temporary problem. Investors need to focus on the long-term opportunity. CTV ad spend in the U.S. is expected to grow 22% per year to $39 billionby 2026, according to eMarketer, and total TV ad spend will surpass $100 billion by 2026. That second figure is perhaps more important, as Roku believes all TV adswill eventually be streamed.
At the same, the company is slowly expanding its ad business to other geographies, includingCanada in 2021 and Mexico in 2022. Given its position as the top streaming platform in those three markets, Roku is set to grow like wildfire in the coming years. Moreover, its addressable market will continue to expand as Roku brings its ad business to new geographies in the future.
Currently, shares trade at an inexpensive 3.2 times sales, an absolute bargain compared to the three-year average of 14.9 times sales. That's whythis growth stock is a buy.
Shopify: The top e-commerce software platform
Shopify helps merchants build and grow their own brand across multiple sales channels. Its software integrates with online marketplaces like Amazon and Etsy, and social media networks like TikTok, but it also lets merchants build direct-to-consumer (D2C) websites. That distinguishing quality matters a great deal, as D2C business models allow brands to engage buyers directly and build lasting relationships.
That said, Shopify truly shines because it can support merchants across all aspects of commerce, in both physical and digital settings. It offers value-added services like payment processing and financing, as well thousands of integrations through the Shopify App Store. That includes applications for payroll and team management. Better yet, Shopify is building a fulfillment network that will enable two-day delivery across the U.S., thereby simplifying logistics for merchants and improving the experience for buyers.
Collectively, powerful software and a robust suite of value-added services set Shopify apart from its peers. In fact, it ranks as the leading e-commerce software vendoras measured by market presence and user satisfaction, and it powered 10.3%of e-commerce sales in the U.S. last year, second only to Amazon.
Of course, Shopify has struggled with high inflation of late. Revenuerose just 16% to $1.3 billion in the second quarter, and the company posted a non-GAAP loss of $0.03 per dilutedshare. Even so, Shopify has continued to gain market share in U.S. commerce through the firsthalfof the year, both online and offline, and investors have good reason to believe the stock will rebound as the macroeconomic situation improves.
On that note, one particularly exciting growth opportunity is business-to-business (B2B) e-commerce. Shopify recently launched newB2B commercetools for Shopify Plus, a customizable platform built for larger companies. Those tools make it possible for Plus merchants to sell D2C and B2B from the same online store, strengthening Shopify's appeal and dramatically expanding its market opportunity.
For context, retail (business-to-consumer) e-commerce sales are expected to grow 10% per year to reach $7.4 trillionby 2025, according to eMarketer. But B2B e-commerce sales are expected to soar 20% per year to surpass $33 trillionby 2030, according to Grand View Research.
Currently, shares trade at an inexpensive 8.8 times sales -- a bargain compared to the three-year average of 37.8 times sales. That's why this growth stock is a screaming buy.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon, Etsy, Roku, and Shopify. The Motley Fool has positions in and recommends Amazon, Etsy, Roku, and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.
