Three Promising Stocks Experiencing Drops of 84%, 28%, and 97%, Offering Potential Purchase Opportunities at Present
Even though the general market is hovering close to record highs, not every stock shares in this uptrend. Some stocks, like certain tickers, have failed to surge with the recent market rally and are now trading below their previous peak prices. Fortunately, these market dips might be due to temporary reasons that won't stay long.
Here are three discounted growth stocks you may want to consider purchasing while they're still bargain-priced. Their long-term growth prospects remain robust.
1. Roku
If you've been following Roku (ROKU -0.11%) lately, you're likely aware of its recent upward trend being derailed at the end of last month. Despite recording increases in third-quarter sales and EBITDA, and surpassing predictions for both earnings and revenue, the company's Q3 guidance was uninspiring. Roku projected revenue of $465 million, falling short of the analysts' consensus of $477 million, along with a Q3 EBITDA of $30 million, below the analysts' projected $36.2 million. The post-earnings sell-off has resulted in a 28% drop in Roku shares, returning them to levels 84% lower than their early-2023 high, and 92% lower than their 2021 peak price.
However, there are a few aspects of this company the market is overlooking.
First, Roku has a history of consistently exceeding analysts' earnings estimates, excluding the unpredictable years of 2022 and 2023 when the company was also accumulating losses while investing in its future growth.
Second, and perhaps most importantly, Roku has a sizable footprint in the streaming market. According to the latest data from Pixalate, Roku holds a 37% share of North America's connected television market. Amazon's FireTV platform is the closest competitor, with a 15% market share, meaning it lags far behind Roku in terms of domestic reach. Roku is also expanding its presence overseas, particularly in Latin America where it has made significant efforts to establish itself.
Being the market leader in the most popular streaming platform across the continent isn't the only bullish argument, though. Roku is also deeply involved in the content streaming landscape. According to numbers from TV-ratings service Nielsen, The Roku Channel is more popular within the U.S. than HBO Max or Paramount+, providing a strong base for Roku's ad-supported streaming service.
Clearly, Roku is riding the growing wave of the streaming industry, with Precedence Research forecasting an average annual growth rate of 21% through 2034.
2. Plug Power
After several years of underperformance and steep losses, Plug Power (PLUG -0.81%) seemed to be turning things around in 2020. Shares surged from less than $2 to an early 2021 high of $75.49, driven by investor enthusiasm for the idea of converting hydrogen fuel into electricity during lockdowns.
However, the optimism wouldn't last. Shares have since erased their gains, with investors recognizing that profits remain elusive. The market's skepticism about Plug Power's potential worsened with Donald Trump's election due to his support for fossil fuels and criticism of hydrogen fuel as dangerous. The company's just-released Q3 results didn't help either, as revenue declined 12% year-over-year, missing analysts' expectations by over $30 million.
Despite the challenges, this 97% price drop from Plug Power's 2021 high may represent an excellent opportunity to invest.
Hydrogen fuel cells, like those produced by Plug Power, are a crucial component of the future energy industry. These energy production methods produce no carbon footprint, and electrolysis, the process required to turn water into hydrogen, can be powered using clean energy sources like solar or nuclear power. Hydrogen fuel cells can then be employed to power practical devices such as forklifts, cars, and even buildings.
While consumer and institutional interest in this eco-friendly alternative has been modest so far, that might be changing. Recent research from Straits Research predicts the global fuel cell market will expand at an annualized pace of nearly 26% through 2032, with most of this growth taking place in the latter half of the forecast period.
3. Arm Holdings
When it comes to computer processors, names like Intel, Qualcomm, and Nvidia usually come to mind. While their chips are ubiquitous in personal computers and data centers, their architectures are starting to encounter limitations. Developers are increasingly turning to alternative processing platforms, such as those offered by Arm Holdings (ARM -3.77%), for certain applications. Arm's processors offer improved power efficiency, making them well-suited for heavy-duty AI work, an area where Apple has chosen Arm processors for its new AI-capable iPhones.
The fascination with Arm technology doesn't stop at its processors. As the world advances in utilizing Arm-built chips in data centers, more and more, they're opting for these over silicon produced by Intel and AMD. Even tech giant Apple is rumored to be diving into this realm, designing their very own data center chips based on Arm's architecture.
Hold on to that thought, as Apple's license to utilize Arm's intellectual property is valid until at least 2040.
It's essential to recognize that Arm primarily functions as an intellectual property licensor, rather than a foundry or manufacturer. This means their revenue is modest in comparison to the broader chipmaking industry.
However, it's a steady and high-margin revenue stream, primarily due to the fact that approximately half of the world's processors, many of which go unnoticed, are built on Arm's design. Adding to this, nearly every single smartphone incorporates an Arm processor somewhere inside. The stock's 28% dip from its July peak may just be a short-lived buying opportunity.
Given the discounted prices of these growth stocks, now might be an ideal time for investors to consider allocating their finance resources towards purchasing shares of Roku, Plug Power, and Arm Holdings. These companies have demonstrated robust growth prospects in their respective industries, with Roku leading the streaming market with a 37% share, Plug Power poised to benefit from the expanding hydrogen fuel cell market, and Arm Holdings seeing growing demand for its high-efficiency computer processors, particularly in the AI sector. With money invested wisely in these opportunities, investors could potentially reap significant returns in the future.
