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A bull market seems to be just around the corner.of S&P500 ended 2023 with a breakthrough that brought the market-wide index close to all-time highs. Despite a pullback in stock prices in the first few days of the year, the S&P 500 index has risen to record levels this year, and it looks like a new bull market is in the offing.
Even though the index is near all-time highs, there are still many stocks that are down significantly from their peaks and are worth buying now. Keep reading to see two of them.
Image source: Getty Images.
Leaders in this category have the potential to deliver significant 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 have access to thousands of different gaming and social experiences through its hub, and can even create their own content and generate lots of real-world cash if it’s popular with other players.
Even after rising about 48% over the past year, Roblox stock is still down about 69% from its highs reached in November 2021. For long-term investors looking for explosive stocks with the potential to soar in the next sustained bull market, Metaverse’s leadership position could have great rewards.
Indeed, the business has recorded uneven performance over the past few years due to strong pandemic-related tailwinds and headwinds. In the second half of 2022, sales growth slowed as it faced comparisons with a period when it benefited from increased engagement.
However, despite slow sales and engagement growth, Roblox remained a top player in the online media industry with incredible long-term promise. Metaverse’s leaders are proving this plan is no flash in the pan, bringing back momentum to the business that should excite growth-focused investors.
In the third quarter of 2023, we once again set a new engagement record. Average daily active users increased by 20% year-over-year to reach 70.2 million, and total engagement time on the platform reached his $16 billion. Thanks to a surge in user activity, Roblox’s revenue increased 38% year over year to $713.2 million.
Although the company’s recent performance has been impressive, Roblox is still in the early stages of revitalizing its digital advertising business, which could be a huge new growth engine. With the benefit of the company’s platform’s large and engaged user base, this could significantly drive the company’s performance.
Despite the business soaring to new heights, it’s still significantly down from its previous valuation peak, but at current prices Roblox stock could prove to be a bargain.
E-commerce stocks are on a recovery trend
Jeremy Bowman (Etsy): The e-commerce sector has been slow to recover from post-pandemic reopenings as consumer spending shifts from goods to services such as travel and restaurants.
Etsy (ETSY -0.85%)The online market, known for selling handmade and vintage goods, has been particularly slow to recover. Gross merchandise sales (GMS), or the total amount of products sold on the platform, rose only 1.2% in the third quarter, but sales rose 7%, due in part to higher fees.
Poor earnings and growth headwinds have depressed the stock price — Etsy stock is down 80% from its 2021 highs — but there’s reason to believe the stock should start recovering in 2024.
First, the disparity in spending on goods and services that has plagued other discretionary retailers should start to normalize, as spending on travel and restaurants is no longer as new as it was in 2022 and 2023.
Additionally, active buyers and sellers on the platform are back on the rise after declining in 2022, indicating that user interest is returning to Etsy. For example, active sellers in the third quarter increased by 19% to 8.8 million, proving that Etsy remains attractive to creators, but active buyer growth was His was a modest 3.4%.
Etsy should benefit from the expected rate cuts this year, which are likely to boost consumer spending and economic growth. The company also maintained strong profitability, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increasing 9% to $182.2 million in the third quarter, with an EBITDA margin of 28.6%. ing. Etsy laid off his 225 employees in December, representing 11% of his total workforce, so profit margins seem likely to expand.
Finally, the stock feels cheap at around 13x EBITDA, so even if sales growth improves slightly, there should be a shockwave to the stock price in 2024. Etsy stock may be down, but it’s definitely not down.
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