Two Potential Stocks Worth Considering as Investment Opportunities
The market can be harsh to promising stocks, and sometimes, investments may seem overvalued even after a big hit. Investors might be down on Roku (-3.19%) and Crocs (-3.88%) following their latest financial reports, but let's consider why these sliding stocks could be a treat for shareholders.
1. Roku
Roku shares dipped after posting Q3 results, surpassing revenue expectations and posting its first billion-dollar quarter. However, lukewarm guidance led to the stock's slip. The company anticipates slightly slower growth in the current quarter, but other financials shine. Roku reported a stronger-than-expected operating loss and revenue growth of 16%, with 16 billion streaming hours. The company will continue reporting platform revenue growth and streaming hours, despite stopping household and ARPU reporting. Investors are still bullish on Roku's dominance in the streaming market and its potential return to profitability earlier than expected.
2. Crocs
Crocs endured a 19% slide following its disappointing Q3 earnings report, despite exceeding revenue expectations and beating analysts' EPS estimates for the third straight quarter. The latest guidance was problematic, indicating a slowdown for both flagship products and the Heydude line (acquired for $2.5 billion). However, the stock's valuation is appealing in today's inflated market. Crocs is forecasting $12.82 to $12.90 EPS for the year, pricing the stock at less than 9 times the lower end of that range.
Investor takeaway:
While both companies have faced financial challenges, their growth prospects and improving financial health make them potential investment opportunities. The market's harsh treatment of these stocks might provide ample opportunities for value-focused investors.
Additional insights:
- Roku: The company saw significant revenue growth (over $1 billion) for the first time in Q3, with streaming hours reaching 32.0 billion, a 5.3 billion-hour increase from 2023. Roku has been aggressively cutting costs and leveraging its rich data sets to scale its business. The shift to streaming services is a long-term trend, and Roku is well-positioned to capitalize on this shift.
- Crocs: Despite some financial challenges, Crocs has shown consistent revenue growth and improving profitability, as well as strong cash flow generation. The company's valuation ratios, such as the P/E ratio and PBR, are relatively low, making it potentially undervalued compared to its peers. Analyst consensus remains positive, with an average target price of $134.31 USD and a trading rating of "OUTPERFORM."
- Given Roku's strong revenue growth and streaming hours, investors might see this as an opportunity to invest in finance, helping the company potentially return to profitability earlier than expected.
- Despite Crocs' recent financial setbacks, its appealing stock valuation in today's inflated market could make it an attractive option for investors interested in money management and capitalizing on undervalued stocks.
