Estimated read time: 3 minutes
Publication date: 18th Oct 2021 12:39 GMT+1
Several tech stocks have been hit hard in recent trading sessions. For example, shares of Roku (NASDAQ: ROKU) and Palantir (NYSE: PLTR) are down 31% and 38% respectively from all-time highs. However, the recent pullback also creates a buying opportunity for investors with a long-term view. Both Roku and Palantir stand to benefit from secular tailwinds that make them top bets at current prices.
Roku stock is up 1,300% since IPO
Roku went public in late 2017 and the tech stock is up 1,300% since its initial public offer. It is one of the top players in the streaming industry as the Roku platform connects users wih content publishers. Its operating system for connected TV or CTV has also gained massive traction over the years and in Q2 it powered close to one third of global streaming time.
In the June quarter, the number of streaming hours on the Roku platform was 19% higher which was significantly lower than the 65% growth experienced in the year-ago period. But investors should note that viewership across streaming platforms in the U.S. fell by 2% which shows Roku easily outpaced the industry average.
Roku’s stellar customer engagement metrics makes the platform extremely valuable to digital advertisers. Now, similar to giants such as Netflix, Disney and Amazon Prime Video, Roku is also looking to produce original content for the Roku Channel which is an ad-supported service.
In the second quarter of 2021, the number of active Roku accounts rose by 28% to 55.1 million. It more than doubled monetized ad impressions in Q2 which meant revenue growth stood at 81% year over year as Roku reported $645 million in sales.
Roku is well poised to gain momentum in the future on the back of rising CTV ad spending. In the U.S. TV ad spend on CTV platforms is expected to rise from 13% in 2020 to 17% in 2021, showcasing the increasing popularity of online entertainment options.
Analysts expect Roku sales to increase by 59.4% year over year to $2.84 billion in 2021 and by 37.3% to $3.9 billion in 2022. Comparatively, its earnings are forecast to rise to $1.71 per share in 2022, compared to a loss per share of $0.14 in 2020.
Roku stock is valued at a market cap of $44 billion which indicates its forward price to sales multiple is 11.3x which is not too steep given its growth estimates. Wall Street is also bullish on Roku stock with a 12-month average price target of $460 which is 40% above its current price.
Palantir Technologies is valued at a market cap of $47.9 billion
A company that builds and deploys software platforms for the intelligence and counterterrorism organizations in the U.S., Palantir Technologies is currently valued at a market cap of $47.9 billion. The Palantir Gotham platform enables users to identify patterns hidden within large datasets and was used by the CIA to locate Osama Bin Laden.
In the last decade, Palantir has won contracts with several government agencies that include the U.S. Coast Guard, the Air Force, Army and the Department of Health and Human Services among others.
Palantir’s portfolio of products include Foundry, a data analytics platform which is enterprise facing. Foundry allows pharma companies to accelerate the drug discovery process while financial institutions can detect and prevent fraud.
In the June quarter, Palantir’s revenue from government customers were up 66% to $232 million while commercial sales soared by 28% to $143.5 million. Its forecast to grow its sales by 38% to $1.51 billion in 2021 and by 29.4% to $1.95 billion in 2022.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
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