2 Monster Growth Stocks You Can Buy Now and Hold For The Next Decade

A myriad of factors have contributed to recent market volatility, including high inflation, the Omicron variant, and changes in the Federal Reserve’s monetary policy. And while the S&P 500 near its all-time high, many growth stocks have fallen sharply in recent months. For example, Roku (NASDAQ: ROKU) and Sea Limited (NYSE: SE) are currently 51% and 40% below their all-time highs.

Of course, these losses sting if you’re a current shareholder, but there’s a silver lining for long-term investors. You can buy these high quality growth stocks at a discount now, and both Roku and Sea Limited are well positioned to generate market-leading returns over the next decade.

Here’s why.

Image source: Getty Images.

1. Roku

In 2008, Roku pioneered the streaming industry with the release of its first device, and its platform remains the only purpose-built operating system for Connected TVs (CTVs). Today, Roku’s technology connects over 56 million viewers with content publishers (and advertisers) and is by far the most popular streaming platform.

In fact, Roku accounted for 31% of CTV viewing time in the third quarter, while the closest competitor held just 17% market share. To take advantage of this advantage, Roku has invested aggressively in its advertising business. Last year, the company launched the OneView platform, a suite of tools that enables marketers to create, measure, and optimize targeted advertising campaigns for CTV, desktop, and mobile devices. And that year, Roku showcased original content on its own ad-supported service, The Roku Channel, with the aim of increasing audience engagement and creating new advertising opportunities.

So far, the management’s growth strategy has paid off. The streaming hours on The Roku Channel more than doubled in the third quarter and are among the five best channels on the platform in terms of reach. That’s impressive because Roku connects viewers to virtually every ad-supported and premium service out there. Unsurprisingly, the company has had an impressive financial performance over the past year.

Metric

3rd quarter 2020 (TTM)

3rd quarter 2021 (TTM)

change

revenue

$ 1.5 billion

$ 2.5 billion

66%

Free cash flow

($ 32.0 million)

$ 266.2 million

N / A

Data source: YCharts. TTM = trailing 12 months.

Looking ahead, Roku is prepared for future growth. Connected TV currently makes up a relatively small percentage of total TV ad spend, but as more consumers switch to streaming entertainment, advertising budgets will follow suit. According to BMO Capital, CTV ad spend will even hit $ 100 billion in 2030. And as an industry leader, Roku is well positioned to take advantage of this opportunity.

2. Sea Limited

Sea Limited is a holding company based in Southeast Asia, one of the fastest growing economies in the world. Sea owns businesses in three key industries: Shopee is an e-commerce platform, SeaMoney provides digital financial services, and Garena is a video game developer and publisher. More importantly, Sea has established itself as a leader in several industries.

Shopee, in particular, is the most popular online marketplace in Southeast Asia, receiving more than twice as many monthly visitors as its closest competitor. And SeaMoney adds value to merchants and consumers by streamlining the payment process both inside and outside the Shopee marketplace. After all, Garena is best known for Free fire, the top-selling mobile game in Southeast Asia and Latin America for the past nine quarters.

Overall, Sea’s impressive lineup of successful companies over the past year resulted in impressive financial results.

Metric

3rd quarter 2020 (TTM)

3rd quarter 2021 (TTM)

change

revenue

$ 3.6 billion

$ 8.3 billion

131%

Free cash flow

$ 87.7 million

$ 341.9 million

290%

Data source: YCharts. TTM = trailing 12 months.

Looking to the future, Sea Limited has plenty of room to grow its business. Currently only 75% of the population in Southeast Asia has internet access, but that number is growing rapidly. As a result, according to Bain & Company, the gross volume of e-commerce goods is expected to more than quintuple over the next nine years and reach $ 1 trillion by 2030. And as more consumers spend money online, Shopee and SeaMoney should benefit.

However, Shopee is also aggressively expanding into Europe and Latin America, expanding its addressable market outside of its core regions. If the company gains momentum in these regions, I believe Sea could reach $ 1 trillion in market cap in 10-15 years, which equates to a return of more than 700%. So this growth stock looks like a smart buy.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

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