2025 is off to a sturdy begin. Final month’s inflation charges have been modest, and the three largest inventory market indexes have been up yr up to now as of Jan. 16. The inventory market has typically soared lately, with tech shares main the cost on this bull market.
Nonetheless, not each tech inventory obtained the memo about spectacular value positive aspects. A few of my favourite shares on this sector are buying and selling far under their 52-week highs proper now, however their enterprise prospects nonetheless look nice. With these diverging developments in thoughts, it is best to take into account shopping for some Roku (NASDAQ: ROKU) and MongoDB (NASDAQ: MDB) shares in January.
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This is why.
MongoDB: A high-octane progress story
Let’s begin with MongoDB. The following-generation database software program knowledgeable’s trailing gross sales are up by 49% during the last two years. Free money flows jumped 520% over the identical interval:
MDB Revenue (TTM) information by YCharts
MongoDB’s inventory has solely gained 25% on this time span, although. To place that efficiency into context, the S&P 500 (SNPINDEX: ^GSPC) rose 49% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) was up by 75%.
The database knowledgeable’s chart features a 29% drop since Dec. 9, 2024. The corporate reported third-quarter outcomes that day, beating Wall Road’s consensus earnings estimates by 73%, whereas revenues got here in 6% above the typical analyst goal. The inventory nonetheless crumbled the following day as a result of longtime CFO Michael Gordon additionally introduced his resignation. The corporate additionally provided modest next-quarter steerage, however that ought to be much less attention-grabbing as a result of MongoDB has a behavior of lowballing its earnings projections.
And Gordon is leaving on pleasant phrases. He’s nonetheless doing investor convention shows, and the subject of his departure did not even come up for dialogue. As a substitute, Gordon spent most of that hearth chat underscoring how wholesome the demand is for MongoDB’s ultra-flexible database options. Specifically, the cloud-based Atlas database is turning into a well-liked information supervisor for large-scale artificial intelligence (AI) initiatives.
I will admit that MongoDB’s inventory is not low cost based mostly on conventional metrics. On the similar time, the corporate has earned its 74x price-to-earnings ratio by rising gross sales at a compound annual price of 45% during the last 5 years. The latest inventory value low cost appears like a wide-open shopping for window.
Roku: An undervalued sector big
Roku’s story is surprisingly just like MongoDB’s. Many traders wrote it off as a play on the coronavirus lockdowns of 2020, driving the high-flying market darling down into Wall Road’s discount basement in 2022 and 2023. The inventory has primarily floated sideways since then, together with a 19% value drop within the typically booming market yr of 2024.
However Roku’s enterprise remains to be rising.
The corporate could also be unprofitable on the taxable backside line, however generates wholesome money income over time. It used low pricing as a growth-boosting technique within the lean years of the inflation disaster, however has raised costs in latest quarters.
The balance sheet holds zero long-term debt and $2.1 billion in money reserves. Streaming media is a wholesome goal market, and Roku holds a dominant market share for streaming platform software program in North America. Subsequent, the corporate targets worldwide progress and stronger revenue margins.
What’s to not love?
But bearish traders maintain discovering causes to keep away from the inventory. Roku shares at present commerce at simply 2.8 times trailing sales, simply above an all-time low of 1.7x.
This can be a downright thrilling funding concept. Actually, I doubled down alone Roku funding with one other buy final week. In case you solely wish to purchase one inventory this month, Roku could possibly be your finest wager. The inventory merely has no enterprise being this low cost.
Do you have to make investments $1,000 in Roku proper now?
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Anders Bylund has positions in Roku. The Motley Idiot has positions in and recommends MongoDB and Roku. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
