It's been a bumpy ride recently in the stock market. The S&P 500, for example, was recently down 10% from its 52-week high, while the Dow Jones Industrial Average was down 9%. Many people's personal portfolios are down much more than that.
Stock market crashes and corrections can be unnerving, but they do offer a big upside: They put the stocks of many great and/or promising companies on sale. Here's a look at three companies worth a closer look, as their prices have been whacked recently.
Let's start with an exceptionally familiar name: Netflix (NASDAQ: NFLX). The streaming star's shares were recently down almost 50% from their 52-week highs. Its forward-looking price-to-earnings (P/E) ratio was recently 33, well below its five-year average of 82, while its price-to-sales ratio was 5.6, well below the five-year average of 9.1.
If you loved Netflix as a business before, and wanted to buy some shares of it, they're a much better bargain than they have been in a long time. If, on the other hand, you see Netflix as overvalued even now, and are very concerned about the competition it faces from Amazon‘s Prime Video service, Apple‘s Apple TV+, Walt Disney‘s Hulu, and many others, then perhaps pass up this opportunity.
Here's why you should consider buying Netflix, though: It is, arguably, the top dog in video entertainment streaming, recently boasting some 222 million paid memberships globally. (Amazon Prime isn't far behind, according to Variety.com, and YouTube boasts more than 2 billion monthly active users.) Competition shouldn't be a dealbreaker, as many great brands can coexist.
There are many hundreds of millions (if not billions) of additional subscribers that Netflix can grab, and it's starting to expand the scope of its offerings, too: It's now wading into the gaming world, having bought Finnish game developer Next Games recently.
PayPal Holdings (NASDAQ: PYPL) is also familiar to gobs of people, as it's a major electronic payment specialist, owning not only the widely used PayPal platform, but also Venmo. PayPal's shares hit $310 back in July, but have recently been trading near $100 — that's a whopping 68% haircut.
There's much to be impressed by with PayPal. As of the end of 2021, for example, it had 426 million active consumer and merchant accounts, and an annual total of $1.25 in payments processed — at a rate of more than 40,000 transactions per minute. The fintech giant has been making acquisitions in recent years that expand its scope of operations, and it has done so largely with cash, not by issuing more shares of its stock. Its purchase of Swift Financial in 2017 helps it address the financial needs of small businesses, for example, while the more recent acquisition of the Honey shopping service can help it make money while serving shoppers — not to mention that it will also be acquiring a lot of valuable data reflecting consumers' shopping interests and behaviors. Even more recently, PayPal bought the Japanese buy now, pay later specialist, boosting its ability to offer consumers another way to buy.
If you think drops of 50% and 67% are huge, consider the fall of streaming hub and smart-TV enterprise Roku (NASDAQ: ROKU), which was recently down a full 75% from its 52-week high. Oof.
Roku offers a lot to consumers, starting with a suite of easy-to-use streaming devices that take viewers to a hub of countless channels that they can arrange as they like and view whenever they like — channels such as Netflix, Amazon Prime, and Hulu, as well as less mainstream ones such as a saltwater fishing channel, regional news channels, channels for movies from many different countries, and channels for many different churches, offering rebroadcasts of services.
Roku's future seems bright. Its smart TV operating system is already the market leader, with millions accessing it via Roku devices and also because it's within many smart TVs. In 2021, its total streaming hours topped 73 million, up from 14.4 million the year before, while average revenue per user (ARPU) jumped by 43% year over year to $41.03 on a trailing 12-month basis.
Roku is also producing its own original content now, aiming for its Roku Channel to join the likes of Netflix and Prime Video as a top streaming content provider. Roku does have some risks, as all companies do. For one thing, its growth rate has been slowing recently, and by various measures, its shares may still not be dirt cheap. Read up on Roku to see whether you think its future is golden enough to have you buying shares now or whether you'd like to wait for either an even lower entry price or a return to faster growth.
These companies are just three of many great businesses that have seen their share prices tank in the recent stock market correction. A little digging online can turn up many more. Whether you buy some or all of these, or other companies, this is a great time to go shopping.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Selena Maranjian owns Amazon, Apple, Netflix, PayPal Holdings, and Walt Disney. The Motley Fool owns and recommends Amazon, Apple, Netflix, PayPal Holdings, Roku, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.