June is typically a quieter month for the stock market. There aren’t a lot of earnings reports, and people are focused on getting ready for summer vacation. This year is a little different with inflation at a four-decade high and the market teetering on bear territory.
But that doesn’t mean amazing stock-buying opportunities don’t exist this month. With prices down, the market is crawling with them. Even more, companies are always at work, and news could impact prices. With some potentially important updates, Shopify (NYSE: SHOP) and Roku (NASDAQ: ROKU) are two companies that could be explosive this month.
The next exciting stock split
Amazon‘s stock split has been a topic of strong investor interest over the past few weeks. As that begins to die down, the next exciting stock split is Shopify’s. Shareholders approved the split last week, and it’s set to take effect on June 28.
The Shopify stock split is 10 for 1, and trading right now at around $370 per share, each share will be worth around $37 after the split. The nine additional shares per one current share will go to shareholders of record on June 22, even though the split will go through on the 28th. If you buy between June 22 and June 28, all it means is that the paperwork will get sorted out through the buyer and seller of those shares during that time.
Shopify has been in a slump this year with its stock down 73%. Growth has slowed, and expenses have increased. That led to a net loss in the first quarter.
Revenue increased 22% in the 2022 first quarter, which seems low compared with a 110% increase last year. However, it’s important to keep in mind that last year’s increase was the highest in the company’s history. A 22% increase on top of that looks pretty good.
There were many positive signs for the e-commerce giant in the first quarter. Monthly recurring revenue increased 17% over last year, and that came from a mix of both new merchants joining and old merchants increasing services. In a big move, Shopify is acquiring logistics company Deliverr to improve its platform with a more competitive end-to-end delivery network.
The pendulum is swinging back to physical retail as people continue to return to normal life after pandemic restrictions. But omnichannel retail remains a growing trend that’s not reversing, and Shopify’s presence should only increase in the coming years as it expands its services and attracts more merchants.
At the current price, Shopify’s stock looks attractive. And stock splits typically generate investor interest and a price spike. Amazon’s split is a case in point. Shopify’s stock is up 10% over the past month despite its dreadful performance this year as the stock split gets closer, and it could explode in June.
Managing just fine on its own, thank you
Roku is another stock whose price has tanked this year. It’s down 64% in 2022 as supply chain costs and streaming wars weigh on its bottom line, and an astronomical valuation doesn’t make sense in the current investing climate.
Growth continued to decelerate in the 2022 first quarter with net revenue increasing 28% over last year. Its player revenue has been a thorn in its side, declining 19% year over year in the first quarter as supply chain problems continue. Platform revenue, however, climbed 39% over last year as the company inks more deals with partners and more advertisers move their money over to the streaming platform. Slowing growth and increased costs have contributed to a net loss in the first quarter after three quarters of profits.
The recent news for Roku stakeholders was a rumor reported last week that Roku might be acquired by Netflix. It makes sense for several reasons: Netflix might be looking to launch its own ad-supported channel, the two have had a previous relationship, and an acquisition might be a great development for Roku shareholders. The rumor led to a pop in Roku stock last week.
But as the rumor remained just that, with little to back it up, the stock fell back down. Although these reasons have merit, the case against is much stronger. Netflix is looking to cut costs, not add them. Acquiring Roku would be a huge step that Netflix’s model doesn’t work with at this point in time.
But disappointed shareholders shouldn’t feel too bad. Roku management said it is the top TV streaming platform (by hours streamed) in the U.S., Canada, and Mexico, according to the Hypothesis Group. Active accounts increased 14% over last year, as did streaming hours. Even better, average revenue per user increased 34%.
If the Netflix rumor proves to have any substance, expect the stock to rise again. But even if it doesn’t, investors might realize the opportunity to buy on the dip and push the stock higher.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Netflix, Roku, and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.