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Take Advantage of the Dip and Buy These 3 Stay-at-Home Stocks

After positive news that Pfizer (PFE) and BioNTech's (BNTX) vaccine candidate prevents COVID in 90% of patients, many stay at home stocks plummeted. The drop in prices may be an overaction and investors should consider buying the dip in Roku (ROKU), PayPal Holdings (PYPL), and Take-Two Interactive Software (TTWO).

With news that Pfizer (PFE) and BioNTech’s (BNTX) vaccine candidate was more than 90% effective in preventing COVID-19, stay at home stocks suddenly didn't look attractive to investors. We saw massive dips in stocks that have benefited from the work and learn from home trends.

These companies soared from late March to August as most people were forced to stay at home due to the coronavirus. As we saw yesterday, investors see the thesis for these stocks coming to an end. 

But was that an overreaction? I believe so. The PFE and BNTX vaccine candidate still has to complete more testing and submit its candidate for emergency approval.

Plus, it will take a considerable amount of time for most of the population to get vaccinated. For those reasons and the fact that cases are currently skyrocketing, the stay at home trend is here to stay for at least six months, if not longer. That makes recent dips in prices of stocks such as Roku (ROKU), PayPal Holdings (PYPL), and Take-Two Interactive Software (TTWO) the perfect opportunity to pick up some shares, as these stocks could still have plenty of room to grow.

Roku, Inc. (ROKU)

ROKU was down 12.4% yesterday and was down another 2.2% today on the positive vaccine news. I believe this a short-term bump as streaming is the future of TV and movies, and the company just reported fantastic third-quarter results. EPS came in at $0.09, compared to the consensus estimate of -$0.39, a 123% surprise and up 140.91% year over year. Revenue was up 73.1% compared to the same quarter last year.

These results were driven by increased user engagement due to the lockdowns. The company saw a surge in signups and an increase in streaming hours, boosting TV streaming advertising on the platform. The increasing popularity of the Roku Channel has led to a rise in monetized video ad impressions.

Management is forecasting revenue growth of 40% year over year for the current quarter. Sales are expected to grow by 35.9% next year. Currently, most of the company's revenue is generated in the U.S. As ROKU makes its presence known in international markets and more consumers switch to streaming, the company should see additional growth in the future.

ROKU is rated a "Buy" in our POWR Ratings system. It holds a grade of "A" for Trade Grade and a "B" for Peer Grade and Industry Rank. Those are three of the four components that make up the POWR Ratings. The stock is also ranked #6 in the Technology – Hardware industry.

PayPal Holdings, Inc. (PYPL)

PYPL dropped -8.9% yesterday and was down another 0.74% today. As the dominant player in the digital payments industry, the company is poised to continue its run due to another robust quarter for growth. PYPL reported its latest results last week and saw growth in both revenue and earnings. EPS was up 75.4%, while revenue increased 24.7% year over year.

The company saw 15.2 million net new active accounts added, payment transactions up 30%, and total payment volumes (TPV) grew by 38%. The robust growth in total payments volume drove revenue growth for the quarter. Its Venmo app's strong performance, which allows people to send money to friends and family, and its merchant services, contributed to total payment volume growth. Additionally, PYPL sees strengthening customer engagement on its platform, and its recent buyout of shopping discount extension Honey, for $4 billion bodes well for the future.

The company is not only positioned to benefit from the pandemic but is poised to perform well in a post-COVID world where we are seeing accelerating trends in e-commerce and digital payments. As long as these trends continue, the company's stock should continue to move higher. Plus, PYPL's entrance into crypto assets could provide an additional growth catalyst.

PYPL is rated a "Buy" in our POWR Ratings system. It holds grades of "A" in Trade Grade and Peer Grade, and a "B" in Buy & Hold Grade and Industry Rank. It is also ranked #2 out of 46 stocks in the Consumer Financial Service industry.

Take-Two Interactive Software, Inc. (TTWO)

TTWO has certainly benefited from the stay at home trend, as the stock was up 43.1% year to date before Monday. After dropping 8.7% yesterday and an additional 3.19% today, I believe it will head higher over the coming weeks. Its growth story hasn't changed, and the latest versions of the two top video game consoles, the Sony (SNE) PlayStation and Microsoft (MSFT) Xbox, are launching this month.

The company reported its latest financial results last week and blew away consensus expectations. EPS came in at $2.04, a 40.7% surprise over the average analyst estimate of $1.45. TTWO has benefited from an increase in recurrent consumer spending. Sales grew on strong demand for games such as NBA 2K20, Grand Theft Auto, Red Dead Redemption, PGA TOUR 2K21, and more.

Management also provided 9% higher guidance for 2021 net bookings and revenue. The company has seen an ongoing surge in user growth and engagement due to stay at home policies driven by the pandemic. This should continue as COVID cases surge, and colder weather will force gamers inside. TTWO has seen its stock rise on the back of its wildly popular Grand Theft Auto franchise and should see even more growth as an updated version will launch for the PlayStation 5 and Xbox One.

TTWO is rated a "Buy" in our POWR Ratings system. It holds grades of "B" for every POWR component, including Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. It is also the #3 ranked stock in the Entertainment – Toys & Video Games industry.

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ROKU shares rose $0.96 (+0.44%) in after-hours trading Tuesday. Year-to-date, ROKU has gained 62.05%, versus a 11.58% rise in the benchmark S&P 500 index during the same period.



About the Author: David Cohne

David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a Consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers.

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