PROOF 2023 Is Going To Be A Much Better Market Than 2022
This might be the best stock market news you’ve heard since the markets topped out in February.
The onslaught of the bear has been especially brutal.
Aside from the general stock carnage, even “safe” investment-grade bonds have had their worst run in decades.
But there is an upside to it all.
Eventually the post-pandemic bubble will have deflated.
And it looks like that has finally happened.
Here’s why.
Anatomy Of A Deflating Bubble
In order to see where we’re going, you’ve got to look at where we’ve been.
And that’s coming out of the post-pandemic bubble.
To see what that means, we’ll look at Roku (ROKU), one of the breakout stocks of that time.
Roku is a popular consumer product.
It makes set-top streaming devices and software that powers smart TV’s.
The company says its mission is to “connect the entire TV ecosystem of viewers, content publishers and advertisers.”
Roku generates revenue from commercials, digital content sales, and user data collection.
It’s quite a successful company too.
It has survived competition from Apple, Amazon, Google, and many others.
At last report it had a total of 63 million customers.
On top of that, it was able to generate more revenue per user as well.
In 2019 it generated Average Revenue Per User (ARPU) of $23.14.
In 2020 Roku’s ARPU increased to $28.76.
Then in 2021, with a big assist from increased viewing time from the pandemic, ARPU surged to $41.03.
It’s a sign of a great company that is both growing its user base and increasing the value of each user.
It all combines to show major revenue growth for the company.
This 5-year chart of rolling annual revenues from MacroTrends.net shows the strength of Roku:
That’s pretty impressive and reflects the fundamental strength of Roku.
It is the type of success the stock market would reward.
However, the market drove up Roku shares far higher than this deserved.
Just compare the above chart of revenue growth to this 5-year Roku stock chart from MacroTrends.net:
Roku shares soared from around $50 in 2018 to nearly $500 in 2020.
That was a run of more than 800%.
Meanwhile, revenues didn’t even go up 200%.
Clearly, Roku was a bit crazy.
And now, reality set in and Roku shares are down more than 80% and have given up all their post-pandemic bubble gains.
Return To Normal
Roku is not alone.
And again, we’re not bashing it.
The company is solidly run and could be a long-term winner.
But there are many, many stocks out there that follow this similar pattern.
This year was the year that ended and all those gains have largely been given back.
That was a painful process for many, but it takes us to today.
With the markets reset and a lot of the craziness eliminated, investors can start investing again.
We’re not going to say it’s easy.
There are still so many headwinds.
But this situation in Roku stock and many others just like it show we’ve reached the point where it’s actually possible to make money in stocks again.
That’s some pretty good news during a time when there hasn’t been much.
