Every market surge has its leaders and laggards. Sometimes, the coming winners are relatively easy to spot, but in other cases, their strengths only become clear to everyone with the benefit of hindsight.
I feel that Roku (NASDAQ:ROKU) and Sleep Number (NASDAQ:SNBR) -- yes, Sleep Number -- could be among the stocks that power the next bull market. Here's why.
Roku
Roku stock is not a particularly popular bet on Wall Street these days. Some traders see it as an earlier-stage pandemic play that will flounder now that we're once again spending more time outside of our homes and less time streaming escapism. Last week, Amazon.com (NASDAQ:AMZN) rolled out a new line of Fire TV HDTVs, including the first-ever Amazon-built television.
Let's tackle the Amazon challenge first. The new sets pack impressive specs at even more impressive prices. They start as low as $370 for an Alexa-fueled experience that feeds right into the Amazon Fire TV ecosystem. But will they become popular enough to dethrone Roku?
Flat screens with built-in smart TV hardware and software platforms are popular, and Roku currently commands 38% of that market. However, for most consumers, the solution often comes down to just buying a $20 or $30 dongle -- cheap tech that a person can take with them wherever they travel, and that will also outlive the obsolescence of whatever gargantuan HDTV they own.
Roku has been competing with Amazon's cutthroat pricing for the past seven years. And it has steadily found ways to compete with challengers that include three of the world's most valuable tech titans.
There are now 55.1 million active users who rely on Roku to feed their streaming habits -- to the tune of more than three hours of viewing a day, on average. Roku's audience has grown by 28% over the past year, and average revenue per user rose by 46% as marketers paid up to reach Roku's engaged audience.
One should never underestimate the power of a hungry Amazon, but Roku will continue to be the bar-raising leader. It's the obvious pick for consumers coveting its service agnosticism and its thousands of available apps. Its recent push into original content is just the cherry on top for the undisputed champ of streaming service stocks.
Are we spending more time outside now? Sure! Will you still come back to watch the perpetually widening options of great must-see TV? Absolutely. Why do you think Amazon is making its own TVs now?
Sleep Number
Some people put their money under their mattress, but smart investors may want to consider investing some of their money in the mattress. Sleep Number makes air-chambered mattresses with easily adjustable firmness based on a sleeper's desires.
Sleep Number has always stood out within a challenging mattress market thanks to its differentiated product, and it stands out even more now that it has debuted its Sleep Number 360 bed. Billed as the company's first smart bed, it monitors people's sleep levels and adjusts for them throughout the night. From firmness, heat or cooling, and even elevation levels, Sleep Number provides a customized experience with tech that none of its peers can offer.
Customers love it. Sleep Number sales soared by 70% in its latest quarter. A lot of companies have been cranking out ridiculous year-over-year growth numbers lately because the early stage of the pandemic -- 2020's second quarter -- was so challenging. But even measured against the more normal climate that prevailed in Q2 2019, Sleep Number's top line was up by 36% -- and its bottom line is growing even faster.
Investors weren't impressed by Sleep Number's latest report. It was actually a rare miss on the bottom line, and management had warned that supply chain constraints would drag on its operations in June and July. Thankfully, these are all transitory troubles. We've been spending a lot more time at home over the past two years, and putting extra wear and tear on our beds. When it comes time to upgrade your mattress -- and you may be due about now -- don't be surprised if Sleep Number winds up being your first choice. Will that make Sleep Number a growth stock to own for the next bull market? Sleep on it.
