2 Growth Stocks Down More Than 70% That Could Have Great Rebounds in 2025

"The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage." -- Benjamin Graham.

Whether the declines are "unjustified" or not is likely up for debate. But what's not debatable is that shares of connected-TV platform company Roku (NASDAQ: ROKU) and energy drink maker Celsius Holdings (NASDAQ: CELH) are down by large amounts. As of this writing, Roku stock is down 84% from its all-time high, and Celsius stock is down 71%.

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Benjamin Graham is known as the father of value investing, and he was an early mentor to Warren Buffett. His investing advice means that shareholders shouldn't be "unduly worried" when stocks act like this. Otherwise, they risk giving up an important advantage they have in the stock market.

What exactly is the advantage that investors have and need to hold on to? In my view, the advantage is to maintain objectivity in spite of negative market sentiment. Investors can be generally bearish. But whether they're right or wrong is ultimately another matter entirely.

As martial-arts author Bohdi Sanders said: "When you react, you let others control you. When you respond, you are in control."

How should investors respond to Roku stock and Celsius stock, now that they've dropped so low?

1. Roku: Will advertising demand grow?

Roku generates revenue from selling streaming hardware devices, and from digital advertising when its users are watching ad-supported content. The latter is called platform revenue, and it's the higher-margin revenue stream. One of the troubling trends right now is that streaming hours are going up more than revenue from advertising.

The table below shows the trend for Roku in 2024.

Numbers from Roku's filings. Table by author.

This could either mean that there are fewer and less frequent ads (which, anecdotally, I doubt), or that Roku is generating less revenue per ad. Ideally, the company's ad spaces would become more valuable over time because of increased competition to get in front of its massive audience of nearly 86 million households. But that hasn't seemed to materialize lately.

It's frustrating to watch so many key performance metrics from Roku improve while certain other important metrics lag behind. I believe frustrations have led to Roku stock's cheap valuation of less than 3 times sales.

Roku's adoption is still improving, which is reason to maintain optimism. Founder and CEO Anthony Wood said: "We remain confident in our ability to grow Platform revenue in 2025 and beyond as we grow ad demand." If Wood delivers on this promise in the coming year, Roku stock could rebound nicely as investors' fears subside and the valuation consequently increases.

2. Celsius: Is the slowdown temporary?

Celsius may have gone from market darling to market outcast in record time. The issue driving this emotional 180 is the company's slowing growth rate. After revenue growth of 140%, 108%, and 102% in 2021, 2022, and 2023 respectively, its revenue through the first three quarters of 2024 is only up 5% from the comparable period of 2023.

It gets worse: Celsius' revenue in the third quarter of 2024 was down 31% year over year, which is the first time quarterly revenue has dipped since 2018.

From a price-to-sales (P/S) perspective, Celsius stock has dropped to a cheap valuation due to this slowdown. As of this writing, it trades at less than 5 times sales, which is about 50% cheaper than its 10-year average valuation.

CELH PS Ratio data by YCharts.

A 31% drop in revenue seems dire, but it contradicts another metric shared by Celsius' management. According to management, the company continues to take market share in the energy drink space. But this apparent contradiction has a simple explanation, and it could make all the difference for 2025.

PepsiCo distributes Celsius' products. In 2024, PepsiCo had too much inventory ordered, and now it's ordering less to sell what it has on hand. In other words, some of Celsius' hot growth numbers were too high because the distributor ordered too much. Now the dip in revenue looks worse than it is to correct the problem.

If this is the entire problem, then Celsius' growth should perk back up in 2025 as it moves past the issue. Once the growth numbers perk back up, investors could start believing in this long-term growth story again. The company's profitability has improved in recent years, and it still has new markets to move into. All of this could carry the stock higher.

Investors have generally soured on Roku stock and Celsius stock. They might avoid this duo if they allow market sentiment to guide their decision-making process. However, taking an objective step back, there is reason to believe that things will be better for Roku and Celsius in 2025. That's why I continue to hold both.

Moreover, I believe the case is stronger and more compelling with Celsius, which is why I may add more shares to my portfolio in the near future.

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Jon Quast has positions in Celsius and Roku. The Motley Fool has positions in and recommends Celsius and Roku. The Motley Fool has a disclosure policy.