All three major U.S. indexes dropped for the second day in a row Wednesday, with the Nasdaq down 1.7% and the S&P 500 0.82% lower at the closing bell. Headlines pointed to 30-year high inflation that could force the Fed to raise interest rates sooner than projected.

Rising prices and supply chain bottlenecks are clearly worrisome. But they have been here for months and they didn’t prevent Wall Street from pushing stocks to new records just a few days ago.

In fact, the Nasdaq had climbed nearly 12% since early October until its recent pullback, with investors looking to stronger-than-projected corporate earnings, solid margins, historically low interest rates, as well as signs of consumer positivity entering the busy part of the crucial holiday shopping season.

Therefore, an alternative reading of the pullback is simply that Wall Street decided it was time to take profits and a breather—as it regularly does—after a month-long rally sent many index-tracking ETFs into overbought territory.

The Nasdaq 100-tracking QQQ ETF began its climb out of oversold RSI territory (30 or under) in early October and it popped to overbought levels (70 or higher) by early November. In fact, it climbed all the way to 78 last week, which marked its highest level since early September 2020.

The quick drop pushed QQQ all the way to 59, or closer to neutral levels in just a few sessions. Meanwhile, S&P 500-tracking ETFs including SPY made similar moves, though they haven’t come down as quickly.

There could clearly be more near-term selling and the current economic headwinds might be with us for a while longer. Still, rising prices have yet to appear in the S&P 500 margins outlook for FY22 or FY23. And even when the Fed starts to finally raise interest rates, they will likely continue to favor stocks for the foreseeable future.

Investors with outlooks beyond 2021 might want to take this time to add strong stocks. Today, we dive into three tech-focused stocks trading at substantial discounts to their highs that boast strong, longer-term growth outlooks…

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Snap Inc. (SNAP Quick QuoteSNAP - Free Report)

Snap stock tumbled over 20% in the blink of an eye after it warned investors on its Q3 earnings call on October 21 that changes to Apple’s privacy policies are making it more difficult for its advertisers to “measure and manage their ad campaigns for iOS.” The news sent waves through the broader digital ad world, including Facebook, which has been publicly fighting with the iPhone maker since its announcement last year.

Snap and its Snapchat app are fueled by digital advertising and the firm is actively working on new ways to help its clients better track consumer engagement and more, including additional first-party tools. Wall Street had clearly discounted the impact Apple’s new opt-in-focused app tracking would have on the mobile-based advertising market.

Snap’s user base is still growing within key demographics that are hard to reach anywhere but their smartphones. This backdrop provides Snap with plenty of long-term growth runway because advertisers have to try to reach younger consumers as they disconnect almost completely from legacy media. And the change to Apple’s policies, which impact all iOS apps, doesn’t mean advertisers and marketers are going to simply stop spending.

Snap grew its daily active users by 23% to 306 million last quarter and it boasts that it reaches “more than 500 million people, including more than 75% of 13- to 34-year-old in the United States, Canada, France, the U.K., Australia and the Netherlands.” Snap has attracted these highly sought-after consumers by continually enhancing its social media app that became famous for disappearing photos and videos.

Snapchat is now full of video content and shows from social media stars, big-time Hollywood celebrities, and brands like the NFL and countless others. Its Discover page has gained traction and it’s been in the booming mobile gaming market for over two years. The company also constantly releases various augmented reality offerings and it launched its Spotlight feature late last year that aims to challenge TikTok

Image Source: Zacks Investment Research

Snap’s Q3 revenue still climbed 57% to over $1 billion and its adjusted earnings soared to easily top our estimates. Zacks estimates currently call for its FY21 revenue to surge 62% to reach $4.1 billion, with FY22 projected to climb another 43% to $5.8 billion. This year will represent its best growth as a public company and follow three straight years of between 43% to 46% top-line expansion. Snap is also projected to swing from an adjusted loss of -$0.06 a share to +0.35 this year and then jump 55% higher in FY22.  

The digital entrainment app’s revenue and EPS outlook remains impressive. That said, its consensus FY22 EPS figure tumbled from $0.80 a share before its release to its current $0.54 level. The change in its 2022 earnings outlook is striking, but Wall Street already hammered the stock and Snap has consistently destroyed our bottom-line outlooks.

Snap currently lands a Zacks Rank #3 (Hold) and the 23 brokerages recommendations Zacks has remain as bullish as they were three months ago, with 18 “Strong Buys” and two more “Buys.”

Snap shares have tumbled nearly 40% from their September records and 30% since its Q3 release to close regular trading Wednesday at $52.88 a share. The move sent it well below its 50-day and 200-day moving averages and it currently hovers right at oversold RSI levels.

Despite the tumble, Snap is up 40% in the last year and 265% in the last two years. The recent fall has the stock trading at year-long lows in terms of valuation at 15.9X forward sales. And its current Zacks consensus price target of $77.26 a share represents 46% upside to its current levels.

Some may want to stay away from Snap until it shows signs of a comeback or simply not touch it at all. But it continues to join together the two seemingly unstoppable trends of digital advertising and overall smartphone addiction, even though Apple has made it harder to track users.

Roku, Inc. (ROKU Quick QuoteROKU - Free Report)

Wall Street continued to sell Roku following its Q3 earnings release on November 3, as part of a longer and larger decline from its summer records. The streaming TV firm provided lower than projected revenue guidance for the current holiday quarter and posted slower account growth in Q3. Roku management pointed to ongoing supply chain setbacks that are disrupting connected TV sales in the U.S.

Roku pulled in 1.3 million new active accounts—Wall Street was calling for around 1.7— last quarter to lift its total active users to 56.4 million. And executives expect these setbacks to remain into 2022, after “overall U.S. TV sales in Q3 fell below pre-Covid 2019 levels.” Near-term setbacks aside, it posted blowout quarterly results, with adjusted earnings up from $0.09 a year ago to $0.48 a share to crush our estimate by 700%. Meanwhile, its revenue climbed 51%.

The firm is also due for a comeback considering that its player space, which includes its streaming devices and smart TV OS, accounts for far less of its business these days. Roku now makes most of its money from its booming digital ad unit that enables companies to buy targeted ads to promote their streaming movies, shows, platforms, or whatever else they’re selling. In fact, its ad-heavy platform revenue soared 82% in Q3 to account for over 85% of sales, while its player segment fell 26%.

Roku ramped up spending to roll out more content, including original programming on its own ad-based Roku Channel that allows users to watch free streaming movies and TV shows. Plus, it’s expanding its international reach outside of the U.S. and Canada. Perhaps most importantly, ad dollars are simply pouring into streaming, and Roku is not being impacted by Apple’s privacy moves.

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Zacks estimates call for Roku’s FY21 revenue to surge 58% to $2.80 billion. Sales are then set to climb another 38% in 2022 to extend its streak of between roughly 40% and 60% revenue growth to five years. Plus, it’s projected to swing from an adjusted loss of -$0.14 a share to +$1.56 a share this year. Its consensus FY22 estimate has slipped from $1.77 a share prior to its release to +$1.58 per share, as it faces a margin crunch in players and other headwinds.

Roku has consistently blown away our EPS estimates and it lands a Zacks Rank #3 (Hold) at the moment. Despite the post-earnings drop and the broader pullback from its highs, Wall Street remains extremely bullish on the stock, with 17 of the 20 brokerage recommendations Zacks has at “Strong Buys.”

Roku shares have fallen over 40% since early August, including a 13% slide since its Nov. 3 release. The drop has the stock right at oversold RSI levels (30 or under) at 31. And it’s now up only 18% in the last 12 months to lag its industry. Yet, it has still soared 560% in the last three years and it's been on extended downward and sideways runs before.

Like its peer on this list, Roku is trading at year-long lows at 10.0X forward sales. And its $429 a share Zacks consensus price target marks 55% upside to its current levels. All that said, investors with long-term horizons might want to take a chance on the pure-play streaming stock that stands to benefit from the growth of the entire connected-TV space.