The stock markets face several headwinds in the near term, causing a sell-off. These include rising interest rates, supply chain disruptions, and a Russian military invasion of Ukraine, to name a few. That said, a market sell-off can create an opportunity to buy excellent stocks inexpensively. Here are two cheap tech stocks you can buy on the dip.
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1. Meta Platforms boasts nearly 2 billion daily active users
The company formerly known as Facebook is reeling -- down 39% in 2022. After more than a decade of double-digit revenue growth, Meta Platforms (NASDAQ: FB) expects 2022 to be the end of that streak. Privacy changes implemented by a major phone manufacturer make it harder for Meta to track its users, subsequently challenging sales of targeted advertising.
Still, as of Dec. 31, Meta boasts over 1.9 billion daily active users across its family of apps, including Facebook, Instagram, and WhatsApp. That was 84 million more than it has at the same time the year before. These users voluntarily provide several pieces of personal information -- data that Meta can then use to show relevant ads. And in the face of privacy changes by phone manufacturers, Meta can add features that encourage users to share even more information that it can use to enhance advertising precision.
Admittedly, the near term will be challenging as Meta adjusts to privacy changes and the world is evolving from COVID-19, but the company has grown earnings per share at a compound annual rate of 45.9% in the last decade. There is a good likelihood that management handles the headwinds skillfully.
Meanwhile, the sell-off has the stock trading at a price-to-earnings ratio and price-to-free cash flow ratio of 15.08 and 15.20, respectively -- by far the lowest it has sold for in the previous five years.
2. Alphabet is among the leaders in a massive industry
Like Meta, Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) earns revenue primarily through advertising. The company is home to Google, the most dominant search engine globally. And overall, advertisers spent $61 billion with Alphabet in its fourth quarter ended Dec. 31.
Interestingly, marketers spent an estimated $763 billion on advertising in 2021. That was 22.5% higher than in 2020. In another tailwind for Alphabet, businesses are allocating more to advertising online. Digital advertising is more easily measurable, and it helps companies identify the return on their investment. That's an improvement compared to advertising in print magazines, for instance, where it isn't easy to discern precisely how many folks saw your ad.
Over the last decade, Alphabet has increased revenue by a compound annual rate of 21%. Fortunately, investors can buy Alphabet at a price-to-earnings ratio and price-to-free cash flow ratio of 24 and 27.25, respectively. According to metrics, it is nearly the cheapest price investors have been able to buy Alphabet in the last five years.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Parkev Tatevosian owns Alphabet (C shares). The Motley Fool owns and recommends Alphabet (A shares) and Meta Platforms, Inc. The Motley Fool recommends Alphabet (C shares). The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
