Meta Platforms, Alphabet, and Amazon could constitute three exceptional buying opportunities as the Federal Reserve’s resolve wavers.
Right now, the US Federal Reserve funds rate is sitting in the range of 3% to 3.25%, having risen by 75 basis points at its latest meeting.
While the central bank’s Chair, Jerome Powell, has warned ‘we need to act right now,’ the economic sands may be shifting. The UN has warned advanced nations to rein in interest rate rises, while the rising strength of the US Dollar against every other currency on earth is starting to seriously damage the competitiveness of US exports.
Yes, rates could still have some way to climb stateside. But an arrest could be in order soon. And this could seriously benefit some of the best NASDAQ stocks, as most are in growth phases, benefitting hugely from cheap debt and consumer credit.
Better yet, some of these overcorrected tech stocks are titans in their fields, yielding a once-in-a-crash chance to gain equity at a relative discount.
3 best NASDAQ stocks to watch
Meta Platforms (NASDAQ: META)
Meta Platforms shares are down 59% year-to-date to just $138. Competition from the likes of ByteDance’s TikTok and Google’s YouTube are eating away at the social media giant’s advertising revenue, as are the changes to Apple’s privacy policy earlier this year.
Further investor concern comes from CEO Mark Zuckerberg’s unblinking obsession with the Metaverse, as he pours over $1 billion a month into the Reality Labs division to make the dream a reality.
However, some perspective is critical for long-term investors. Meta wholly owns Facebook, Instagram, and WhatsApp. Despite a minor drop in daily active users earlier this year, 2.88 billion people make use of the company’s ‘family of apps’ every single day.
For context, this represents more than half of Earth’s internet-connected population.
Further, the company generated nearly $29 billion of revenue in Q2. Even if Meta were to literally burn $1 billion a month rather than investing in the Metaverse, it still appears ridiculously undervalued. Facebook is a keystone in internet connectivity architecture. And it’s trading on a price-to-earnings ratio of just 11.
And if the CEO is right, he could lead the charge for an industry that McKinsey analysis shows could potentially be worth $5 trillion by 2030.
Alphabet (NASDAQ: GOOGL)
Alphabet shares are down 32% year-to-date to just $98. Again, this dip could prove to be an exceptional buying opportunity, as the risk of a recession hitting global marketing spend now appears to be factored in.
Like Meta Platforms, Alphabet has incredible marketing power. It’s the sole owner of Google, which controls 92% of the global search market share, and contributes to more than half of Alphabet’s annual revenue.
Then there’s the impact of its Android brand to consider. There are circa three billion Android smartphones in the world, allowing Google to retain a stranglehold on search.
In fact, excluding pandemic disruption, Alphabet has grown revenue cumulatively at around 20% for the past ten years. Accordingly, it’s now generating over $250 billion in annual sales against its current $1.3 trillion market cap.
And further growth at this rate seems likely. It owns YouTube, by far the most popular online video platform with 2.5 billion active users. And the platform only generated 10%, or $7.3 billion, of Alphabet’s latest quarterly revenue.
In addition, it owns Google Cloud, a direct competitor to Amazon Web Services and Microsoft Azure.
While the division generated only $6.3 billion of revenue in the latest quarter, this represented year-over-year growth of 35.6%. And the cloud computing sector is expected to expand by 15% annually over the next five years.
Amazon (NASDAQ: AMZN)
Similar to Alphabet, Amazon shares are down 32% year-to-date to $116. The company is being hit from various directions, including high inflation, declining consumer spending compared to pandemic levels, and the palpable risk of a global recession.
Accordingly, operating cash flow has decreased by 40% compared to the prior year period, to only $35.6 billion in the trailing twelve months ended June 2022.
However, Amazon is by far the largest e-commerce retailer in the world. And despite falling cash flow, Q2 saw sales increase by 7% year-over-year to $121.2 billion. For context, Amazon saw 2021 full-year sales rise by 22% to $469.8 billion.
Meanwhile, its AWS cloud service controls 33% of the available market share, streets ahead of Azure at 21% and Google Cloud at 8%.
Jefferies analyst Brent Thill argues that ‘Amazon’s current stock price already embeds headwinds from a recession/cost inflation and expect the market to attribute greater value to core-retail over time as cost headwinds are addressed and profitability expands.’
And when the recovery gets underway, a share price revival could see today’s investors handsomely rewarded. Of course, further corrections cannot be ruled out.
This article has been prepared for information purposes only by Charles Archer. It does not constitute advice, and no party accepts any liability for either accuracy or for investing decisions made using the information provided.
Further, it is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
