Meta Platforms and PayPal: A Dynamic Duo for Long-Term Investors
In a tech sector characterised by lofty valuations, finding quality stocks at reasonable prices can be a daunting task. However, according to an analysis by The Motley Fool, two notable exceptions are Meta Platforms (NASDAQ: META) and PayPal (NASDAQ: PYPL). As reported by The Motley Fool, these tech stocks offer a compelling combination of growth potential and affordability.
The The Motley Fool highlights that Meta Platforms, the parent company of Facebook, has been a leader in adapting to changing technology trends. The company’s foray into virtual reality (VR), augmented reality (AR), and artificial intelligence (AI) has been a strategic move to stay ahead of the curve. While not all of its ventures have been successful, such as its Reality Labs division, which has reported losses exceeding $60 billion over the past five years, The Motley Fool notes that the company’s AI investments have paid off.
Meta’s use of AI-powered content recommendations has led to increased user engagement on its social platforms. Additionally, AI-enabled ad tools have helped advertisers achieve a better return on their spending, driving additional spending. In the first quarter, Meta reported a 5% year-over-year increase in ad impressions and a 10% increase in the average price per ad. Total revenue for the quarter increased by 16%, and adjusted earnings per share jumped by 37%, both beating expectations, as per The Motley Fool.
Despite its strong performance, Meta Platforms’ reliance on advertising revenue is a cause for concern. With advertising accounting for approximately 98% of the company’s total revenue, a downturn in the economy could impact the company’s financials. However, The Motley Fool notes that Meta has a strong balance sheet, with $70.2 billion in cash, cash equivalents, and marketable securities as of March 31. This financial strength should enable the company to weather any potential economic downturn.
On the other hand, PayPal’s stock has underperformed in recent years, down 4.3% over the last three years. However, The Motley Fool suggests that the company’s new leadership and strategic initiatives could be a catalyst for growth. Under the guidance of CEO Alex Chriss, who took over in September 2023, PayPal has overhauled its leadership team and established new e-commerce partnerships, including an online checkout deal with Amazon.
PayPal’s expansion into digital advertising, with the launch of PayPal Ads, is also seen as a significant growth opportunity by The Motley Fool. With 400 million users and Venmo having over 92 million users, advertising revenue has the potential to become a significant contributor to PayPal’s bottom line. Additionally, the company’s core business remains strong, with over $1.5 trillion in annual payment volume.
In conclusion, The Motley Fool views Meta Platforms and PayPal as two tech stocks that offer a compelling combination of growth potential and affordability. While both stocks have their risks, their strong balance sheets, innovative strategies, and growth opportunities make them attractive long-term investments.
As The Motley Fool notes, "Quality tech stocks trading at reasonable valuations aren’t easy to find lately." However, with Meta Platforms and PayPal, investors may have found two stocks that can deliver strong returns over the long term.
Before investing in Meta Platforms or PayPal, it is essential to consider the views of multiple analysts and do your own research. According to The Motley Fool, "The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Meta Platforms wasn’t one of them."
The original publication also notes it is worth considering when top analysts make recommendations, pointing to previous recommendations such as Netflix and Nvidia as successful picks.
