3 Beaten Down Tech Stocks To Buy

Tech stock investors who were feeling beaten down at the end of 2021 aren’t off to the best start in 2022 either after the Nasdaq Composite Index plummeted about 16% since its peak in November.

This was largely caused by news of the Fed’s plans to start increasing interest rates. But like any other time of economic downturn or volatility, opportunities to make high returns exist if you know where to look. Here are 3 beaten down tech stocks to buy now if you’re willing to risk short-term volatility for long-term gains.

Netflix (NFLX)

 A pioneer in the streaming sphere, Netflix has no plans to slow down anytime soon. From new content and original series and films to video games, Netflix plans to add 30 million subscribers this year.

But, it won’t stop there. By 2025, the streaming giant could exceed 360 million. Currently, there are about 209 million people worldwide who call themselves Netflix subscribers. 

Despite these ambitious plans and expected explosive growth, the stock fell nearly 50% from its 52-week highs in November. This came after concerns about growth, inflation, and rising interest rates. 

However, those concerns could be blown out of proportion. During the pandemic, as people were forced to entertain themselves from their homes, Netflix saw a surge in subscribers, adding nearly 37 million members in 2020, followed by 18.2 million in 2021.

This pandemic-spurred growth has also accelerated Netflix’s financials, sending revenue soaring from $20.1 billion to $29.7 billion within the two years. What’s more, net income nearly tripled to $5.1 billion.

Of course, as restrictions ease and things get back to normal, this kind of historical growth won’t continue. For this reason, Netflix forecasted only 8% for YOY growth in membership adds for the first quarter of 2022 — a figure that’s considerably lower than the 22% YOY growth rate in the Q1 last year.  

Netflix also plans to raise the fee of admission again for American and Canadian customers — the 6th price increase since 2014. The good news is, even with price hikes, the acquisition does not skip a beat. This illustrates the pricing power Netflix enjoys.

Netflix investors will likely see the average monthly revenue per paying member increase this year again and beyond. This demonstrates Netflix’s ability to raise prices without affecting demand, the number of subscribers.

A valuation analysis confirms how compelling an opportunity Netflix is now as an investment opportunity. The intrinsic value or fair market value for Netflix sits at $516 per share, representing a potential gain of 33%.

Meta (FB)

Meta, formerly Facebook, has long been a social media trailblazer. Like other tech companies, Meta’s stock has slipped in recent months, falling nearly 50% from its weekly high in September.

Mark Zuckerberg launched a Facebook rebrand in 2021 as it focused on the Metaverse.

Meta is another company that reaped the benefits of people staying home and relying on digital communication over the past couple of years. In fiscal year 2021, Meta revenues have increased to $117.9 billion from $70.7 billion in 2019. 

The company also more than doubled its net income to nearly $40 billion during the same time period. The number of daily Facebook users also increased significantly, rising from 1.66 billion to 1.93 billion.

When measured across the full range of Meta apps, including Snap and WhatsApp, there were 3.59 billion monthly users, up from 2.89 billion in 2019.

Zuckerberg is just getting started with his Metaverse plans and investments, and users are growing over there too. The company’s VR platform, Horizon Worlds’ users, have multiplied by a tenfold to 300,000 within the months following its December launch.

Zuck and his team are just getting started. But investors should be prepared to accept slower growth in the near future as the company works on building its Metaverse platform and infrastructure.

Patience will be needed to hold Meta, but its long-term promise and potential should outweigh the short-term risks. 

Looking at analysts’ estimates for Meta, the upside is enormous now. The fair market price per share for Meta sits at $335, representing as much as 64% upside at the time of research.

PayPal Holdings (PYPL)

Like the other stocks on our list, the popular payment platform PayPal Holdings is also experiencing a dip in its share price — the price is down around 66% since its 52-week high in July.

Although PayPal has shown a long history of growth, it still reaped the benefits of limitations put on in-person contact over the past few years.

In 2020, PayPal doubled its net revenue from $10.8 billion in 2016 to more than $21 billion in 2020. During the same time, the company’s net income tripled to $4.2 billion.

In 2021, PayPal’s numbers stayed impressive, with an 18% YOY growth to $25.4 billion. The company’s free cash flow also saw an increase of 9% YOY to $5.4 billion.

Total payment volume (TPV) also experienced a surge of 31% YOY to $1.25 trillion. PayPal ended 2021 with 426 million active accounts after adding 48.9 million accounts through the course of the year.

Even as the pandemic wanes, consumers are not going to give up the convenience of PayPal, and its growth momentum will continue. This fiscal year, TPV is expected to grow by 22% as they add 15 to 20 million new accounts.

While that may seem lower than what we saw last year or the year before, it’s important for investors to remember how the pandemic impacted new members over the past two years. So, growth going forward may not be as fast, but it should be consistent.

When we look at Paypal from a discounted cash flow forecast perspective, we see massive upside to $179 per share from current levels. That suggests a whopping 68% upside based on current share price levels.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.