The stock market is experiencing some heavy selling pressure. Quality names such as Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) are trading more than 20% off the highs. Certainly, economic activity will contract as cities, states, and countries around the world mobilize isolation efforts to counter the COVID-19 coronavirus's spread. That doesn't mean things will stay that way forever.
As difficult and counterintuitive it may feel, long-term investors should be looking to buy great stocks at their now-lowered prices.
The Cupertino, California company is seeing shares sell at over 15% below the highs. No one is arguing sales are going to be significantly depressed in the near term. In fact, Apple admitted that it will miss earnings estimates for the current quarter.
The pandemic is hitting areas of strategic importance to Apple, impacting both its supply chain and demand simultaneously. Even before the coronavirus caused supply shocks, Apple's AirPods Pro were sold out in most major retailers, and you had to wait over one month to get your hands on a pair.
However, the fundamental strength of the company remains strong. Demand for its products and services will almost certainly rebound dramatically, and the balance sheet is strong enough to weather short-term declines in sales.
Upcoming catalysts that can lift the stock higher soon after supply chains return to normal include a 5G iPhone and a lower-cost phone. The latter will help it gain market share in emerging markets. The two products raise the potential of a V-shaped recovery to the stock price.
Furthermore, Apple's services segment could see a boost during coronavirus countermeasures. Many people will be spending more time at home, potentially adding the growth of its Apple TV+, Apple Music, and Apple Arcade services.
Overall, Apple remains one of the highest-quality businesses on the planet, and long-term investors should consider accumulating shares at these prices.
Shares of Alphabet are down more than 20% since its peak. Investors looking for a quality growth company with a pristine balance sheet need look no further.
Google is the undisputed leader of online search. In the aftermath of this crisis, it will likely remain the leader. The top spot in a growing space will allow it to continue generating robust growth in revenue, with excellent profit margins. When investing for the long-run, you want to invest in businesses that have the demonstrated pricing power shown by Google.
With roughly $120 billion in cash and only $4 billion in debt, the company is in a position to get aggressive in the market. It can increase the amount of its share buyback program or look to make acquisitions. Additionally, the steep market sell-off gives its cash more purchasing power should it decide to become more acquisitive.
What's more, time spent watching YouTube is likely to skyrocket during the pandemic -- not to mention all the Google searches for information regarding the novel COVID-19 coronavirus.
Shares of Facebook have not been immune to this broad market sell-off. The 24% drop in price could be a chance to start accumulating shares in this incredible tech company.
The bull case for the company has not changed. Facebook has a swiftly expanding revenue stream with a strong moat, a great balance sheet with over $54 billion in cash and marketable securities, potential in undermonetized apps like WhatsApp and Messenger, and phenomenal profit margins it can sustain while growing the top line rapidly.
As the pandemic encourages people to spend more time at home, the company's apps will likely be used more often. Increased user engagement and new user signups will boost demand for its services when economic activity returns to normal.
Admittedly, advertisers may look for lower-priced options to get their message across. However, with limited alternatives available, and without the option to market to audiences of sporting events, marketers may reluctantly maintain spending. If you are looking to target a specific group, there is nothing close to what Facebook can offer. Its ability to gather data on individuals is unprecedented, and therefore, incredibly valuable.
What this means for investors
The short run may be painful, but when you are investing over a long time horizon, it usually pays off to buy quality stocks when the market is in panic mode. Since, it is a challenging task to time the market correctly, it is prudent to dollar-cost-average your way into one or all of these high-quality tech stocks.