The recent market sell-off, primarily driven by growth stocks' dives, has created tremendous opportunities for investors to buy shares of excellent companies at a discount. While the current economic issues may continue to impact the market's performance in the short term, investors focused on the long game had better stay the course.
It's impossible to know when stocks will reach rock bottom, but investing in great businesses and holding onto their shares for five or more years will always be a winning strategy. Let's look at two well-known companies that haven't escaped the recent bloodbath: Meta Platforms (META 0.14%) and Amazon (AMZN 1.49%).
Both companies are among the largest in the world by market cap, but Wall Street thinks they still boast significant upside potential from their current levels.
1. Meta Platforms: Implied upside of 36%
Meta Platforms, formerly known as Facebook, has multiple growth opportunities at its disposal. First, there is the company's venture into the e-commerce industry. Meta Platforms already allows merchants to set up online stores on Facebook and Instagram through its Facebook Shops. The company makes money from this service via transaction fees.
The prospect of setting up online stores on Facebook or Instagram is appealing. Facebook alone recorded 2.91 billion monthly active users as of the third quarter of 2021, representing a 6% year-over-year increase. Meta Platforms' vast ecosystem may entice more and more business owners to set up shop on one of the company's highly popular apps.
With the e-commerce industry still in growth mode, this opportunity may become increasingly important for Meta Platforms. In other news, the tech giant recently announced another way it could monetize Instagram. It is currently testing Instagram Subscriptions, which will allow creators on the app to charge their followers monthly fees for access to exclusive content.
If Meta Platforms makes this feature permanent, it will eventually start taking a cut from the fees that content creators on Instagram charge.
Image source: Getty Images.
Meta Platforms' most exciting opportunity might be the metaverse. The company's increasing focus on creating this virtual, parallel world is the main reason it decided to change its name last year. The company is already investing billions of dollars into this project and it likely will ramp up its efforts in the coming years, since the metaverse won't fully materialize anytime soon.
One of the company's business units tied to the metaverse is its virtual reality (VR) segment. Meta Platforms' Oculus headset is already one of the more popular ones. But that's just one piece of the puzzle. The tech juggernaut is building the foundational platform for the metaverse, and it sees the potential to monetize digital commerce within it. CEO Mark Zuckerberg hopes to attract 1 billion people inside this virtual world in the next decade.
The metaverse-related opportunities will take time to take shape, but in my view, Wall Street's optimism for the company's overall prospects is justified. According to Yahoo! Finance, Meta Platforms currently has an average price target of $401.59, representing a juicy upside from its current levels of $295.01 as of this writing.
Meta Platforms may not rise that much in the next few months, especially if growth stocks keep sliding. But the company's long-term potential remains intact -- and very attractive. That's why investors can't go wrong with this tech stock.
2. Amazon: Implied upside of 47%
Amazon has dealt with several headwinds amid the pandemic, including labor supply shortages and supply chain issues. As the company invests money to handle these obstacles, it may well impact its bottom line -- and its margins -- in the near term. These headwinds help explain why the company has lagged the market over the past 12 months, although the recent tech sell-off probably didn't help either.
Despite these problems, Wall Street remains bullish -- Amazon has an average price target of $4,108.80. Meanwhile, shares are currently changing hands for $2,792. Investors looking for short-term gains may see Amazon as a risky investment, but it remains one of the most attractive stocks to buy for those focused on the long game. For one, Amazon is still one of the leaders in e-commerce.
The tech giant is the cheapest online retailer, according to a study conducted by Profitero, a company that focuses on e-commerce analytics. Amazon has ranked first on this list for the past five years. But with inflation near 40-year highs in the U.S., Amazon's ability to offer consumers quality goods at relatively low prices, not to mention same-day or next-day delivery options for many items, is perhaps more critical than ever.
Image source: Getty Images.
Amazon's e-commerce business does not have particularly juicy margins, but the company's cloud computing business, Amazon Web Services (AWS), makes up for that. In Q3, AWS saw its sales increase to $16.1 billion, 38.9% higher than the year-ago period. The company's total sales grew by 15.3% to $110.8 billion. In other words, AWS had a positive impact on Amazon's revenue growth rate during the quarter.
The segment also accounted for the lion's share of Amazon's operating and net incomes. Amazon came on top of the list of cloud computing leaders during Q3 2021, with an impressive 32% share of the market. But the company operates within other industries as well. Amazon is one of the leaders in music streaming and video streaming, not to mention its presence in the grocery business via Whole Foods.
Amazon boasts a diversified business and is a leader in two industries that are still growing rapidly: cloud computing and e-commerce. That's why investors should stay the course with this tech giant, even amid challenging market conditions like those we are experiencing right now.
