Fortunately for those with money they want to invest, the stock market sell-off has created opportunities to buy at lower prices. Specifically, if you have $2,000 that you do not anticipate you will need for necessities for several years, Meta Platforms (META 0.14%) and Netflix (NFLX 2.60%) are two cheap stocks you can buy now.
Each has fallen out of favor with market participants, and their stocks have been punished. Meta Platforms and Netflix are trading at prices that are the cheapest in several years.
Meta Platforms stock is cheaper than ever
Meta Platforms has grown to a massive scale. The company formerly known as Facebook boasts 3.6 billion monthly active users across its family of apps, including Facebook, Instagram, WhatsApp, and Messenger. That was 9% higher than at the same time the prior year. So despite its size, it is still expanding.
Meanwhile, its stock has arguably never been cheaper. At a price-to-free-cash-flow ratio of 13.6 and a price-to-earnings ratio of 14.5, Meta Platforms is a bargain right now. Certainly, it's facing multiple headwinds, including Apple's privacy changes, supply-chain disruptions constraining advertiser demand, and competition from Tiktok. However, Meta has experience effectively grappling with challenges.
From 2016 to 2021, it has grown revenue from $28 billion to $118 billion. Note that selling advertisements is a lucrative business, and Meta has expanded its operating income from $12 billion to $47 billion in that time. Investors with cash on the sidelines can take this opportunity and buy Meta Platforms.
Investors are overreacting to Netflix's subscriber slowdown
The streaming pioneer thrived at the pandemic's onset. Folks cooped up at home passed the time by binging on streaming content. The tailwind is reversing now that economies are reopening and folks are looking to spend more time away from home. Netflix shed 200,000 subscribers in its most recent quarter, which ended on March 31. Management has forecast a loss of two million more in the second quarter.
The slowdown has caused the market to shun Netflix, and the stock is down 75% off its high. That's an opportunity for long-term shareholders to scoop up its shares at a discount. The sell-off has Netflix trading at a price-to-earnings ratio of 15.8 -- the cheapest it's been in the last five years. Meanwhile, the loss of two million subscribers will not be devastating to Netflix.
As of March 31, it boasted 222 million, which generated $7.9 billion in revenue. That's an annual run rate of $31.6 billion. Like Meta, Netflix has expanded revenue and operating income at a healthy pace over the years. More specifically, revenue increased from $8.8 billion in 2016 to $29 billion in 2021. In that same time, operating income jumped from $380 million to $6.2 billion. Losing roughly 1% of its subscribers is not likely to threaten that growth. Certainly not enough to justify the 75% sell-off in the stock.
Nevertheless, the overreaction has created an opportunity to buy Netflix at a bargain price.