Investors have fallen out of love with technology stocks lately, and it's abundantly clear why. Record-high inflation is impacting the global economy, and as a result, the Fed has opted to raise interest rates. Additionally, adverse effects from the war between Russia and Ukraine serve as another element currently weighing down the stock market.
Since the start of 2022, the S&P 500 and Nasdaq Composite have dropped 14% and 23%, respectively. As macro headwinds continue to govern share price movements, many investors have lost sight of fundamentals. Long-term investors can exploit the ongoing sell-off by purchasing shares of great businesses at attractively low valuations.
On that note, here are two tech stocks that investors should pounce on right now while they're down.
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1. Spotify Technology
The first tech stock on my list is Spotify Technology (SPOT -4.62%). The global leader in music streaming has witnessed its share price collapse 54% year to date, and in my opinion, has now entered the buy zone. The company's CEO and co-founder seems to agree with me -- Daniel Ek purchased $50 million of shares in early May, sending a signal to investors that he's confident in the company's future prospects.
Spotify continued to make headway in its opening quarter of 2022 as well. Total sales increased 23.9% year over year to 2.66 billion euros, finishing in-line with Wall Street estimates, and diluted earnings per share ended at 0.21 euro, despite consensus forecasts calling for a loss. Gross margin came in ahead of guidance at 25.2% but down slightly year over year. Both total monthly active users (MAUs) and premium subscribers grew a healthy 18.5% and 15.2%, respectively, to 422 million and 182 million. The music technology company battled hard to kick off 2022 on the right note, outperforming on almost all its key metrics, even after halting business in Russia.
Fortunately for Spotify, which boasts a 31% market share, the global music streaming market is projected to generate $103 billion in annual revenue by 2030. This means the company has only captured 11% of its revenue potential up to this point. Combine that with its price-to-sales multiple of just 1.8 -- more than two times lower than a year ago -- and I feel comfortable chalking Spotify up as a great investment opportunity today.
2. Netflix
Video-streaming giant Netflix (NFLX -9.09%) has been all over the news but for all the wrong reasons. As competition heats up and growth unwinds, investors have quickly fallen out of love with the once highly sought-after streaming stock. Year to date, its shares have plunged 67%.
Sure, the company's start to 2022 was far from ideal. Its $7.9 billion in total revenue and $3.53 earnings per share were fine. In fact, its earnings beat Wall Street estimates by a convincing 21%. The problem stemmed from its paid subscribers as the platform lost 200,000 of them during the quarter, and management and is projecting another two million losses in the second quarter.
This year, analysts believe Netflix's total revenue will grow 9% to $32.4 billion, and earnings will retreat 3% to $10.90 per share. There's no doubt Netflix's growth trajectory isn't what it once was, but there is still a lot to like about the company.
The FAANG stock still controls 45.2% of the U.S. market. And the global streaming industry is projected to grow at a 20% annual rate through 2029, climbing to $1.7 trillion. A lot can happen between now and then, but Netflix surely looks well-positioned to benefit from the industry's expansion. The stock is trading at just 18 times earnings right now, offering investors a strong margin of safety. We'll have to wait and see, but I'd put money on Netflix rebounding nicely in the long run.
