It can be mentally and emotionally taxing to invest while stocks are falling. During a downturn, many investors simply decide to pack it up and stop investing. However, investing during a correction -- when stocks have been beaten down immensely and are now trading at discounts -- can be the time you find your best long-term investments.
The Nasdaq Composite index has dropped 18% year-to-date, while these three tech stocks have plummeted between 10% and 64% over the same period. At these prices, here's why you should consider buying MercadoLibre (MELI 2.67%), Roku (ROKU +2.32%), and Veeva Systems (VEEV +0.10%) while they are at a discount.
1. MercadoLibre
MercadoLibre has often been called the Amazon (AMZN +0.30%) of Latin America, but MercadoLibre has seen tremendous success in one category that Amazon hasn't: fintech.
NASDAQ: MELI
Key Data Points
Yes, MercadoLibre has a thriving e-commerce platform in Latin America that sold 275 million items in Q2, but what's really exciting is its digital payments platform. Mercado Pago processed over $30 billion in total payment volume in Q2, representing an 84% year-over-year increase. With over 38 million active users, Pago is becoming one of the top dogs in the fintech space in Latin America.
This hypergrowth segment, along with the company's steady e-commerce success, helped total revenue soar 56% year-over-year in Q2 to $2.6 billion, which is stellar for a company at this scale. However, there's even more room to flourish for MercadoLibre. The company has 84 million active users across its entire ecosystem, but Latin America has over 650 million citizens.
With this much potential to expand its user count and drive higher engagement, MercadoLibre could be a big winner over the long haul. At just 5.9 times sales, you can get MercadoLibre at a historically low valuation as well. With its dominance in a lucrative, untapped market, you won't want to miss out on this bargain growth stock while shares are down.
2. Roku
Roku is also trading at a historically low valuation. The streaming platform trades at just 3.7 times sales -- its lowest price since 2017. However, that's because the company is facing some rough short-term headwinds.
Roku makes a sizable chunk of its revenue from advertising on its streaming platform. However, Roku has been left in a tough spot as a recession looks more likely and businesses have started to cut back on ad spending. In Q2, the company saw revenue rise just 18% year-over-year to $764 million, and for Q3 2022 management expects only a 3% jump compared to the year-ago period.
NASDAQ: ROKU
Key Data Points
The short term could be rocky for Roku, but if it can make it out of this tough economic environment, the company could see smoother sailing over the long haul. Management noted that, as the economy recovers, advertisers will start to bring back spending on platforms where the return on investment is highest.
Considering Roku is the leading streaming platform in North America with over 63 million active accounts and almost 21 billion hours streamed in Q2, it could prove to be the best value for these advertisers for TV advertising. Therefore, Roku could see a sharp bounce back.
If Roku can maintain its leadership and keep engagement high during this economic environment, this top dog could see a healthy recovery, making shares a bargain right now.
3. Veeva Systems
While it can certainly be lucrative to make riskier investments like Roku, you should also balance it out with more stable investments like Veeva Systems.
NYSE: VEEV
Key Data Points
Veeva is the market-leading cloud provider for life sciences companies, helping pharmaceutical businesses with everything from drug testing to marketing. Its services are critical to its customers: Once you shift to a digital cloud platform like Veeva, it would be hard to move back to manual processes to manage data and information, especially when regulatory compliance is involved.
As a result, Veeva generated over $505 million in revenue in its first fiscal quarter (which ended April 30, 2022). This represented an increase of just 16% versus the year-ago period -- but what Veeva lacks in growth, it makes up for with profitability. On a trailing-12-month basis, the company sports a 21% net income margin and a 40% free cash flow margin.
Since Veeva's products are mission-critical and it's unlikely to see demand soften during an economic downturn, this company could thrive over the short term. Additionally, Veeva has lots of money to invest in its market leadership to capitalize on the $13 billion opportunity ahead of it, making the long haul look appealing too. Veeva looks like a smart stock to buy during this tech stock correction with this impressive combination of stability and potential.
