The recent market correction is raising anxiety for some investors, but the stock market historically rises for longer stretches than it falls. These dips are an opportunity to boost your returns by getting more value for your shares relative to the company's revenue and earnings. Here are two stocks of growing companies to buy on the dip right now and hold for long-term gains.
1. Meta Platforms
Shares of Meta Platforms (META +4.30%) delivered excellent returns over the last 10 years, rising more than 585%. The company fueled those returns with annualized revenue growth of 29%, and it's still growing at high rates that could support more market-beating gains in the coming years.
Meta has more than 3.3 billion daily active users across Instagram, Facebook, Threads, and WhatsApp. This massive base is an advertising magnet. Meta has half the planet using one of its apps every day, and that's why it continues to grow, with revenue up 22% to reach $164 billion last year.
NASDAQ: META
Key Data Points
Meta's lucrative advertising revenue is fueling strong growth in earnings. In Q4, Meta spent $19 billion on expenses to support its family of apps, but it still generated nearly $21 billion in net income. For the year, earnings per share grew 60% over 2023.
One of the areas it is investing is artificial intelligence (AI), where the Meta AI assistant is projected to reach more than 1 billion users this year. Investing in personalization is a key part of management's strategy to increase engagement and drive more advertising growth. AI could also pave the way for future opportunities in premium services, which doesn't seem to be reflected in the stock's current valuation.
Concerns over the economy and advertising market has sent the stock down 22% from its recent highs. However, the last time Meta stock fell over concerns about a slowing ad market proved to be a great buying opportunity. Meta's share price rocketed 375% since bottoming out in 2022 as the ad market recovered.
The digital ad market is a major long-term tailwind for Meta's business. The company's massive audience is a valuable asset that should keep revenue growing as advertisers invest in the platform. The stock trades at just 22 times this year's earnings estimate, which is attractive considering long-term earnings growth estimates of 17% based on the Wall Street consensus.
2. Reddit
With Reddit (RDDT +2.80%), investors can buy an interest in one of the fastest-growing communities online. Following its initial public offering in 2024, the stock soared to more than $200 before falling 53% from its highs this year. Reddit's revenue grew 62% last year, making it a potentially rewarding growth stock to hold for the long term.
NYSE: RDDT
Key Data Points
Reddit is tapping into the same opportunity as Meta Platforms. Social media ad spending is projected to reach $276 billion in 2025, according to Statista. It's an enormous opportunity for a company with just $1.3 billion in trailing revenue. With 379 million people visiting Reddit every week to get information across a wide range of topics, Reddit is well positioned to soak up more ad spending that is flowing to the most used platforms.
One advantage for Reddit is its focus on communities, or subreddits. These attract users looking to connect with others across shared interests. It creates a sticky platform for people, and advertisers love it, as it pulls in more users. Reddit said logged-in users grew 27% year over year in the fourth quarter, which helped increase its average revenue per unique user by 23% year over year.
Reddit is also just getting started on its international growth opportunity. It recently started using AI to make content more accessible to people that speak different languages, which could be huge for growing the appeal of the platform.
The stock is trading at a more reasonable valuation after falling from its recent highs. A price-to-sales multiple of 12 is still somewhat expensive, but Reddit should grow into that valuation, based on the billions of ad spending up for grabs.
