As tech stocks continue their upward trajectory, finding worthwhile investments at reasonable valuations is becoming increasingly challenging. The Nasdaq Composite Index, a bellwether for the technology sector, has surged 10% so far in 2024, building on last year’s impressive gains. However, for investors willing to embrace a long-term outlook, two tech giants – Garmin and Meta Platforms – stand out as compelling opportunities.
Garmin: The Underrated Wearables Powerhouse
While Apple dominates the headlines in the wearables market, Garmin has quietly carved out a lucrative niche, offering a diverse range of fitness trackers, GPS-enabled smartwatches, and other innovative devices. In the latest quarterly report, Garmin’s revenue grew an impressive 13%, outpacing Apple’s modest 2% uptick.
“We are entering 2024 with strong momentum,” proclaimed Cliff Pemble, Garmin’s Chief Executive Officer, underscoring the company’s robust performance. Garmin’s fitness watches and smartwatches have resonated with consumers, driving substantial growth in a highly competitive market.
Although Garmin’s business model is more heavily skewed toward hardware sales, which typically generate lower profit margins than software services, the company’s financial performance remains robust. Last year, Garmin generated a staggering $1.2 billion in free cash flow, representing a remarkable 25% of its total sales.
What sets Garmin apart is its attractive valuation. Despite the stock’s recent rally, Garmin trades at a reasonable 5.5 times its sales, a discount compared to Apple’s premium valuation of 6.9 times its revenue. For investors seeking exposure to the wearables market without paying a premium, Garmin presents an enticing opportunity.
Meta Platforms: The Social Media Juggernaut
Meta Platforms, the tech behemoth behind social media giants Facebook and Instagram, has firmly established itself as a force to be reckoned with in the digital advertising landscape. As the company prepares to report its first-quarter earnings on April 24, investors would be wise to consider adding this stock to their portfolios.
Despite facing headwinds and controversies in recent years, Meta’s core engagement metrics remain solid. The company reported a staggering 3.2 billion daily active users across its suite of apps in late 2023, with a remarkable 80% of its monthly users logging in daily.
Furthermore, Meta has made significant strides in monetizing its user base more effectively. In the last quarter, the company’s average revenue per user surpassed the $10 mark, a testament to the higher volume of advertisements Meta is serving on its platforms.
Investors will be closely monitoring Meta’s ability to increase average advertising rates during the upcoming earnings report, as this could unlock even faster earnings growth. However, the company’s momentum is already impressive, with operating income soaring 62% last year to reach an astounding $46 billion, representing 35% of its total sales.
While the next year may not match the same level of growth due to Meta’s strategic investments in areas such as data centers, artificial intelligence capabilities, and virtual reality hardware, CEO Mark Zuckerberg and his team are positioning the company for long-term success. By focusing on these emerging technologies, Meta is poised to reap substantial returns over the next decade or more.
Navigating Market Volatility with a Long-Term Mindset
As with any investment, both Garmin and Meta Platforms are likely to experience periods of volatility, particularly surrounding major events like earnings reports. However, for investors willing to embrace a long-term outlook, these two tech titans present compelling opportunities.
Garmin’s dominance in the wearables market and its attractive valuation make it an appealing choice for those seeking exposure to the rapidly growing fitness and health-tracking industries. Meanwhile, Meta Platforms’ unrivaled social media presence, coupled with its ambitious plans for the future, position the company as a potential powerhouse in the years to come.
By adopting a long-term investment strategy, investors can weather short-term market fluctuations and capitalize on the enduring strengths of these tech giants. As the technology sector continues to evolve and reshape various industries, Garmin and Meta Platforms stand poised to deliver significant returns for patient, forward-thinking investors.
