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3 social media stocks to buy amid Fed rate hike jitters

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Wall Street is going through a crisis of sentiment much like a child learning to ride a bicycle. Investors know the economy is healthy, but they can’t trust themselves without help from the Federal Reserve. As a result, the indices underwent a correction in anticipation of a change in monetary policy. Today we muster up the courage to share three social media stocks to buy on this dip.

The assumption is that this too will pass and the bulls will remain in charge overall. The rally out of the pandemic has been extremely fierce, so it’s normal to stall a bit. Healthy bull markets need weak periods to gain momentum and continue rising. Otherwise, they would build a house of cards that would crumble in no time. The fact is, the economy is so healthy that the Fed feels the need to cool it down. Keep in mind that we still have QE running until March.

Following the Fed’s event, stocks tumbled yesterday after being green all day. The official statement was restrained, but Mr Powell spooked investors during his Q&A session. He went off script and unofficially pre-announced the hike for March. He did the same with the soft start announcement last year. It’s kind of annoying, to tell you the truth, because it causes short-term heartache without a cause.

Nevertheless, the fact remains that we have a healthy economy and that it no longer needs help. The Fed can drop the saddle of the bike and the stock shouldn’t crash. Stocks may wobble a bit, but the dashboards will eventually speak for themselves. Concrete example You’re here (NASDAQ:TSLA) reports a 65% increase in sales over last year and 217% in revenue. The knee-jerk reaction to this was to sell the stock for $880 after hours.

We now know that the Fed will end tapering and will most likely raise rates in March. This should not materially change corporate profit and loss statements for years. Therefore, investors should expect to find stocks to buy on weakness. The best are the companies that now have strong, tangible finances. Ideally, they would also have fallen into earlier support areas.

Our three picks for today do the trick perfectly. I cannot guarantee that they will not fall further if the indices continue to correct. However left alone, taking bullish positions seems quite reasonable. Since we have extrinsic factors, investors should be patient in taking only partial positions to begin with. This is not the time to increase the current risk, but it is normal to start new positions.

The idea is to leave enough room to add later if lower prices become available. Succeeding on Wall Street takes patience and planning. When we are unsure of macroeconomic conditions, we must allow room for error. No one should have absolute certainty in their thesis, no matter how infallible. These are unique conditions, so there are no experts on the eventual results.

The three:

Stocks to buy: Snapchat (SNAP)

Source: Charts from TradingView

In October 2020, SNAP stock soared 50% unexpectedly. Yesterday, he made the round trip to square one. When this happens, the stock usually finds lurking buyers to buy it again. Investors like to rinse and repeat winning trades. This 2020 rally generated 195% upside, so there is ample opportunity to attract them. While I don’t expect another 200% rally, it’s reasonable to expect a 40% rebound effort. Withdrawing $45 per share will be difficult and may take some time to pass.

Basically, Snapchat has made improvements. They have more than doubled their sales since 2019. Although they are still losing money, the stock is not outrageously expensive with a sale price of 13. Moreover, they are now showing a 40% improvement in their net profit compared to that year. This is proof that management is moving in the right direction. SNAP stock is expected to follow the markets higher.

The current precarious situation on Wall Street is causing problems for investors in general. But the smaller caps are suffering more severely for some reason. As a result, the easy moss has already fallen from it. From there, it will take a lot more work for the bears to punish him much further. Although it’s not a sharp line bottom, it’s probably close to one. By using options, investors can write put options at equities much lower, leaving a lot of room for error. This reduces the need to be surgical with the entry in case there is more short-term volatility.

Twitter (TWTR)

Source: Charts from TradingView

Our second choice today is a bit politically controversial. Precisely because they threw themselves into it permanently ban Donald Trump. This undoubtedly gave life to Digital World Acquisition Company (NASDAQ:DWAC). DWAC seeks to take on Twitter by offering an alternative platform. While I think there’s plenty of room for them all to exist, that’s another topic for discussion.

Basically, the bulls have reason to like this stock. Nevertheless, TWTR is my least favorite of the three today. It seems to be the farthest from adapting to the coming metaverse trend. Credit goes to management for improving its financial statements. And it has a much cheaper selling price than SNAP. However, more often than not, investors get what they pay for. The important thing is that income grows at a respectable rate.

TWTR stock is also falling into a potential support zone. While there is no hard line to draw, there should be buyers lurking at $28 per share. Twitter falls within reach of the start of the pandemic. At the time, the whole world had stopped working, so conditions were literally as bad as they could have been. It’s the complete opposite of what we have now, so I expect a rebound from that base. It makes no sense that he continues to fall into conditions that were horrific at the time.

Stocks to buy: Facebook (FB)

Source: Charts from TradingView

I will end today’s note with the king of social media platforms. Facebook is still under the microscope and undergoing intense scrutiny in the media. It is an inevitable fate that he must endure due to his success. All gigantic companies have to go through this process, much like Microsoft (NASDAQ:MSFT) and walmart (NYSE:WMT) did decades ago. Facebook deals with so many people that it is inevitable that they will upset a few.

Luckily, this is a global company and local public opinion doesn’t matter as much. As long as the results continue to be so good, the rhetoric will not cause the title to crumble. The success of the Facebook action has been saved in its finances. Revenues are now 10 times greater than in 2014. Additionally, gross profits are double sales that year. Facebook’s net income for the past 12 months more than doubled from two years ago. These are impressive growth rates that investors need to recognize.

Whichever way you slice it, there’s nothing obvious wrong with its financial metrics. Meanwhile, Facebook stock is 25% off its all-time highs. Although the rally out of the pandemic was 175%, so it’s okay to give back a little. Additionally, the stock falls into a pivotal zone near $280 where it is likely to find buyers. This has been in contention since the summer of 2020 and the basis for last year’s rally.

If the indices continue to fall, Facebook stock may also suffer. However, falling from here will take a lot more effort than falling here. The rise in stock prices over the past two years is still impressive. Even after this correction, it is still 140% above its Christmas 2018 correction. Throughout, the valuation has remained reasonable due to the growth rate they have been able to sustain. The company still has a modest 21 P/E and its stock is only seven times the turnover. I can confidently say that if the indices are higher in the future, so will Facebook.

At the date of publication, Nicolas Chahine did not hold (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Nicolas Chahine is the Managing Director of SellSpreads.com.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.