Tech Sector Faces Tariff Concerns, Analysts Recommend Resilient Stocks
Recently, the technology sector has faced uncertainties due to tariffs imposed by the U.S. government. As global dependence on semiconductor production from Taiwan and hardware manufacturing in China continues, many tech stocks have declined. Despite this, areas of the industry that are less hardware-dependent appear to be less impacted by these tariffs, creating potential investment opportunities for when the current negative sentiment subsides. Three analysts from The Motley Fool have highlighted tech stocks that may help investors navigate these tariff-related concerns.
Meta Platforms Sees Significant Price Drop
Jake Lerch (Meta Platforms): My recommendation is Meta Platforms (NASDAQ: META).
After a strong start to the year, Meta Platforms has seen its stock price drop nearly 30% from its all-time high, reflecting heightened market volatility. Currently, the stock is down approximately 11% year-to-date.
This downturn, however, may be a short-lived hurdle for long-term investors. With the upcoming earnings report scheduled for April 30, there is potential for a setback. Historically, though, Meta has managed to exceed expectations; it has recorded an average quarterly earnings surprise of 12% over the past five years, while its revenue surprise has averaged 2%.
Notably, these surprises are not merely statistical outliers. During the same period, Meta’s revenue has surged from $75 billion to $165 billion, and its net income has increased from $21 billion to $62 billion.
This growth can be attributed to Meta’s asset-light business model, which capitalizes on a vast user base to generate significant profits and free cash flow.
Moreover, considering current economic developments, Meta is relatively insulated from the effects of trade wars. Approximately 97% of its revenue comes from advertising, suggesting that tariffs will have minimal impact on its operations.
For long-term investors, the key takeaway is that Meta remains a robust business with strong fundamentals, making it a stock to consider during this price dip.
The Trade Desk: Long-term Potential Despite Recent Challenges
Justin Pope (The Trade Desk): The stock of The Trade Desk (NASDAQ: TTD) has significantly dropped following disappointing Q4 earnings, marking a rare miss for the company. Nonetheless, this setback is unlikely to be a long-term concern. The company’s advertising technology platform enables clients to purchase ad space, target specific audiences, and analyze campaign performance.
The challenges faced in Q4 were primarily due to customer transitions to a new AI-driven platform. CEO Jeff Green stated that this transition is a temporary challenge. The digital advertising market continues to grow, and The Trade Desk has benefited from providing brands with alternatives to established ecosystems like Meta and Alphabet.
In 2024, brands spent $12 billion using The Trade Desk, a small piece of a $900 billion market, suggesting significant growth potential ahead. The stock has declined 64% from its peak, reaching its lowest valuation since around 2018, with an enterprise value-to-revenue ratio of 9.3.
While tariffs have created unease in the market, they likely do not pose a significant threat to The Trade Desk, which generated 87% of its gross billings in the U.S., a market relatively insulated from trade issues.
Considering current valuation, the stock appears poised for long-term growth. CEO Jeff Green, a notable industry pioneer, outlined the company’s strategies for capitalizing on digital advertising trends in the recent earnings call. Despite Q4 challenges, The Trade Desk’s revenue increased 26% in 2024, demonstrating its resilience.
Finding Opportunities in a Tariff-Impacted Environment
Will Healy (MercadoLibre): Amid growing tariff concerns, investing in a company that heavily depends on Mexico may seem unwise. However, this concern primarily affects Mexican firms tied to the U.S. market. Aside from one fulfillment center that imports U.S. goods into Mexico, this impact does not broadly apply to the company’s operations.
By examining these opportunities, investors can navigate the complexities of the tech sector while remaining aware of tariff implications.
MercadoLibre Reports Significant Growth Amid Regional Challenges
MercadoLibre, Inc. (NASDAQ: MELI), a major player in e-commerce and fintech, has demonstrated impressive resilience. Operating across 18 Latin American countries, the company primarily generates revenue from Brazil, Mexico, and Argentina, leveraging its capabilities in logistics to enhance customer service.
Historically, MercadoLibre has thrived in a competitive environment. Being a first mover in Latin American e-commerce, it has established a substantial foothold that poses challenges for foreign competitors, such as Amazon. To better serve customers, particularly those relying on cash transactions, MercadoLibre developed Mercado Pago, which facilitates online purchases. This service’s success prompted the company to extend its offerings to non-MercadoLibre customers. Additionally, the launch of Mercado Envios has provided vital shipping and fulfillment solutions for online sellers, further broadening its market influence.
Financial Performance Overview
In 2024, MercadoLibre’s combined business units generated $20.8 billion in revenue, marking a 38% increase compared to the previous year. Operating expenses grew by 29%, but the company managed to control other costs effectively. As a result, net income surged to $1.9 billion, reflecting a remarkable 94% rise from 2023.
Despite some concerns regarding tariffs, MercadoLibre’s stock has rebounded over the past year, recovering from a recent market downturn. Currently, the stock remains approximately 10% lower than its previous highs, yet its long-term performance illustrates its stability.
Moreover, while MercadoLibre has traditionally maintained a high price-to-earnings ratio, it has recently seen a significant drop in this earnings multiple. Currently, with a P/E ratio of 56, the company presents an appealing investment opportunity for those wary of tariff-induced disruptions.
Investment Considerations for Meta Platforms
Before investing in Meta Platforms, potential investors should evaluate other opportunities. The Motley Fool Stock Advisor team has highlighted ten stocks that are considered favorable at this time, notably excluding Meta.
For instance, consider Netflix’s inclusion in that selective list on December 17, 2004. An investment of $1,000 at that time would be worth $594,046 today. Similarly, if you had invested $1,000 in Nvidia on April 15, 2005, you would see that value grow to $680,390.
It’s important to note that Stock Advisor has reported an impressive total average return of 872%, outperforming the S&P 500’s 160% return. Investors should remain informed about this evolving financial landscape.
Disclosure: John Mackey, former CEO of Whole Foods Market, is on The Motley Fool’s board. Other board members include executives from Alphabet and Facebook. The Motley Fool owns shares in and recommends MercadoLibre, among others.
The views expressed are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.
