What is a bulletproof stock? Well, in my book, it's a stock with excellent fundamentals that is worth owning for the long term -- meaning five years or longer.
Thankfully, the tech stock is chock-full of stocks that meet these criteria. Here are two of the best.
Let's start with Spotify Technology (NYSE: SPOT).
Up nearly 500% since the start of 2023, there's no doubt that Spotify has already made a few fortunes. Yet, I think the stock has plenty of room to grow further.
First, Spotify operates the top music streaming platform in the world. As of its most recent quarter (the three months ending on Sept. 30), Spotify reported over 640 million monthly active users (MAUs). That's up 11% year over year.
Not only is Spotify's overall user base enormous (it represents roughly 8% of the world's population), it's also growing more profitable. That's because Spotify's subscriber base has grown to 252 million, up 12% from a year ago. What's more, this group is growing more quickly than overall users, and it boasts a higher profit margin compared to ad-supported users.
Indeed, Spotify's premium users generated 88% of the company's revenue, while its ad-supported users contributed only 12%. Taking a step back, Spotify is capitalizing on the overall strength of the streaming market, as its overall revenue grew 19% year over year, and operating margin surged to an all-time record of 11.4%.
In short, this is a company that is executing at a high level and shows no signs of slowing down. Investors should take notice.
Next, there's Meta Platforms (NASDAQ: META).
There's one big reason why I believe Meta is a bulletproof stock that will make investors very wealthy in the years to come: It's a huge cash cow.
The company is one of the dominant forces in digital advertising -- an enormous market. Statista estimates the size of the digital ad market is already $740 billion. What's more, it estimates the market will grow to $965 billion by 2028.
Meta, which has over 3.3 billion daily active users (DAUs), leverages its enormous scale to generate about $150 billion in ad revenue annually. Then, thanks to the company's wide profit margin, a significant portion of that revenue is converted into profits and free cash flow.
Case in point: Meta has reported over $55 billion in net income over the last 12 months and more than $52 billion in free cash flow. Those figures increased by 201% and 146%, respectively, over the last five years.
That's extremely important because stock prices tend to track changes in profits and free cash flow. As you can see, this is clearly demonstrated when observing Meta and its stock price over the last five years.
In addition, consensus analysts estimates compiled by Yahoo! Finance indicate that Wall Street expects Meta's finances to grow even larger. For next year, the average estimate is for Meta's revenue to grow 15% to $187 billion.
It's clear that Meta is a financial powerhouse. With its enormous profits and free cash flow, the company can return value to shareholders in many different ways, including via dividends and share buybacks. Investors looking for a bulletproof tech stock should take note: Meta is a stock to consider now.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jake Lerch has positions in Spotify Technology. The Motley Fool has positions in and recommends Meta Platforms and Spotify Technology. The Motley Fool has a disclosure policy.