2 Stocks to Buy in a Tech Market Sell-Off

Equities have not performed well since Donald Trump took office as the 47th U.S. president. As of March 10, the S&P 500 was down 8.6% since Feb. 19, while the tech-heavy Nasdaq Composite was down 13.4% since Dec. 16 highs. Between trade wars, tariffs, and other potential macroeconomic headwinds, investors, especially those in the tech sector, fear that a major sell-off is on its way.

Market downturns are rarely fun, but they always create opportunities to scoop up shares of excellent companies on the dip. Let's consider two tech stocks that will become even more attractive if there is a full-blown market sell-off: Netflix (NASDAQ: NFLX) and Meta Platforms (NASDAQ: META).

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1. Netflix

Netflix is on fire. The streaming giant has crushed the market in the past couple of years after several business changes paid off massively.

The company's fourth-quarter results provided even more evidence of the strength of its business. Netflix's revenue grew by a healthy 16% year over year to $10.2 billion, while its earnings per share more than doubled to $4.27. Despite Netflix's strong performance, the company would likely fall along with the rest of the market in a downturn -- these things spare few corporations.

It's also worth pointing out that Netflix's shares look somewhat expensive based on traditional valuation metrics. The streaming giant's forward price-to-earnings (P/E) ratio tops 34.8. The average for the communication services industry to which it belongs is 19.4.

Netflix is arguably worth the premium, considering how well it is doing. Still, in a market crash, its much-higher-than-average forward P/E may count against it. However, considering Netflix's prospects, picking up its shares in a downturn would be great.

Consider that the company's ecosystem continues to deepen. Netflix ended 2024 with 301.63 million paid subscriptions, an increase of 16% compared to the year-ago period. That strengthens the company's network effect since the more people are on its platform, the more data it can use to analyze consumers' preferences and adjust its content production strategy accordingly. That means even more engagement, more subscriptions, and higher revenue from ads (now that Netflix has a low-price subscription option).

Streaming is far from having peaked. It accounted for just 42.6% of television viewing time in the U.S. in January. Netflix estimates a total revenue opportunity of $650 billion, and it has barely scratched the surface of that total.

While competition in streaming has increased, Netflix has remained the leader and is well positioned to capture a significant percentage of this opportunity. So, Netflix is a great long-term option, and its shares would be even more attractive in a market crash.

2. Meta Platforms

Meta Platforms has also been performing well. The company's ad business is booming, partly thanks to its introduction of artificial intelligence (AI)-powered initiatives across its business. For instance, Meta Platforms' Reels -- short-form videos on Facebook and Instagram -- have been a major growth driver in recent quarters thanks to an AI-based recommendation algorithm.

In the fourth quarter, Meta Platforms' revenue increased by 21% year over year to $48.4 billion. The company's EPS was up by 50% compared to the prior-year quarter to $8.02. Meta Platforms now boasts 3.35 billion daily active users, which increased by 5% year over year.

Few companies have a base of customers this large, and importantly, Meta is still finding ways to deepen engagement. Meta Platforms launched Meta AI, a free (for now) generative AI platform. It also started Threads, an X (formerly Twitter) competitor. Meta AI has 500 monthly active users, while Threads has 275 million.

Meta Platforms' deep ecosystem presents it significant long-term monetization opportunities, especially since it benefits from the network effect. The company is already ramping up some of these, including paid messaging on WhatsApp. The tech leader will likely find ways to turn its generative AI efforts into revenue sources in the future.

Of course, Meta's core advertising business should remain strong -- businesses can't pass up an opportunity to put their products in front of billions of potential customers. So, Meta Platforms' prospects look attractive, and the company's forward P/E of 23.5 looks fair for a company performing as well as it is in the communication services industry.

Meta's shares could turn into a bargain in a market downturn. If tech stocks continue to drop and take Meta Platforms with them, investors should consider purchasing the company's shares.

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*Stock Advisor returns as of March 10, 2025

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. Prosper Junior Bakiny has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms and Netflix. The Motley Fool has a disclosure policy.