2 Top Tech Stocks to Buy Right Now – The Motley Fool

It may feel strange to buy stocks when everyone else is selling. However, bear markets are actually a great time to pick up fantastic stocks at low prices. The whole “buy low, sell high” mantra works much better when you can find an affordable starting point, after all.

The trick is to find top-quality companies whose stocks have been dragged down by a negative market trend, and not by any game-changing flaw in the actual business. On that note, here are two proven winners in the tech sector whose stocks have seen savage price cuts for all the wrong reasons. Read on to see whether they are a good fit for your portfolio.

Not the Netflix you’re used to

Media streaming veteran Netflix (NFLX -1.78%) has seen a respectable recovery in recent months, powered by July’s optimistic second-quarter report. The stock is up 37% over the last three months, including an 8% climb over the last 30 days.

This stock is still dramatically undervalued, though. Netflix shares are down 60% in 12 months, and shares are changing hands at the modest valuation of 22 times earnings. Share prices have gone nowhere in three years, while top-line sales increased by 64% and earnings nearly quadrupled:

Chart showing Netflix's price dropping, and EPS and revenue rising, since 2020.

NFLX data by YCharts

Netflix bears have zoomed in on the company’s waning subscriber growth, which even turned negative in the last two reports — on a quarter-by-quarter basis. The 220.7 million global subscribers seen in the most recent report was still a 5.5% year-over-year increase.

The larger point is that Netflix isn’t all about subscriber numbers anymore. The business model is shifting before our eyes, as management is now willing to trade in some subscriber growth in exchange for more robust revenues per member. For example, the push to extract subscription fees from people tapping into a friend’s or family member’s Netflix account could lift annual revenues by as much as $1.6 billion without adding anything to the reported subscriber counts, according to analyst firm Cowen. 15 million monthly fees will be rolled into the existing subscriber list, once Netflix decides what the free-sharing countermeasures will look like.

So Netflix’s financial model is moving away from maximum-velocity growth, in favor of richer profit margins and cash flows. Wall Street should embrace this profit-friendly trajectory, but the stock is trading at a massive discount anyway. In short, I see Netflix as the biggest no-brainer buy on the market today.

Universal Display is just waiting for a starting shot

Display technology developer Universal Display (OLED -2.11%) is also in the doldrums this year. The stock is down 44% over the last 52 weeks, sporting a price-to-earnings ratio of 25. Keep in mind that Universal Display’s sales have increased by a compound average of 23% in the last five years, while earnings surged even faster — in a period of soft demand for smartphones and high-end TV sets.

This stock has hunkered down at the starting line of a sprint that will take place whenever the economy allows those key markets to shine again. Universal Display’s organic light-emitting diode (OLED) patents and materials are crucial components in modern display screens.

OLED displays boast perfect blacks, generate their own light for accurate colors and impressive contrast, and draw less electric power than traditional LCD screens. And the unique properties of OLED technologies allow device makers to design transparent or bendable screens, resulting in popular top-shelf devices like the Samsung Galaxy Z Fold4 and Fold4 product lines.

This technology isn’t going away. Instead, OLED screens are working their way down from the top-end smartphones of yesteryear to mid-range devices today. The same transition is happening in the television market as well, but with far larger screen sizes this time around. That’s important to Universal Display and its shareholders, because the company collects patent royalties and material sales based on the total area of OLED screens its manufacturing partners are cranking out.

That volume will only increase for many years to come, and Universal Display’s screen-building clients are investing billions of dollars to expand their OLED-making facilities. Astute investors should pick up Universal Display shares whenever they’re available at a discount, and that’s exactly what you get right now.

Anders Bylund has positions in Netflix and Universal Display. The Motley Fool has positions in and recommends Netflix. The Motley Fool recommends Universal Display. The Motley Fool has a disclosure policy.