Quality tech stocks trading at reasonable valuations aren't easy to find lately. The sector has plenty of highly successful stocks, but many of them range from expensive to really expensive when comparing valuations.
Two notable exceptions are Meta Platforms (NASDAQ: META) and PayPal (NASDAQ: PYPL). The former is close to the S&P 500 average when measuring its forward price-to-earnings ratio. The latter is quite a bit cheaper than the average.
Here's why each of these tech stocks can make for a good long-term investment right now.
Image source: PayPal.
1. Meta Platforms
The best tech companies are adaptive and forward-thinking -- attributes that Meta Platforms has in spades. Since starting out in social media, it has expanded into virtual reality (VR) and augmented reality (AR), the metaverse, and artificial intelligence (AI) technology.
Not every swing has been a home run, at least so far. Meta Platforms' Reality Labs, which focuses on VR, AR, and the metaverse, has reported losses exceeding $60 billion over the past five years related to its development efforts. It's still too early to write this division off -- Ray-Ban Meta glasses surpassed 1 million in sales last year and now have AI features -- but the results to this point haven't been great.
Speaking of AI, that's looking much more promising for Meta. It's using AI-powered content recommendations to increase user engagement on its social platforms, and AI-enabled ad tools are helping advertisers get a better return on their spending, which is encouraging additional spending. In Meta's first-quarter results, it reported a 5% year-over-year increase in ad impressions and a 10% increase in the average price per ad. In addition, total revenue for the quarter increased by 16% and adjusted earnings per share jumped by 37%, both beating expectations.
The main cause for concern with Meta Platforms is an overreliance on advertising, as it makes up about 98% of the company's total revenue. In an economic downturn in which companies slash their marketing budgets, Meta Platforms could struggle. And a downturn might be on the way -- J.P. Morgan analysts recently put the odds of a recession in the next year at 60%.
But Meta is a profitable company with $70.2 billion in cash, cash equivalents, and marketable securities as of March 31. It's financially strong enough to ride out a downturn. During the last three years, Meta's stock price has grown 238%, nearly five times as much as the S&P 500. Although it likely won't keep up that pace of growth over the next decade, its AI investments and massive user base should help it continue to outperform the market.
2. PayPal
PayPal stock hasn't performed nearly as well as Meta recently. It's down 4.3% over the last three years, and the company faces increasing competition from other digital payment options, including Apple Pay, Alphabet's Google Pay, and Zelle.
However, PayPal is also under new leadership, with CEO Alex Chriss taking over in September 2023. Before that, Chriss managed the Small Business and Self-Employed Group at Intuit. He helped drive strong growth in customers and revenue there, and he's getting praise for his performance with PayPal. He has overhauled the leadership team and established new e-commerce partnerships, including an online checkout deal with Amazon.
Those aren't the only recent changes at PayPal. Earlier this year, PayPal announced a full-service merchant platform, PayPal Open, that unifies all its offerings under a single platform. It's also entering the digital advertising space with PayPal Ads.
Considering PayPal has 400 million users and Venmo has more than 92 million, advertising is a massive untapped revenue opportunity. PayPal also still has a reliable core business, with over $1.5 trillion in annual payment volume. And it has been building positive momentum. The first quarter of 2025 was the fifth in a row of profitable growth, with operating income increasing by 31%.
PayPal has a good balance sheet, including $15.8 billion in cash, cash equivalents, and investments as of March 31 compared to $12.6 billion in debt. At the current price, and with ads on the horizon, this is a deep value stock that could pay off handsomely for long-term investors.
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JPMorgan Chase is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Intuit, JPMorgan Chase, Meta Platforms, and PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short June 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.
