Out with the old, in with the new. A saying we’ve all heard. And this is happening now in the stock market in a way that creates some great opportunities.
“Old tech” stocks are struggling. Just look at it Meta (META). The parent company of Facebook, Instagram, Messenger, and WhatsApp reported quarterly numbers last night. And they are an absolute mess. In response, Meta stock is now down about 20% to its lowest level since 2015. The stock is now down nearly 70% this year alone!
Meanwhile, a “new tech” is the name of Service Today (NOW) is increasing. The enterprise software provider reported excellent quarterly numbers last night. They prove that this company grows itself through the broader macroeconomic noise. Now that stock is up more than 200% in the last five years!
The trend is clear as day. Old tech stocks are struggling. New tech stocks are on the rise.
So, while the smart money is looking to buy the dip in tech stocks today, the best investors are just looking to buy the dip in new tech stocks. They will start to rise soon, while old tech stocks will likely continue to struggle.
Here’s a deeper look.
Meta is past its Prime
If last night’s numbers confirmed anything, it was that The Meta is past its prime. And the descent is going beautifully fast.
The company’s user base on Facebook, Instagram, Messenger, and WhatsApp stands at 2 billion daily active users and 3 billion monthly active users. Over the past 10 years, you can count on those user bases to grow 5% to 10% per year. No longer. Everyone who wants to have a Facebook account already has one. And some users are even leaving those platforms for up-and-comers like TikTok, Snap (SNAP), BeReal, and more.
Meanwhile, average-revenue-per-user rates are actually declining, partly because engagement is declining. Plus, the places users still spend most of their time are quick video formats like Reels. Meta has yet to find the perfect ad mechanism for this format. Sure, it would know that. There are advertising geniuses at Meta. But even so, a drop in overall engagement will put a cap on ARPU. That’s bearish.
And then there’s the company’s entire metaverse “shtick.” This past quarter, Mark Zuckerberg and company poured $3.7 billion into the development of Reality Labs – the company’s VR division. That division did less than $300 million in revenues. That’s a huge financial investment in a project that simply isn’t showing much traction in the real world. This weighed on operating profit margins, which reached 20% in the quarter. (And it used to be a 45%-plus-operating-margin firm.)
But what else is Zuckerberg supposed to do? He saw the writing on the wall. His social apps are past their prime. User bases have increased, and soon, ad revenues will also increase. He needs to find the “next big thing” to keep his company growing. He’s going all-in on the metaverse. And he may be right. But for now, looks like a desperate last-ditch attempt to stay relevant.
Put it all together, Meta is a company past its prime doing everything it can to avoid getting in the way HP (HPQ) or GE (GE). Efforts can work. In fact, I’m willing to bet they do. But not just yet – and that means Meta stock is likely to go down before it goes up.
ServiceNow is just entering its “Golden Era”.
On the other hand, you have ServiceNow.
The enterprise software provider also reported quarterly numbers last night. And they couldn’t be more different than what Meta reports.
Meta’s user base is increasing. ServiceNow continues to grow its customer base at a 20%-plus annual clip.
Meta’s revenue growth rates have been negative. ServiceNow is still growing revenues at a 20%-plus rate – and 25%-plus on a constant currency basis.
Meta’s profit margins are being eroded. ServiceNow’s operating income margins expanded 40 basis points last quarter to a multi-quarter high.
The meta stock is now crushed. ServiceNow stock is on the rise.
It is a tale of two cities. Meta is an “old tech” company facing a massive growth slowdown that resembles an existential crisis. ServiceNow is a “new tech firm” that maintains steady growth rates that indicate a big runway ahead.
Our advice? Forget old tech stocks. Buy new tech stocks. It’s time for a changing of the guard in the technology landscape. The FANG is already 2010s. It’s time to embrace a new generation of tech giants.
The Last Word on New Tech Stocks
The stock market looks like it’s ready to kill this bear market and embrace a new bull market. That means stocks will rise in 2023. And investors who buy the dip now stand to make a lot of money next year.
But what stocks you buy now will determine how much you will earn at that time.
Some stocks will rise 10% or 20% in 2023. Some will rise 50% or 70%. Others are double or triple.
I looked for stocks that will double or triple by 2023 – and I think I have found them.
See; there is this rare phenomenon in the market that appears whenever an economic crisis emerges. And it has a historically proven track record of creating some of the best buying opportunities in stock market history. I’m talking about the opportunity to turn thousands of dollars of investment into million dollar paydays.
This phenomenon appeared for the first time since the 2008 financial crisis. And I’ve identified stocks at the epicenter of the phenomenon – stocks that are poised to rise more than any other stock in 2023.
Find out which one I’m talking
As of the date of publication, Luke Lango does not hold (directly or indirectly) any positions in the securities mentioned in this article.