Technology stocks led the stock market rally in 2020. With remote working and virtual learning becoming the new normal, global dependence on technology has increased. Investors have realized that the industry still has a lot of room for growth. Not only large-cap tech stocks, but emerging e-commerce players also are on a high growth trajectory.
There has been an amount of speculation that the technology sector would come under pressure after Joe Biden took over as U.S. President. Data abuse, increased corporate regulation, and antitrust laws are some of the key elements on the Democratic agenda with respect to the sector. However, even given a worst-case regulatory scenario in which the tech giants’ wings are clipped, there are many other investment opportunities to be explored in this space.
At this juncture, it makes a lot of sense to pick breakout stocks that are positioned for healthy returns. Four such stocks, we believe, are Facebook, Inc. (FB), NVIDIA Corporation (NVDA), Shopify Inc. (SHOP), and Pinterest, Inc. (PINS). These stocks have all demonstrated high growth in the recent past and are positioned for spectacular gains.
Facebook, Inc. (FB)
FB is a social-media platform that connects people through computers, mobile devices, virtual reality headsets, and in-home devices worldwide. The company also has a photo-sharing app, Instagram and messaging app, WhatsApp. FB also offers Oculus virtual reality products, which allow people to connect and share experiences.
FB announced the launch of a News feature in the U.K. The dedicated news tab provides news based on users’ interests along with curated lists of stories. The social-media giant has partnered with Channel 4 News, Financial Times, Sky News, Daily Mail Group, DC Thomson, and Telegraph Media Group to source credible news. Lifestyle publications like GQ, Vogue and Cosmopolitan are among the other partners.
FB’s revenue for the third quarter ended September 30, 2020 surged 21.6% year-over-year to $21.5 billion on the back of strong growth in its advertising revenue. Meanwhile, its EPS climbed 27.8% over the same period last year to $2.71. The company’s daily active users (DAUs) increased nearly 12% to 1.82 billion on average. The coronavirus pandemic compelled people to depend a lot on platforms like FB to connect with others for personal or commercial reasons.
The Street estimates revenue for the quarter ended December 31, 2020 to be $26.4 billion, representing a 25.3% increase year-over-year. Meanwhile, its EPS is likely to increase 25.4% to $3.21.
FB has soared 27.6% in the past year to close yesterday’s trading session at $282.05. The stock has climbed 20.5% during the past six months.
How does FB stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
A for Industry Rank
A for Overall POWR Rating
The stock is also ranked #16 of 69 stocks in the Internet industry.
NVIDIA Corporation (NVDA)
NVDA is a global leader in manufacturing graphics processing units (or GPUs) and chipsets. These are the most critical components in gaming, AI, and autonomous vehicles. The company also has processing capabilities that enable scientists and researchers to conduct high-performance applications. NVDA also manufacturers Tegra mobile processors for tablets, smartphones, entertainment systems, and automobile navigation.
NIO (NIO) announced an alliance with NVDA in which it will use NVDA’s DRIVE Orin system-on-a-chip for its next generation of electric and autonomous vehicles. NIO revealed that its NVIDIA DRIVE Orin-powered supercomputer, called Adam, will first appear in the ET7 sedan shipment in China beginning in 2022.
NVDA’s revenue for the third quarter ended October 31, 2020 was $4.7 billion, up 57% from the same period a year ago, led by a 162% growth in Data Center revenue. NVDA’s gaming revenue also posted 37% growth. Its EPS also surged 46% year-over-year to $2.12.
Analysts expect revenue for the quarter ending January 31, 2021 to rise 55.1% year-over-year to $4.8 billion. Its EPS for the quarter is likely to grow 48.1% to $2.80.
NVDA ended yesterday’s trading session at $537.41, rallying 119.4% over the past year. During the past six months, the stock surged 31.4%.
NVDA is rated “Buy” in our POWR Ratings, with an “A” for Trade Grade, Industry Rank, and a “B” for Buy & Hold Grade. It is currently ranked #61 of 99 stocks in the Semiconductor & Wireless Chip Industry.
Shopify Inc. (SHOP)
SHOP is a Canadian e-commerce platform that has online stores and retail point-of-sale systems. The company offers an entire suite of services to online retailers that includes payments, marketing, shipping, social media and customer engagement tools. Its services allow the online businesses to process orders and payments, leverage analytics, source products, and access financing.
In October, SHOP entered a global partnership with TikTok for the expansion of social commerce. The alliance enables more than one million SHOP merchants to optimize their campaigns and reach TikTok’s the younger audience to spur sales. The ad tools will allow merchants to create native, shareable content that turns their products into In-Feed video ads.
SHOP’s revenue during the third quarter ended September 30, 2020 soared 96% year-over-year to $767.4 million. SHOP’s Merchant Solutions revenue for the second quarter increased 132% year-over-year to $522.1 million, led by Gross Merchandise Volume1 (GMV). Its EPS jumped 140.6% year-over-year to $1.54 from $0.64 posted in the comparable period last year.
A consensus revenue estimate for the quarter ended December 31, 020 is $910.2 million, representing an 80.2% year-over-year increase. EPS is expected to grow at the rate of 105.4% per annum over the next five years.
SHOP ended yesterday’s trading session at $1159.77, surging 159.1% over the past year. Over the past six months, the stock climbed 29.7%.
SHOP’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade, Industry Rank, and a “B” for Buy & Hold Grade and Peer Grade. It is currently ranked #16 of 45 stocks in the Internet - Services industry.
Pinterest, Inc. (PINS)
PINS is an image sharing and social media platform designed for saving and discovering information through visuals, known as ‘Pinboards. The platform functions as a visual search engine in many ways. In addition to being a unique social media platform, PINS is widely used by marketers to secure higher brand engagements.
Consistent with the current trend, PINS displays a carousel of stories at the top of its home screen. The company introduced the “Story Pins” format in September and has now it has made it easier to stand out. For now, this feature is only accessible to approved creators and businesses.
During the third quarter ended September 30, 2020, PINS revenue grew 58.2% year-over-year to $442.6 million, led by a surge in the international segment. Its Global-MAU during the quarter climbed 37% over the year to 442 million, and its loss per share narrowed to $0.16 from $0.23 posted in the same period last year.
Analysts expect revenue for the quarter ended December 31, 2020 to grow 61.3% year-over-year to $644.6 million. Meanwhile, EPS for the quarter is likely to expand at the rate of 152.3% per annum over the next five years.
PINS ended yesterday’s trading session at $69.24, soaring 227% over the past year. During the past six months, the stock surged 199%.
PINS is rated a “Buy” according to the POWR Ratings, with an “A” for Trade Grade and Industry Rank, and a “B” for Buy & Hold Grade and Peer Grade. It is currently ranked #19 of 69 stocks in the Internet industry.
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FB shares were trading at $275.57 per share on Wednesday afternoon, down $6.48 (-2.30%). Year-to-date, FB has gained 0.88%, versus a 1.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.4 High-Growth Tech Stocks Ready to Breakout: Facebook, NVIDIA, Shopify, Pinterest appeared first on StockNews.com