Technology is always changing and the performance of the stock market over the last decade has shown that technological stocks are essential for almost any type of investment style.
The so-called FAAMNG shares have been big winners and are now the top five most valuable companies in the United States. Meanwhile, the share of the technology sector in the general stock market will only grow in the coming years as technology penetrates deeper into everyday and business life.
With this in mind, we have asked three of our collaborators for their options on the actions that determine the evolution of technology. Keep reading to see why Shopify (NYSE: SHOP), Tesla (NASDAQ: TSLA), i Facebook (NASDAQ: FB) they all made the list.
Buy until sold out
Eric Volkman (Shopify): The coronavirus pandemic has forced many consumers to replace face-to-face shopping with online variety. Comfort and convenience become a habit that is hard to break. This, combined with other positive trends, is why e-commerce is facing a long-tail growth story where it will become much, much bigger.
Similarly, an obvious beneficiary will be the leading operator of the Shopify retail platform. The company is the one-stop shop (sorry) for many companies that build an online presence and earn revenue by charging fixed subscription fees or (in the case of the Shopify Plus service for larger companies) as a percentage of sales of the customer.
It is a clean, direct and effective way to get a piece of the advantage of e-commerce. As a result, Shopify (barely a young company) continues to grow as gangbusters.
In fact, Shopify’s 86% year-over-year revenue growth in 2020 to $ 2.9 billion was the fastest revenue growth in the last four years. Many hot and new companies in the tech industry can get double-digit growth in their early years, but this usually slows down after a short time. He is a rare and special operator who can actually to increase that pace, and do it after you’ve been on stage for a while.
In terms of profitability, Shopify has been considering other advanced technologies landing in the red at the bottom line for years. In the end, the costs to develop their offerings were considerable. That changed in the fourth quarter of 2019, when it made a net profit of about $ 800,000. Since then, those numbers have improved dramatically: in its two most recently reported quarters it grossed $ 879 million and nearly $ 1.26 billion, respectively.
Skeptics immediately point out that Shopify’s shares have a maximum valuation, thanks in large part to its monster popularity among investors during the pandemic. Its 12-month price-to-sales ratio has risen to nearly 51 and its affordable price-to-profit ratio is 244. In comparison, the e-commerce favorite Amazon has a P / S of 3.9 and a P / E of 58.
Still, Amazon, while arguably a retail juggler, is a more mature business than Shopify. And the latter company is still in the middle of a gold rush that will only get more. In many ways, Shopify will not only be a beneficiary of the future of e-commerce, but it will is the future of e-commerce.
Writing the future of the car
Trevor Jennewine (Tesla): Tesla may not be the first company that comes to mind when you think of technology stocks, but maybe it should be. Recently, CEO Elon Musk expressed his belief that, in the long run, people would think of Tesla as an artificial intelligence and robotics company, not just as an electric vehicle (EV) manufacturer.
Until now, since October 2016, all Tesla vehicles were shipped with autopilot hardware, which involves eight external cameras, 12 ultrasonic sensors and a built-in supercomputer. Today, with more than a million cars on the road, the company has collected real-world driving data worth more than 3 billion miles, far more than any other automaker. This gives Tesla a significant edge in the race to build a fully autonomous EV.
In 2019, the company bolstered that advantage with the release of Hardware Autopilot 3.0, with an updated version of the car supercomputer. At the time, Musk called it “[objectively] the best chip in the world, “and a Nikkei report came to the same conclusion, claiming that Tesla’s technology was six years ahead of its rivals.
More recently, Musk made a bold announcement at Tesla’s Battery Day event, saying the company would produce a $ 25,000 fully autonomous EV over the next three years. You read that right: Tesla plans to have an affordable, self-contained electric car in the short term.
If the company achieves this goal, it could radically change Tesla’s business model. Instead of competing for low-margin vehicle sales, Tesla could license its autopilot platform to other automakers, moving to the higher-margin software industry. The company could also launch a standalone network, a market that Cathie Wood’s Ark Invest values at $ 1.2 trillion by 2030. And given Tesla’s advantage (better technology and more data), the company could capture a good part of that figure.
As a last thought, Tesla shares are currently trading with outrageous sales 19 times while Toyota operations even with sales. But a decade from now, if Tesla shifts gears and disrupts the mobility industry, that number may not seem so absurd to the eye. So now seems like a good time to pick up some stocks from this tech stock.
Meet me on the metaverse
Jeremy Bowman (Facebook): Traditionally, Facebook has not been known as a pioneer of new technologies. The company dominates social media and earns its money from advertising, and while social media as a concept is new, thanks to the Internet, selling advertising alongside content is a century-old business model.
However, the next phase of Facebook might look very different. The company invests heavily in its virtual reality platform, Oculus, and in projects similar to Facebook Reality Labs, its research division dedicated to augmented and virtual reality. In Facebook’s second-quarter earnings report, CEO Mark Zuckerberg introduced investors to the term “metaverse,” which he explained in the earnings call that it was a virtual environment where people can be present with each other within ‘digital spaces. Zuckerberg described it as a place where anyone can hang out with friends, work, create or play.
So far, Oculus only generates a small fraction of Facebook’s total revenue, but it could increase a lot as virtual and augmented reality (RA and VR) become a major thing. Zuckerberg predicted that the RV would be the next big computer platform, noting that historically computer platforms have changed about every 15 years, from mainframes to computers, to the Internet and to mobile phones. Given that the iPhone was first introduced in 2007, the transition to virtual reality should be emerging in the coming years, based on this pattern.
Metaverse monetization will come later, but it’s easy to see how a new VR and RA experience lends itself to a wide range of possibilities, including ads, subscription content, apple-such as the app store, games and more. Zuckerberg is only 37 and could run Facebook by 2050, which would give him plenty of time to execute his vision. Wherever the future of technology goes, it’s a good bet to be there.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We are motley! Questioning an investment thesis (even one’s own) helps us reflect critically on investment and make decisions that help us be smarter, happier, and richer.