Technology stocks have outperformed the broader market in 2020. The coronavirus pandemic has been the key driver of this performance because remote working, learning, and shopping trends have been facilitated by technology. Businesses have accelerated digital transformation to stay operational (and competitive) in the “new normal.” According to a survey from Enterprise Technology Research, permanent work-from-home employees across the globe are expected to double in 2021, as this arrangement has resulted in better employee productivity. We think this trend will sustain the demand for technology products and services going forward.
The solid performance of technology stocks is evidenced by the Vanguard Information Technology Index Fund ETF’s (VGT) 37.6% returns so far this year. In comparison, the S&P 500 has gained 13.7% during the same period.
Companies such as Alphabet, Inc. (GOOGL), ServiceNow, Inc. (NOW), UBER Technologies, Inc. (UBER), and Spotify Technology SA (SPOT) are at the forefront of this performance. These companies are innovating quickly to offer digital solutions to emerging stay-at-home needs, and investors are rewarding their efforts. As a result, we believe these four stocks should continue doing well in 2021.
Alphabet, Inc. (GOOGL)
GOOGL does not need an introduction. The company’s subsidiaries include Google, X, Fitbit, Waymo, Calico, Verily, and more. GOOGL’s stock has gained 32.7% so far this year.
GOOGL recently entered into an agreement to acquire Actifio, an IT company that focusses on data backup and disaster recovery. The acquisition will help Google Cloud enhance its offerings and provide greater value to users. The company has also recently launched Google Health Studies, which will allow users to participate in medical research and studies.
For the quarter ended September 2020, GOOGL’s revenues increased 14% compared to the same period last year. During the same period, Google Cloud’s revenue increased 44.7%.
GOOGL is expected to see a revenue growth of 18.2% for the quarter ended March 2021, and 21.3% in 2021. The company’s EPS is estimated to grow 18.6% in 2021 and at a rate of 16.5% per annum over the next five years.
How does GOOGL stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Peer Grade
A for Industry Rank
A for Overall POWR Rating
The stock is also ranked #2 out of 59 stocks in the Internet industry.
ServiceNow, Inc. (NOW)
NOW provides cloud-based service management solutions that cater to the needs of legal, HR, marketing, and other departments within an organization. NOW has operations worldwide. NOW’s stock has risen 87% year-to-date.
NOW recently acquired Element, which is an AI-company. The acquisition is expected to help the company boost its offerings across all verticals using artificial intelligence. The company has also made several upgrades to its Safe Workplace apps, which include an integrated feature for contact tracing and a new user interface.
For the quarter ended September 2020, the company saw a 1% year-over-year increase in subscription revenue. The company’s total revenue increased 28% during the same period.
NOW’s revenue is estimated to increase 24.3% for the quarter ended March 2021 and 24.9% in 2021. The company’s EPS is expected to rise 22.9% in 2021 and 27.2% per year over the next five years.
NOW’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade and Buy & Hold Grade. It is ranked #1 of 48 stocks in the Software – Business industry.
UBER Technologies, Inc. (UBER)
UBER operates a ride-hailing service that allows users to book taxies. The company also provides delivery services. UBER has operations worldwide. UBER’s stock price has increased 80.8% year-to-date.
The company recently launched Uber Reserve in more than 20 cities in the United States. Uber Reserve allows users to book rides in advance, seeking higher reliability. The company has recently partnered with Postmates to enhance its delivery services.
For the quarter ended September 2020, the company’s delivery adjusted EBITDA increased 42%, compared to the same period last year. UBER’s revenue is expected to grow 8.5% for the quarter ended March 2021 and 42% in 2021. The company’s EPS growth is expected to be 59.2% in 2021 and 57.3% per annum over the next five years.
It is no surprise that UBER has a “Strong Buy” in our POWR Ratings system with an “A” in Trade Grade, Buy & Hold Grade, and Peer Grade.
Spotify Technology SA (SPOT)
SPOT operates a music streaming platform that can be used through mobiles, computers, tablets, and home entertainment systems. The platform is subscription-based and is available in several countries. SPOT’s stock has gained 122.3% year-to-date.
SPOT has recently acquired Megaphone, which is a leader in podcast technology. The acquisition will help SPOT enhance its podcast services. The company has also recently launched its services in Russia and related markets.
For the quarter ended September 2020, the company saw 14% year-over-year growth in revenue. The number of podcasts on the platform increased 26.6% sequentially.
SPOT’s revenue growth is expected to be 45.5% for the quarter ended March 2021 and 22.3% for 2021. The company’s EPS growth is expected to be 56.6% in 2021 and 145.9% per annum over the next five years.
SPOT’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade, Buy & Hold Grade, and Peer Grade. It is ranked #1 out of 11 stocks in the Entertainment - Radio industry.
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GOOGL shares were trading at $1,771.14 per share on Thursday morning, down $6.72 (-0.38%). Year-to-date, GOOGL has gained 32.23%, versus a 15.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks.4 Red-Hot Tech Stocks That Should Continue to Climb in 2021 appeared first on StockNews.com