Tech stocks are a great place to invest and already, the world’s top companies are tech giants.
The dot-com bubble left a sour taste in the mouths of many tech investors. But they were too optimistic on the technology timeline. There’s since been a big, healthy rebound. Some publicly traded tech companies have reached the $1 trillion mark, and many more will follow.
Tech stocks will continue to take over more of the market and investors’ portfolios. The new innovation is improving all of our lives. The internet of things, blockchain, driverless cars and many other technologies are pushing us into a new age.
In this article, we look at the top 10 best technology stocks you can invest your money into.
Microsoft (MSFT, $153.83) has several lines of business that could see an uptick as a result of self-isolation and people working from home.
For one, Microsoft has an opportunity to take advantage of the increasing number of employees who are being asked to work from home. This is the perfect time to push adoption of Teams, the company’s group chat and collaboration software. With adoption comes more subscriptions of Microsoft 365 – the company’s rebrand of Office 365 rolling out later in April. Indeed, the company is really pressing the point, offering a six-month free trial of Teams that includes some of its more impressive paid features.
The Windows upgrade cycle allows for guaranteed recurring revenue, as does the brilliant decision to make Microsoft Office a cloud-based subscription product. Azure, its cloud computing division that is second only to Amazon.com’s (AMZN) AWS by market share, highlights MSFT’s growth prospects, with revenue soaring 62% last quarter.
Also, while Xbox One may have lost the current generation console war to rival Sony’s (SNE) PlayStation 4, the company’s Xbox Live subscription gaming network is seen as the online leader. Gamers use it not only for multiplayer competition, but for social interaction. Xbox Live has seen even heavier use than usual. At $9.99 per month for a Gold subscription, Microsoft could see a gaming division revenue uptick.
2. Netflix (NFLX, $361.76)
Netflix already has more than 60 million subscribers in the U.S. as of the end of 2019, and 107 million subscribers internationally. But that still leaves room for growth, especially on the latter front.
NFLX will release its latest subscriber numbers in April, but early data has shown significant increases in downloads of the Netflix app for mobile devices in countries being hit hard by the coronavirus. For instance, in early March in Italy, Netflix app downloads for iPhone and Android were up 57%, with Spain seeing a 34% increase.
Netflix has been one of the best tech stocks of the bear market as investors anticipate a subscription spike thanks to the coronavirus – with some of those viewers sticking around after the pandemic has passed. NFLX shares have recorded a nearly 12% gain in 2020, while the S&P 500 has declined by 23%. SunTrust analysts, for instance, estimate that paid subscriber additions will total 9.5 million in Q1, which is much better than the consensus expectation for 7.5 million.
3. Zoom Video Communications
(ZM, $128.20) is a leading provider of enterprise-strength video conferencing solutions. Zoom’s offerings include not just video conferencing for large groups, but accompanying chat, collaboration, reporting and recording features.
That’s perfect for the current coronavirus environment, in which remote employees need to be kept in the loop and productive, and in which many meetings simply need face-to-face contact.
That’s why CEO Eric Yuan was recently able to claim that usage “has ballooned overnight,” from 10 million daily users at the end of 2019 to more than 200 million by March.
ZM stock isn’t an easy play right now, however. The company is up 88% year-to-date, sure, but it’s also on a significant decline after various reports revealing security and privacy issues with its software. For what it’s worth, Yuan released an apology and has frozen product development for 30 days to work on the software’s various bugs; indeed, the company already has fixed its macOS installer.
If the company is able to quickly put out its technical fires – and the resulting PR fire – it might be positioned to enjoy a shift to video conferencing that lasts far longer than the coronavirus pandemic.
“We think Zoom’s exceptionally easy to use meetings product has both enabled and benefited from a long-term secular shift towards working from home,” writes Needham analyst Richard Valera, who rates shares at Buy.
4. Dell Technologies (DELL)
Another well-known business from the 1990s that helped PCs go mainstream is Dell, which, after evolving and diversifying, is attractive enough to be one of the best tech stocks to buy for 2020.
Dell isn’t just a computer company anymore: It has tentacles in the data center, storage, servers and the cloud – a diversified portfolio of modestly growing business units. Its commercial PC business picked up steam last fiscal year, driving operating income growth of 60% on the year in the client solutions group.
Most importantly, Dell acquired a roughly 80% stake in VMWare (VMW) in 2018, a stake currently valued around $22 billion. Dell’s current market cap isn’t much higher than that, at roughly $28 billion.
Trading for just over 6 times earnings, Wall Street still seems to be dramatically mispricing this stock.
5. Cisco System
Cisco Systems (CSCO, $39.06) is another beneficiary of the push to have employees work from home. Its Webex platform is a popular enterprise option, and it has seen a big spike in usage as the coronavirus crisis has developed. Besides subscriptions for the application, Cisco also sells Webex devices, including connected whiteboards and video conferencing hardware.
Dan Eye, head of asset allocation and equity research at Roof Advisory Group, a division of Fort Pitt Capital Group, makes the case for Cisco seeing coronavirus upside:
“The measures being taken to control the outbreak of the coronavirus have forced many professionals, students and educators to work remotely,” he says. “According to company reports, networking giant Cisco Systems is experiencing a massive spike in the usage of its Webex video conferencing platform. Estimates indicate that Webex traffic in some Asian countries has increased by 700% or more.
“While the Webex platform does not represent a large portion of Cisco’s revenue stream, it should incrementally support its initiative of transitioning away from hardware with a greater emphasis on software solutions and recurring revenue streams.”
6. Adobe (ADBE)
For a second consecutive year, application software giant Adobe makes the cut as one of U.S. News’ best tech stocks to buy. ADBE stock gained 46% in 2019, but there’s still long-term upside in Adobe, the company behind the suite of iconic creativity apps that includes Photoshop, InDesign, Illustrator, Acrobat and Premiere, to name a few.
Simply put, this is a must-have software for many industries and professionals, and Adobe’s cloud-based software-as-a-service model helps bring high-margin recurring revenue – an investor’s dream.
At around $150 billion, ADBE is still growing sales by about 15% to 20% a year. Keep in mind, ADBE might not insulate you from short-term volatility like low volatility and minimum volatility ETFs can, but it’s about as volatile with the wider market and with better long-term prospects.
Amazon.com (AMZN, $1,906.59) is finding itself in the spotlight during the coronavirus crisis. That can have negative aspects — such as profiteers using the platform to gouge panicked consumers on products like hand sanitizer and protective masks.
But in an environment when people are hunkering down and reluctant to venture into stores, Amazon’s online shopping provides a valuable service. In fact, the demand by shoppers has been so massive, that Amazon announced it is trying to hire an additional 100,000 new warehouse and delivery workers. That increased volume is going to result in higher revenue for the e-commerce division during the quarter, and might win Amazon some new customers.
Amazon’s various devices are also proving popular during the coronavirus outbreak, and could see boosted adoption if the current situation is extended. For example, Kindle re-readers and e-books are a way to spend time. Echo smart speakers can be programmed to turn on lights and trigger other hands-free actions — ideal for reducing risk of contamination. And Ring video doorbells make it possible to interact with visitors at the front door without having to risk a personal, face-to-face encounter.
8. AT&T (T)
Communications and media giant AT&T also has an entrenched business, but it isn’t growing like an Adobe or Microsoft. Across the U.S., AT&T boasts more than 100 million U.S. customers paying for TV, mobile or broadband services. After acquiring WarnerMedia the company became an entertainment empire; it’s the parent company of Hollywood studio Warner Bros., DC Comics, HBO, CNN, TBS, TNT and many more. Trading around 10 times forward earnings and paying a sustainable 6% dividend, AT&T brings relative stability to the list of the best tech stocks to buy for 2020. It expects about $28 billion of free cash flow in 2020.
Twitter (TWTR, $23.09), as a platform, has always shown signs of excellence during times of crisis, when getting information to people in real time is critical. It’s also a popular platform for social interaction.
The coronavirus pandemic is tailor-made for Twitter. People are looking for information on a life-or-death situation that can change by the minute. They’re looking for ways to vent about actions that have been taken — or inaction.
And they’re bored and looking for ways to interact with other humans, without having to risk a face-to-face conversation.
This heavy use is why Twitter is one of the social media platforms the World Health Organization is most active on, making it a key outlet for coronavirus updates and advice.
Twitter user engagement almost certainly will be up this quarter, and it seems likely the social media platform is going to gain users as well. That said, so far, TWTR shares have been a disappointment among tech stocks, underperforming the S&P 500 40% to 27% since the bull-market peak.
As one of several tech names on U.S. News’ list of best stocks to buy for 2020, Facebook is automatically one of the best tech stocks to buy for 2020 as well. Due to the market sell-off, FB trades for just 28 times earnings – not bad for a company expected to grow profits 41% this year. Although Facebook boasts 2.5 billion monthly active users, it’s still growing that figure by about 8% annually.
Almost 2.9 billion people use either Facebook, WhatsApp, Instagram or Messenger at least once a month.
Another honorable mention is Tesla (TSLA) Stocks
The company certainly has a lot of irons in the fire.
Tesla provides vehicle service centers, supercharger stations and cars with ever-improving self-driving capabilities. Its Energy Generation and Storage segment includes the design, manufacture, installation, sale and lease of stationary energy storage products and solar energy systems, along with the sale of electricity generated by its solar energy systems to customers.