There are many things to like about tech stocks, but at the same time, investors need to be aware of a few common pitfalls of investing in tech stocks as well. One of the primary reasons behind the hype about tech stocks is the stellar returns provided by tech stocks on a historical basis. On the other hand, technology is advancing at a rapid pace, and these tech developments are expected to change some industries for good. Therefore, the common notion is that tech stocks will outperform all other subsectors for some years to come. However, a common pitfall of investing in tech stocks is that investors blindly invest in tech stocks without analyzing the fundamentals of the company in question. More often than not, tech stocks tend to trade at very high earnings and other valuation multiples, which provides a reason for prudent investors to investigate such companies further before investing in the shares of such companies. Growth prospects of a company are certainly important in evaluating which company to invest in, but at the same time, the price at which the investment is made is equally important. In this article, we will look at 10 tech stocks that every stock investor should keep an eye on in 2019. As a word of caution, this list is not a list that consists of the best buys in the current market but rather, a list of stocks that should be on the watchlist of every investor so that they can invest in these stocks if these stocks trade at undervalued levels.
Even though no investor needs an introduction to Facebook, it might come as a surprise why Facebook is in the list considering the company share price has appreciated in leaps and bounces over the last decade. There are a few reasons why an investor should keep an eye on Facebook. The company has been hit with several litigation issues in the recent past and it’s likely that regulators around the world will impose even more fines on Facebook that run into billions of dollars in the near future. Facebook has failed to protect user privacy and it’s likely that the stock price will come down significantly, as it did in 2018, based on these issues. If the stock price comes down based on fears of regulatory issues, it would present a good opportunity for tech investors to get into Facebook once again as the company has a very positive outlook for the future. In fact, Facebook is investing billions of dollars to avoid scams and privacy issues in the long-term, and the monetization of WhatsApp and Instagram will earn billions of dollars for the company. In addition, the company plans to unveil GlobalCoin in 2020, which is a cryptocurrency.
PayPal, another household name, might turn out to be a multi-bagger in 2019. The secular trend of online payments, online shopping, and the growth of peer-to-peer transfers position the company to benefit immensely in the future. The company has completed a number of acquisitions including Venmo, which has enabled the firm to make inroads into the growing peer-to-peer transactions. As the world becomes more digitized, online payments will continue to outpace in-store payments, which forms the backdrop for established online payment platform providers such as PayPal to reap benefits. As such, investors should monitor the movements of PayPal to identify potential entry points as the company will continue to deliver robust growth throughout the next decade.
Microsoft, which is another large-cap company, makes the list of top-10 tech stocks to watch out for in 2019. Even though Microsoft is generally associated with MS Office products, Windows products, and devices, the growth of the company in 2019 will come from a different source; the growth of cloud products. Today, corporations and individuals are increasingly shifting to cloud-based networks and subscription products. For example, millions of people use the per-month Office 365 package today, which enables them to download flagship Microsoft office products on any device they use, while allowing to store data up to 1TB per user in the OneDrive cloud. The growth of subscription products will continue to drive the company forward, and investors can expect higher dividend per share from Microsoft as well. The company is well set to grow its earnings and revenues this year as well.
Shopify is a cloud-based, multi-channel commerce platform designed for small and medium enterprises. Shopify enables entrepreneurs to design, set up, and manage their stores across multiple sales channels including web, mobile, social media, marketplaces such as Amazon, and brick & motor stores. Shopify has transformed itself into a billion-dollar company from humble beginnings, and early investors of the company were rewarded with unbeatable returns. Shopify shares have gained more than 595% since its IPO in 2015 and are expected by many investors to perform even better in the future.
Shopify has introduced subscription plans that suit everyone from SMBs to large retailers, and the company is dynamically changing the way it operates to support the acquisition of enterprise level merchants. Initiatives taken by Shopify to increase the number of larger brands who partner with the company has already paid off, as several large companies have been brought on-board over the last couple of years.
Even though I believe Shopify shares are pricy at the current price level, I continue to recommend adding Shopify to the watchlist as this is one of the best companies to invest in if the share price retreats to a more attractive level.
Weight Watchers International Inc. is the largest provider of weight control programs in the world. The company is focused on promoting weight loss through exercise, nutrition, and portion control. The core business model of Weight Watchers includes providing 24/7 chat support and access to personalized features such as personalized coaching.
While the company offers a digital-only subscription which comes with options such as calorie counting, diet management, and healthy meal recipes, the standout offering of the company is the Studio+Digital plan, which comes with weekly insightful lessons from an expert and the ability to network with fellow members on a weekly basis.
Weight Watchers has not only expanded its reach in the U.S. but has worked toward making an impact on a global basis. Global expansion activities would be vital for the future growth of the company, as the U.S. market is becoming increasingly competitive, which might lead to a loss of market share.
Losing weight was categorized as one of the most popular New Year resolutions in 2019 as well, and the increasing popularity of health monitoring devices is another tailwind driving the appeal of Weight Watchers. Digital subscriptions will certainly help the company gain traction in a digitizing world, and investors should keep an eye on Weight Watchers as a company that has the potential to deliver attractive returns in 2019 and beyond.
As the leader of the video streaming industry, Netflix will continue to add millions of users from all across the world in 2019. Even though the competition is poised to increase toward the latter part of this year, Netflix is expected to ride the tide and remain the leader of the industry for many years to come. As such, Netflix will earn economic profits for a long period of time even though the company balance sheet is not all that attractive due to significant amounts of debt the company has assumed to support its growth operations. Nonetheless, growth-oriented investors should keep an eye on Netflix to identify potential investment opportunities as the company unveils new products and services targeted at attracting viewership from developing countries.
The popularity of electric cars is growing on a global basis and many renowned automobile manufacturers are expecting to reveal electronic vehicles by the end of 2020. Pure-play lithium producers stand to gain significant benefits from this movement as lithium batteries are used to power electric vehicles. Livent Technologies is a company that produces lithium and distributes lithium chemicals for application in batteries and the company has signed major contracts with leading automobile manufacturers to deliver lithium products. Many investors might not have even heard of the company as of today, but the company is certainly set to do good things in 2019, which warrants a closer look at the company to identify investment opportunities.
Apple is facing headwinds in China and the sales of mobile devices are declining rapidly. For so long, the sale of iPhones has driven the company forward. The pessimistic outlook for the growth of iPhone sales has prompted many investors to turn bearish on the most-loved company in the world. The company management has already identified this and has taken many steps to drive the company forward without the support of iPhone sales. Apple will launch a content streaming platform later in this summer and the company is further expected to roll out its credit card in 2019 as well. The company is focusing on the services segment to drive earnings in the future, which I believe is the right decision. Despite the pessimism of many investors, I keep an eye on Apple as I believe 2019 will turn out to be one of the most important years in the history of Apple as the company diverts away from device sales and become a true technological giant that focuses on healthcare solutions as well.
Fortinet provides various products and services that cater to a wide array of cybersecurity requirements of the corporate world. FortiGate is the flagship enterprise firewall platform sold by the company and this facilitates a broad array of security and networking functions.
Historically, Fortinet has focused on small and medium enterprises to drive the earnings growth of the company. However, the management has shifted from this stance and is targeting high-end enterprises in the hopes of marketing mid and high-end products to these firms. Successful deployment of this strategy will help Fortinet sell midrange and high-priced products in the future, which should support further profit margin expansion.
Cybersecurity is increasingly becoming one of the most important topics in the modern business world. As concepts such as the Internet of Things (IoT) continue to disrupt the global business world, having an adequate level of security for user data and company systems in place has become a core business objective of many firms.
Favorable industry conditions make Fortinet a company to watch out for in 2019 and a successful integration of large-scale customers to the Fortinet eco-system will permanently drive the earnings of the company higher.
Micron Technologies is a leading semiconductor manufacturer that received a beating by investors as the cyclicality of the industry kicked-in in 2019. The recent downturn of the stock has brought back the shares to a very appealing level and the overall industry outlook is positive. Technological advancements boost the demand for semiconductors as many programs and devices are run with the help of semiconductors. As such, Micron will benefit immensely in the near future and the stock is already trading at a significant discount to its historical valuation multiples.
In this article, we examined 10 tech companies that we believe have the potential to provide attractive returns to investors in the future. Not all companies are attractive investments today because the share price has already appreciated significantly, but investors definitely must keep an eye on these stocks to uncover great investment opportunities