In many respects, technology stocks continue to move markets all around the world. Technology growth stocks are consistently among the most widely held and valuable securities — and with good reason. The innovations pioneered by top technology companies push us all forward. They improve the quality of life for people in both rich and poor countries. That said, not all technology stocks are the same. Some are more worth holding in your portfolio than others. While many tech stocks continue to post big gains and outperform the broader stock market, others are lagging behind and losing money for investors. Here we look at top technology stocks, ones to keep a watch on, and ones to avoid.
Disclaimer: This is not professional investing advice (and should not be considered as such). You should always do your own due diligence before investing your own money in any stock. The risk of losing some (or all) of your investment money is always something to be aware of.
Tech Stocks To Watch
iPhone maker Apple appears to be going all-in on 5G smartphones. The company just announced that all the iPhones released in 2022 will be 5G enabled. Even better, Apple is including its first low-cost handset in two years in the updated iPhone SE model. Apple still derives half of its revenue from iPhone sales. Not the mention their line of iPads, MacBooks, headphones, and endless accessories. And then there’s revenue from the App Store and subscription services like iCloud, AppleTV, and Apple Music.
The upgrade to ultrafast 5G wireless technology ushered in a “super cycle” for iPhone sales last year. If Apple can continue this trend, it could lead to another windfall for the company. Apple stock has been breaking out as of late. It rose nearly 11% in the past month to its current level of about $146.00. There doesn’t seem to be any slowing down for the Cupertino tech giant.
The only other company (besides Apple) that has a $2 trillion market capitalization is Microsoft. The Seattle-based company was started by Bill Gates and Paul Allen in the mid-1970s. Today, it continues to perform well thanks to continued new released of its Windows operating system, the Xbox gaming console, and Azure cloud computing services. Analysts praise Microsoft for finding new growth areas while keeping legacy product sales strong.
In recent years, Microsoft has developed its cloud computing business. There’s also their Microsoft Teams video conferencing platform, which proved extremely useful when the pandemic hit. They also recently unveiled new versions of their Office productivity suite, new Xbox hardware, and introduced GamePass — a monthly subscription to games that has proven extremely popular. Microsoft stock outperformed in the first half of this year, rising nearly 30% year-to-date. The shares currently trade at nearly $285 apiece.
Amazon has its first news CEO in its 27-year history. Andy Jassy took over from company founder Jeff Bezos at the end of June. Wall Street is watching Amazon closely for signs of where the new leader plans to take the company. It will be interesting to see if Amazon can continue reporting quarterly revenues that exceed $100 billion.
Amazon is continuing to grow its Amazon Web Services cloud computing offering — a business unit which Jassy previously led. It’s also achieving good results with its Prime streaming service and Whole Foods grocery stores. Next up is the eagerly awaited approval of the company’s $8.5 billion acquisition of the Metro-Goldwyn-Mayer movie studio. Amazon’s stock has risen nearly 12% so far in 2021, and currently trades for about $3,650 per share. It’s one of the most expensive single stocks you can buy today.
Another tech behemoth worth keeping an eye on is Alphabet, the parent company of what was formally Google. The company’s online search and advertising businesses have proven to be largely immune to the Covid-19 pandemic. Online advertising is expected to roar back with the broader economy in this year’s second half.
Beyond digital ads, Alphabet can also continue to grow from its forays into cloud computing and artificial intelligence. While the company has faced some antitrust actions around the world, those issues haven’t held back its stock. Alphabet’s stock price is up nearly 50% so far in 2021 at $2,610 a share. Analysts who cover the company expect more gains in coming months.
Social media giant Facebook is riding high after it recently won a huge antitrust victory. It dodged a government case brought against it by the Federal Trade Commission (FTC), which was dismissed. News of the legal victory pushed Facebook stock past the $1 trillion market capitalization level for the very first time. While Facebook will likely still face future criticism and scrutiny, they continue to thrive for now.
Outside the courtroom, Facebook’s online advertising business continues to see strong growth. In this year’s first quarter, the company reported that the average price per advertisement on its platform increased by 30% from a year earlier. The number of advertisements booked climbed 12% overall. At $372 a share, Facebook’s stock is now up nearly 34% this year alone.
Tech Stocks To (Potentially) Avoid
Looking at the share price of fitness equipment retailer Peloton, you’d think that the home exercise revolution ushered in by the pandemic is coming to a quick end. Peloton stock is down 20% year-to-date, to about $120 a share. The share price peaked in early January at an all-time high of $171.09. However, it’s been steadily declining ever since.
The stock possibly dropped due to expectations that people will return to gyms and fitness centers as vaccination rates rise. However, the company was also hurt by a massive recall of their treadmills, after children were harmed by the devices. They’ve also sparked controversy by removing some features that were previously free-to-use, locking them behind expensive monthly subscription fees. These two factors have combined to make 2021 a rough year for the stock, as it’s down 27% since January 1. Can the company rebound in a big way, or will it see a further drop in the second half of 2021?
One of the best growth stocks of 2020, Tesla shares are down 13% so far in 2021. They are also now 28% below their 52-week high of $900.40. Currently changing hands at about $630 a share, it’s not clear how much further Tesla stock will slide before finding a bottom and reversing higher.
Tesla’s stock has been hurt by a combination of problems. They range from a big recall and political issues in China, to rising competition from automakers both foreign and domestic. Even traditional automakers like General Motors and Ford are getting into the electric vehicle business in a big way. The stock continues to draw negative media attention from numerous vehicle safety issues and some short positions that prominent investors hold against it. Yes, some of the so-called experts are betting that Tesla’s decline will continue. On the other hand, Tesla remains the best-selling electric vehicle in the world. Will Elon Musk’s pride and joy continue to grow? Or hit a roadblock?
Cloud-computing giant Salesforce currently controls about 20% of the cloud-computing software market. That’s more than its four leading competitors, combined. With annual revenues of over $20 billion and more than 56,000 employees worldwide, the San Francisco-based company seems to have a lot going for it. But sadly, its stock continues to be a question mark.
Much of the problem stems from the fact that Salesforce has a major acquisition at stake right now. Salesforce is in the process of trying to conclude its $27.7 billion purchase of Slack, a company that runs a messaging platform for employees to communicate with each other more efficiently than email. Right now, the Slack deal is being scrutinized by regulators in the United States. Getting final approval could prove difficult. This year, Salesforce stock is up a modest 10% at $241 a share. However, it’s all-time high is only $271 and it’s dropped down to just above $200 multiple times this year alone. It’s a roller coaster.
Now is not the time to invest in any Chinese technology companies. As the government in Beijing continues to crackdown on the country’s leading technology firms, stocks of once high-flying companies like Alibaba have suffered. While many people on Wall Street view Alibaba as a “best of breed” Chinese technology company, its stock is down 20% year-to-date and is struggling to stay near $200 a share. As of publishing, it’s down to $180.
Alibaba was slapped with a record antitrust fine of $3.6 billion by the Chinese government this past spring. It continues to be under intense scrutiny from domestic regulators. Company founder Jack Ma is laying low, as the future of Alibaba remains uncertain. This is an unfortunate development for a company that is a global leader in everything from e-commerce and artificial intelligence, to cloud computing and electronic payments. While it’s entirely possible they will successfully emerge on the other side of this stock blip, it’s hard to predict the future.
Another Chinese stock to avoid is electric vehicle maker Nio. Like Tesla, Nio has been hurt by a general shift in sentiment away from stocks of electric vehicle start-ups. And, like Alibaba, Nio has also been harmed by the ongoing government crackdown in China.
This double whammy has conspired to send NIO stock down 26% year-to-date, to $39 a share. The slide in Nio’s share price is particularly painful, coming after the company enjoyed a monster rally of more than 2,500% in 2020. Between March of last year and this January, Nio stock rose from $2.40 to an all-time high of $66.99 per share. Many analysts see the current pullback in Nio stock as the beginning of a potentially big correction.
The Bottom Line
Technology stocks are certainly worth owning. Many technology stocks provide big and consistent gains to shareholders. However, this isn’t the case with all tech stocks. Investors need to do their homework. Make sure you know what is happening with a company (and its stock) before buying shares. Being well-informed is the best way to safeguard oneself against surprises, down turns, and potential losses. Remember that information is a valuable commodity when buying and selling stocks. Do your homework, and, when it doubt, consult with a professional advisor on the best places to allocate your hard-earned money.