• <input id="wcymy"><tt id="wcymy"></tt></input>
  • <menu id="wcymy"></menu>
  • Investing in Tech Stocks

    Updated: Oct. 5, 2020, 4:21 p.m.

    The technology sector is vast, comprising gadget makers, software developers, wireless providers, streaming services, semiconductor companies, and cloud computing providers, to name a few. Any company that sells a product or service heavily infused with technology likely belongs to the tech sector.

    Software companies are increasingly moving to a software-as-a-service model, wherein customers buy a subscription to a program instead of a one-time license. This generates recurring revenue for the software company.

    Powering all that hardware are semiconductor chips. Semiconductor companies design and/or manufacture central processing units, graphics processing units, memory chips, and a wide variety of other chips that find their way into today’s devices.

    Telecom companies that provide wireless services are part of the tech sector. So are the video streaming companies that provide easy access to high-quality content; and so are the cloud computing providers that power those streaming services.

    Hardware Companies

    These design and build devices such as:

    • Personal computers
    • Smartphones
    • Fitness trackers
    • Smart speakers
    • Enterprise equipment like servers and networking gear

    Software Companies

    These design the software that runs on hardware, such as.

    • Operating systems
    • Databases
    • Cybersecurity software
    • Productivity software

    The best tech stocks

    Many of the most valuable companies in the world are technology companies. These are some of the most dominant and impressive tech stocks.

    • Amazon.com (NASDAQ:AMZN) is the leading online retailer and the leading provider of cloud computing infrastructure.
    • Microsoft (NASDAQ:MSFT) is a dominant software company known for its Windows PC operating system and Office productivity software.
    • Apple (NASDAQ:AAPL) makes the iPhone, the iPad, and Mac computers., Intense customer loyalty ensures plenty of repeat customers.
    • Intel (NASDAQ:INTC) is one of the largest semiconductor companies in the world. Intel designs and manufactures CPUs for PCs and servers, as well as specialty chips for uses like artificial intelligence.
    • Cisco Systems (NASDAQ:CSCO) is the dominant provider of the enterprise networking hardware that forms the backbone of the internet.
    • Netflix (NASDAQ:NFLX) is the top dog in the video streaming industry, spending billions of dollars each year on content to keep its ever-growing subscriber base hooked.
    • Facebook (NASDAQ:FB) is the largest social media company, with over 2 billion daily active users across Facebook, Instagram, Messenger, and WhatsApp.
    • Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) is the parent company of online search giant Google and the popular Android operating system for smartphones.

    Facebook, Amazon, Apple, Netflix, and Alphabet (Google) are sometimes grouped together as the FAANG stocks. These companies dominate their industries, and their stocks have produced impressive returns over the past few years.

    The impact of the COVID-19 pandemic

    The pandemic has been a mixed bag for the tech industry. Amazon has thrived as consumers have shifted hard toward e-commerce, with higher sales easily offsetting additional pandemic-related costs. Microsoft has also done well, buoyed by demand for collaboration software, devices, gaming, and cloud computing services as people spend more time at home.

    Apple has held its own during this crisis, partly thanks to economic stimulus measures passed by Congress and partly thanks to the launch of the affordable iPhone SE. Apple’s pricey devices have been in demand despite a highly uncertain economic environment.

    High demand for devices has helped Intel as well, with sales of laptops surging as people work from home. Intel’s data center business is another beneficiary, with customers snapping up powerful server chips to support cloud services.

    Cisco hasn’t been so lucky. While the company’s video conferencing business is booming, the core networking hardware business has suffered as customers pull back on spending. While the pandemic is hurting Cisco in the short term, the shifts toward e-commerce and working from home could ultimately boost demand for networking equipment in the long run.

    Netflix has seen its user base grow rapidly during the pandemic as people stayed home. The company had to temporarily pause production of all shows, but that didn’t stop people from signing up for the service.

    Both Facebook and Alphabet depend on advertising sales, so the steep decline in advertising from hard-hit industries like travel hurt both companies. Facebook held up better, managing to grow advertising sales during the worst of the pandemic. Alphabet suffered a small revenue decline, the first in its history.

    Only time will tell how the long-term trajectories of these major tech companies have been altered by the pandemic.

    How to analyze tech stocks

    For mature tech companies that produce profits, the price-to-earnings ratio is a useful metric. Divide stock price by per-share earnings and you get a multiple that tells you how highly the market values the company’s current earnings. The higher the multiple, the more value the market is placing on future earnings growth.

    Many tech companies aren’t profitable; the price-to-earnings ratio can’t evaluate them. Revenue growth matters more for these younger companies – if you’re investing in something unproven, you want to make sure it has solid growth prospects.

    For unprofitable tech companies, it’s also important that the bottom line be moving from losses toward profits. As a company grows, it should become more efficient, especially when it comes to the sales and marketing spending necessary to close deals. If it’s not, or if spending is growing as a percentage of revenue, that could indicate that something is wrong.

    Ultimately, a good tech stock is one that trades at a reasonable valuation given its growth prospects. Accurately figuring out those growth prospects is the hard part. If you expect earnings to skyrocket in the coming years, paying a premium for the stock can make sense. But if you’re wrong about those growth prospects, your investment may not work out.

    Investing in tech stocks can be risky, but you can reduce your risk by investing only when you feel confident that their growth prospects justify their valuations.

    Recent articles

    featured-transcript-logo

    i3 Verticals Inc (IIIV) Q4 2020 Earnings Call Transcript

    IIIV earnings call for the period ending September 30, 2020.

    woman shopping online on laptop with credit card

    3 E-Commerce Stocks to Consider Not Named Amazon or Alibaba

    All three of these companies are priced with the expectation of lots of future growth, but investors shouldn't write them off as too expensive.

    GettyImages-1190305473

    Should Tencent Investors Worry About China's New Anti-Monopoly Rules?

    Investors were likely relieved after the Chinese internet giant's reassuring conference call.

    GettyImages-890669320

    Avoid this Trendy Stock No Matter What

    The biggest software IPO in history is still too rich for my blood.

    video games streaming

    Here's Why the Best Is Yet to Come for Corsair Gaming

    The market for gaming peripherals is expanding as casual gamers indulge in a new passion and Corsair hopes to capitalize.

    3_E-Commerce_Stocks_Besides_Amazon_Set_for_a_Huge_Holiday_Season

    3 E-Commerce Stocks Besides Amazon Set for a Huge Holiday Season

    Amazon is a lock to have a huge holiday season, but it's not alone. Here are three more stocks set for a big e-commerce boost as we sprint toward the end of 2020.

    GettyImages-1174240964

    3 Tech Stocks That Look Like Bargains Today

    Investors looking for a deal should snatch up shares of these companies.

    What_to_Do_When_You_Just_Don_t_Understand_a_Tech_Stock

    What to Do When You Just Don't Understand a Tech Stock

    A simple plan for dealing with a stock that you can't make sense of as an investment.

    GettyImages-1130794858

    Forget Bitcoin! Buy These 3 Tech Stocks Instead

    Here's why these promising tech stocks could beat bitcoin.

    What_to_Look_for_From_Redfin_Over_the_Next_5_Years

    What to Look for From Redfin Over the Next 5 Years

    As the company's business continues to evolve, what does the future hold for Redfin?

    王中王开奖一马中特