Even after a 75% drop in the crash this year, this tech stock is still up 245% in just three years and investors were up 12-times their money from the IPO to last year.
Unlike a lot of the pandemic stocks though, this company is profitable and booking sales growth that can take it back to that all-time high for a 300% return…and it’s just one of the tech stocks I’ll highlight in this video.
If you could only invest in one stock in different themes, which should it be! We’re going to cover all the strategies here from value to growth, dividends and by the end of the series, you’ll have a portfolio of the very BEST stocks to buy! So join the community and watch for those!
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And I’m excited for today’s video because there are no better stocks than tech to get you to your financial goals fast! You know we all love us some dividend stocks here on the channel but we also want the Lamborghini in the driveway! Now, we could invest in a safe dividend stock like Coca-Cola, investing a $1000 and hoping for a miracle but it would have taken 51 years to turn that into our little green machine! Pick the right tech stock though and you’re racing around the corners in half the time. Amazon would have turned just $1000 into over $270 grand in 20 years.
Following these fast-paced tech stocks means staying on top of the news so I want to personally invite you to get the Weekly Bow Tie, our free weekly newsletter with all the stock market news and trends you need to know. Each week, before the market opens, I’ll show you what I’m watching and the stocks that could highlight the week. It’s all totally free, just something I like to do for you out there in the community so look for the sign-up link below.
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I’ll start off with four tech stocks to watch, four runner-ups that almost made that top spot and that could produce even higher returns. I’ll also show you what I’m looking for in these so you can make your own decision and then reveal that best tech stock to buy right now!
Our first tech stock is the newest in the group with its IPO three years ago, Datadog Inc, ticker DDOG.
The company is an IT services provider, monitoring all the data generated from a business and then analyzing that for security, management and efficiency. From a unified platform focus in 2010 to a multi-product cloud monitoring system today, this is the kind of innovation we’ll talk about when I detail what I’m looking for in a great tech stock.
The company has historically spent upwards of 40% of its sales on research and development and other capital investments, helping to drive that constant innovation. And being able to cross-sell its 20,000 customers into different products makes them extremely sticky. More than four-in-five customers use at least two products and a third use four or more. It’s helped sales to grow at a 39% annual pace over the last three years while the company also gets more profitable, improving the operating margin to 0.34% from -5% in 2019 because it costs less to keep a customer than finding new ones.
Revenue is expected higher by almost 58% this year to $1.6 billion which means the shares are still trading pretty expensively at 21-times on a price-to-sales basis. That’s something you’ll notice about these fast-growing tech stocks…you’re going to pay for that growth.
The average analyst target of $155 would be a 42% return from here and even the low target is above the current share price but I wouldn’t mind watching this one for a while to see if the price comes down a little for a better value.
We’re just getting started but I want to get your input on this as well. Watch through the video and let me know which of these tech stocks to you like best, are there any of the runner-ups that should have been number one? So scroll down and let me know in the comments, which do you like best and why?
From the newest stock to one of the oldest tech stocks with Intuit, ticker INTU, around since 1993.
I was going to make a joke about that but couldn’t think of one that didn’t sound condescending to the young investors or make me feel really old…so let’s just pretend I said something funny and move on!
Intuit is the powerhouse behind the QuickBooks accounting software for small business and DIY TurboTax solution for individuals. With an estimated 80% of U.S. small business owners using QuickBooks, the company just dominates the market and the retention rate of 79% means it doesn’t fight the churn other companies struggle with.
Why I think Intuit is one to watch over the next few years is because it’s building a massive user base through acquisitions and just beginning to cross-sell across the platforms. Onto its 56 million TurboTax users and eight million Quickbook users, it’s adding mail delivery platform MailChimp’s 13 million users and a staggering 121 million Credit Karma users.
Intuit is transitioning into a cloud-first software model which is giving it mountains of customer data it can use to cross-sell products and extend its reach. Top this off with the growth in small business filings from all the new work from home freelancers and revenue growth is surging.
Sales grew at a 10% pace over the last three years but are expected 31% higher this year to $12.66 billion. Now that means the stock is still a little pricey at 10-times on a price-to-sales basis which is why this one didn’t make it closer to that top spot but analysts have an average target of $527 for the shares and 40% higher to the high target.
Now I know a lot of you just want a list of stocks but you know I can’t do that. I’m not about just telling you what to buy because like so many channels want, that just keeps you dependent on some Yahoo to make your decisions for you.
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We’ll get back to our list but give me two minutes to walk you through what I’m looking for in tech stocks because I promise, this WILL make you a better investor!
And this is going to start like we would with any stock, with that revenue growth and operating margin that sets it apart.
More than just a high rate of sales growth versus competitors or higher profitability in that operating margin, this is the best way to find those companies that have some kind of competitive advantage. Nation, most of us don’t come from the tech industry or have experience in this sort of stuff that will help us know which companies have the most innovative products. That means, if you can’t spend the time to become an expert in the technology, then you need to find other ways of spotting the advantages that make one company grow beyond its competitors.
Another way of finding those competitive advantages is through tracking how much the company spends on its research and development or capital expenditures as a percentage of revenue. This is really important for these companies that have to constantly be innovating to stay ahead. You find how much the company is spending on R&D under operating expenses on the income statement, and this is free on Yahoo Finance, and you want to take that number divided by revenue. So you see here that Datadog spent $419 million last year in R&D or about 40% of its sales.
That kind of aggressive budget for innovating is what made Intel the leader in semiconductors for so many years but then things started to slip and that was the first warning sign. After the dot-com burst, Intel started spending less on its R&D which meant it fell behind competitors and has never been able to take back that momentum.
Back to our list of tech stocks and another older company with amazing growth, Advanced Micro Devices, ticker AMD.
Between 5G, artificial intelligence, IoT and gaming, the demand for semiconductors is making it one of the fastest-growing industries and AMD estimates the addressable market at $135 billion.
AMD really picked up the ball when Intel lost its innovation edge and has never looked back. A bug in Intel’s newest data center processor allowed AMD to double its own data center revenue over the last year and it’s rolling out both the Zen 4 architecture and the world’s first five nanometer processor core later this year.
That innovation is driving revenue growth of 36% over the last three years and expected to hit 60% this year to $26 billion. Now the company does do a third of its revenue from PC and laptop processors so it’s struggling with the slowdown and shares are down 33% since November on that but this is a solid long-term growth story.
Top that off with a valuation story as well with shares trading for just 6.4-times sales compared to something like Nvidia trading at 16-times and you see how analysts get so bullish on the stock with an average target of $123 per share.
Next on our tech stock list is one I haven’t covered before, Hubspot Inc, ticker HUBS.
Hubspot operates a customer relationship management platform with 143,000 clients across marketing, sales, customer management and operations. And while I like Salesforce in the industry, they don’t do as well targeting the mid- and small-business market which is where Hubspot really dominates and uses the freemium model to attract new customers.
Revenue has grown at a 41% pace since 2014 with 56% growth in the international segment. Analysts are expecting 32% growth this year to $1.72 billion for about 9.8-times on a price-to-sales basis which is more expensive than the 6.1-times sales on shares of Salesforce but then again, Salesforce is only growing at a 20% annual pace.
Analysts see a 26% upside to the average target of $438 per share and 58% to the highest target on the stock.
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I’ll reveal that best tech stock to buy next but I want you to think back over the last six months…it hasn’t been all rainbows and unicorns, right? Tech stocks in the Nasdaq, here in red, plunged 30% in just six months and even the broader stock market, the S&P here in yellow fell into a bear market down 20%!
Now I want to buy that lambo just as soon as possible but if there’s one thing we’ve learned this year is, it can’t all be those high-return tech stocks! If you’ve panicked and sold a stock after the price fell, then you know how important it is to have a few other stocks to smooth out the portfolio. The perfect example for this is my favorite blue-chip stock, up 605% over the last 20 years…so still a very solid return but also only down 7% in the first half, so giving you that sleep at night protection for your money. I want to get to that number one tech stock but I’ll link to the blue-chip stock video below if you want to find out what that was.
And the top tech stock to buy right now, shares of Cloudflare, ticker NET, for its unique advantages and growth over the competition.
Cloudflare offers security, networking and applications services across a cloud platform which really makes it unique in being able to do all three and kind of the next generation to legacy companies like Cisco, Juniper Networks and Check Point Software.
Cloudflare already has more than 10% of global internet traffic going through its network because it has a unique advantage for security and faster delivery. Basically, it’s serving traffic from infrastructure in 250 cities around the world so it’s closer to points of origin. It’s a big advantage in speed and efficiency.
The company has plans to grow its addressable market by 17% through object storage and network services through 2024 along with higher market share of existing services to maintain a 51% annual growth rate since 2016. It’s expected to hit $958 million in revenue this year so smaller than most of the tech companies in the list but really leading its market.
Cloudflare targets 18-20% of revenue for research and development which helps it keep that competitive edge and the growth. Shares are down 74% from the November peak and analysts don’t see it back there just yet but the $89 average target price is 55% higher from here and I think a return to the peak of $220 a share could be just a few years away.
Check Out the Entire Just One Stock Series
