In this article we will take a look at the 10 best technology stocks to buy for long term. You can skip our detailed analysis of the technology industry’s outlook for 2021 and some of the major growth catalysts for tech stocks and go directly to the 5 Best Technology Stocks to Buy for Long Term.
We are living in era completely transformed by technology. Tech companies now hold the key to the future. Technology is swiftly becoming a key player in major domains like education, healthcare, communications, retail, restaurants and leisure. Over the last 12 months, the Technology Select Sector fund, which measures technology stocks performance on the S&P 500, has performed better than the wider market with a 51.88% total return. This beats Russell 1000’s total returns of 49.24%.
Dan Ives from Wedbush Securities recently said that tech stocks still have an upside potential of roughly 25% to 30% on average for the remainder of the year. Tech stocks in 2021 are up by approximately 6.98% as measured by S&P 500 Information Technology Index.
In 2020, dependency on big tech grew rapidly as homebound businesses and Americans turned to software and cloud-computing services, video streaming and online shopping. Facebook, Inc. (NASDAQ: FB), for instance, recorded slightly over 3 billion monthly users across all their communication platforms. 98% of Facebook, Inc. (NASDAQ: FB) total revenue comes from advertising. In April, Wedbush initiated a coverage on the stock, rating it “Neutral” with a target price of $355. As Facebook, Inc. (NASDAQ: FB) is behind growing platforms like Instagram and WhatsApp, the company’s revenue stream is highly diversified.
Alphabet Inc. (NASDAQ: GOOG) is another technology stock that is set to benefit long-term investors. Alphabet is seeing growth in advertising, Cloud, smartphone apps and several other businesses it owns. The company’s Google Cloud and Vodafone Group Plc (NASDAQ: VOD) recently announced their six-year partnership designed to help introduce new digital service and products for all Vodafone customers across the globe. Evercore ISI recently initiated a coverage on the stock and rated it “Outperform.” The price target is set at $2,525.
Another tech stock worth investing is Twitter, Inc. (NYSE: TWTR), a go to place for news for millions of people, including famous journalists and politicians. Wedbush recently set a price target of $75 for Twitter, Inc. (NYSE: TWTR). Twitter stock recently shed value even after the company posted strong Q1 results. However, the losses were offset on the news that Paul Singer’s Elliott Investment Management had bought $200 million worth of Twitter shares after the earnings dip and planned to keep buying the stock. According to Bloomberg, Elliott told its clients that the Twitter selloff was overdone.
Warren Buffett once used to avoid tech stocks. But today his hedge fund, just like several other funds in the industry, are loading up on tech stocks. You will find several stocks in our list of best technology stocks to buy for long term in the portfolios of notable hedge funds. This is a sign of a major change. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this background in mind, let’s start our list of 10 best technology stocks to buy for long term.
Best Technology Stocks to Buy for Long Term
10. DoorDash, Inc. (NYSE: DASH)
No. of Hedge Fund Holders: 38
DoorDash, Inc. (NYSE: DASH) is a U.S-based online platform for food ordering and delivery. It is one of the best technology stocks to buy for long term because food delivery business is gaining traction on the heels of the pandemic. More people are opting to order food online rather than visiting restaurants during the outbreak, and this trend might be here to stay even after the viral threat is subdued.
Another reason why DoorDash might be a great buy right now is the fact that it is looking for opportunities to expand its services into the European market through potential acquisitions. DoorDash, Inc. (NYSE: DASH) recently collaborated with Walgreens Boots Alliance (WBA.O) for same day deliveries in the U.S.
DoorDash, Inc. (NYSE: DASH) revealed in its Q4 2020 financials that its revenue during the quarter was $970 million, a substantial improvement from the $298 million revenue it generated in Q4 2019. However, it reported a $312 million net loss or $2.67 per share in Q4 2020, compared to $134 million or $3.05 per share net loss in Q4 2019.
9. Twilio Inc. (NYSE: TWLO)
No. of Hedge Fund Holders: 94
Twilio Inc. (NYSE: TWLO) is a cloud communications platform that also allows software developers and engineers to programmatically receive and make calls, receive and send texts as well as perform several other functions via their internet service APIs.
Twilio Inc. (NYSE: TWLO) in March bought India’s leading communications platform, ValueFirst, with the goal of tapping into the Indian market that’s rapidly growing every year. In the past fiscal year, ValueFirst processed more than 42 billion texts, which made them the largest messaging aggregator in India. Twilio Inc. (NYSE: TWLO), in April 2020, also opened an R&D office in Bengaluru, South India.
In March, Twilio Inc. (NYSE: TWLO) invested $750 million in Syniverse, a mobile messaging marketing company owned by The Carlyle Group Inc. (NASDAQ: CG). Under the agreement, Syniverse will route, process, and deliver application-to-person messages to and from Twilio’s customers and mobile network operators.
TWLO ranks 9th in the list of best technology stocks to buy for long term.
Our calculations show that Twilio Inc. (NYSE: TWLO) ranks 29th in our list of the 30 Most Popular Stocks Among Hedge Funds.
8. Match Group, Inc. (NASDAQ: MTCH)
No of Hedge Fund Holders: 72
Match Group, Inc. (NASDAQ: MTCH) is a technology and internet company that both owns and maintains the biggest portfolio online dating services, including Hinge, OKCupid, Meetic, Match.com, Tinder and OurTime.
The company easily beat Q1 estimates and saw double-digit subscriber gains. The company’s total revenue was around $667.6 million, a jump of 22.6%. There was healthy growth from the non-Tinder brands. It had a $189 million operating income, up 38%. There was also a 12% increase of average subscribers to slightly over 11 million as well a 9% increase in the ARPU, which was $0.64.
Match Group, Inc. (NASDAQ: MTCH) has been upgraded at BTIG with a price target of $175. Evercore ISI also initiated a coverage on the stock with an “Outperform” rating and a price target of $180.
Match ranks 8th in the list of best technology stocks to buy for long term.
Like Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG) and Twitter, Inc. (NYSE: TWTR), Match Group, Inc. (NASDAQ: MTCH) is also thriving in the midst of the pandemic.
“During the first quarter, we initiated a new investment. We bought shares in Match Group, which is the leading global provider of online dating services. Match Group, Inc. (NASDAQ: MTCH) operates both a free service and a paid subscription service. It offers its services via mobile apps like Tinder and Hinge, as well as legacy services like Match.com. Match Group has tailored apps that cater to many demographic groups both in the U.S. and internationally.
The online dating market has grown in the U.S., from a single-digit percentage of new relationships in the 2000s to about forty percent today, according to the Pew Research Center, an independent social research organization. The company’s addressable market is large. In the U.S. there are about 50 million singles under 40 years of age and there are 600 million singles globally who have smartphones. Match Group, Inc. (NASDAQ: MTCH) currently has just 11 million paying subscribers globally. As the stigma towards online dating diminishes worldwide, subscribers and utilization should continue to grow.
Despite spending little on advertising, the company’s user and subscriber base has grown. As this base expands, its network effect strengthens. Once Match Group, Inc. (NASDAQ: MTCH) gains a new subscriber there is clear lifetime value at very little additional cost. This incremental profitability affords Match a wide operating margin and strong free cash flow. Worth noting is that the largest cost to acquire a new subscriber is the app store fee. This fee may decline over the next five years.
This enviable business model has grown its earnings 30% per year for the last five years. Our research leads us to believe that this growth is sustainable for the next half-decade and perhaps longer. Lastly, given Match’s low incremental cost of servicing an additional subscriber and its proven ability to introduce higher-priced services, we would expect that Match will be relatively shielded from any negative inflationary effects and any accompanying higher costs.”
7. Pinterest, Inc. (NYSE: PINS)
No. of Hedge Fund Holders: 95
Pinterest, Inc. (NYSE: PINS) is a social media and image sharing service provider that allows users to both save and discover information on the web.
In its first quarter 2021, Pinterest saw a 78% YoY increase in revenue to $485 million. For Q2 the revenue is expected to grow 105% YoY. Global ARPU for Q1 was $1.04, up 34% YoY, while international ARPU jumped 91% to $0.26.
To respond to the ever-growing global consumer demand and to help merchants worldwide bring both their services and products online easily, Pinterest, Inc. (NYSE: PINS) has expanded its Shopify partnership to 27 new countries.
Pinterest ranks 7th in the list of best technology stocks to buy for long term.
Pinterest, Inc. (NYSE: PINS) is fast becoming a major social media platform like Facebook, Inc. (NASDAQ: FB) Twitter, Inc. (NYSE: TWTR) and Match Group, Inc. (NASDAQ: MTCH).
“Pinterest, Inc. (NYSE: PINS) is an operator of a pinboard-style social media website that enables users to create theme-based image collections for events, hobbies, and other personal interests. The firm delivered another quarter of both earnings and forward guidance above investor expectations, sending shares higher. Strength was driven by notable user growth and a return of advertising spending. We remain excited about an increase in video content, new analytics tools for advertisers, and an increasing shift towards ecommerce.”
6. Spotify Technology S.A. (NYSE: SPOT)
No of Hedge Fund Holders: 48
Spotify Technology S.A. (NYSE: SPOT) is a music streaming service provider that offers ad-supported services and commercial free music to subscribers. The company is increasing its prices in various regions including Family and Duo plans in UK and Europe. It also raised family plans in US to $15.99 per month from $14.99 per month. As part of its new initiative Project Boombox, Facebook, Inc. (NASDAQ: FB) will allow users to listen to music hosted on Spotify.
Spotify Technology S.A. (NYSE: SPOT) was recently upgraded to Buy from Hold at Pivotal Research with a price target of $340. Andy Uerkwitz, an analyst at Jefferies, also initiated coverage on Spotify with a price target of $360.
Spotify ranks 6th in the list of best technology stocks to buy for long term.
Guardian Fund, in its Q4 2020 investor letter, said that they acquired a position in Spotify Technology S.A. (NYSE: SPOT) because they believe that the company has a long runway of growth ahead. Here is what Guardian Fund has to say about Spotify Technology S.A. in their investor letter:
“At the current share price, Spotify basically only represents a fraction of the value they will be able to unlock in the growing market of audio entertainment. The key for Spotify is to change a variable cost base into a fixed cost base just like Netflix has. As the market share of the big labels, measured by the daily hours of engagement of the big labels, is declining, Spotify will be able to adjust its business model and create enormous operational leverage meaning that profitability will grow faster than expenses.
The music catalogue is not the business model. The value lies in the machine learning that drives discovery and engagement, the original content from people like Michelle Obama, Kim Kardashian, and Joe Rogan, the data analytics and distribution for artists, the direct and social relations artists can have with fans through music and videos. We believe that Spotify will be worth at least five times more in 2030.”
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Disclosure: None. 10 Best Technology Stocks to Buy for Long Term is originally published on Insider Monkey.