Where to Invest 2021 Stock Market
Some of last year’s biggest winners are currently trading well after a tough start to the year. What stocks to invest in today?
The stock market had an unprecedented year in 2020, posting above-average gains as it faced a global pandemic. The benchmark S&P 500 index recorded a performance of over 16% last year, but the high-tech Nasdaq was the big winner in the equity market, climbing nearly 44%. Some of the biggest tech trends were clearly the winners last year like video streaming, cloud computing, and telemedicine.
However, in recent months, investors have bought stocks that they felt would benefit from the recovery, excluding many tech stocks, especially those that experienced the most growth last year. This has created some excellent bargains amidst these high-growth stocks in categories that combine the best products, services, and huge favorable winds. Finding companies with these characteristics could help you understand where to invest today.
Let’s take a look at the tech companies that will make you richer.
Roku: The Union of Video Streaming and Digital Advertising
Roku was one of the prominent protagonists of 2020; Roku ( NASDAQ: ROKU ) shares gained 148% for the year, but given its position as an industry leader, future opportunities remain huge.
While the company is best known for its media players and plug-in devices, Roku has a secret weapon. The company created an operating system (OS) for smart TVs from the ground up, licensed by a growing number of TV manufacturers. As a result, it is now the most popular smart TV operating system in North America, found in 38% of TVs sold in the United States and 31% of those sold in Canada.
A look at the company’s fourth quarter results shows that the strategy is paying off. Total revenue grew 58% year-over-year, but that only tells part of the story. Roku sells its players at or near a cost to expand its ecosystem. The company’s platform segment, which includes digital advertising, the Roku channel, and the Roku operating system, grew 81%, the highest growth rate in nearly two years. At the same time, average revenue per user (ARPU) increased by 24% and engagement increased as streaming hours increased by 55%. Viewers spent 17 billion hours using Roku-enabled devices in the fourth quarter, or roughly 3.5 hours a day glued to the platform.
As Roku straddles several categories, it’s hard to pin down how big the company’s total market is. It competes with the traditional TV advertising market and with streaming device makers like Amazon’s Fire TV – which Roku overtook to close 2020 – but the company’s biggest opportunity is digital advertising.
Left Brain Research analysts analyzed the numbers and concluded that Roku’s total market (TAM) was $ 535 billion in 2019 and is expected to grow to $ 769 billion by 2024. Roku’s total revenue last year it was $ 1.78 billion, illustrating the huge opportunity that remains.
Roku shares are now being sold at a 20% discount from its recent highs, making them a great investment opportunity.
Nvidia. The Intersection of Gaming, Artificial Intelligence and Cloud Computing
The events of last year proved beyond a shadow of a doubt that cloud computing is going to last. What many investors may not realize is that artificial intelligence and cloud computing are inexorably linked. All major cloud service providers layer their offerings with artificial intelligence (AI) to help companies analyze and manage their data. The sophisticated algorithms inherent in artificial intelligence help recognize patterns that might otherwise escape.
NVIDIA ( NASDAQ: NVDA ) is best known for its best graphics processing units (GPUs). Parallel processing, or the ability to simultaneously handle a series of complex mathematical calculations, has made it the gold standard, favored by serious gamers. It’s not all. It turns out that the same processing power that makes realistic images in games also makes GPUs natural when it comes to cloud computing and AI.
That’s why NVIDIA GPUs are the best choice of nearly every major cloud provider. This includes Amazon’s AWS, Microsoft’s Azure Cloud, Alphabet’s Google Cloud, International Business Machines’ IBM Cloud, and Alibaba Cloud, and these are just the big companies.
This was clear in NVIDIA’s fourth quarter results. Gaming revenue continues to dominate, growing 67% year-over-year and bringing the company’s total revenue in half. At the same time, the data center segment, which includes AI, cloud computing, and data center revenues, grew 97% year-over-year and now accounts for 38% of the total.
It could be just the beginning. NVIDIA management estimates that its addressable market will reach a total of $ 250 billion by 2023. NVIDIA generated $ 16.68 billion last year, which helps illustrate the magnitude of the opportunity that remains.
While NVIDIA gained 123% last year, its shares had recently fallen by as much as 23%. Investors have begun to see this opportunity, have rallied, but are currently down 8% which makes NVIDIA shares still a great investment opportunity.
Teladoc: A Future Between Medicine and Technology
The future of medicine was brought into focus last year with the accelerated adoption of virtual care, telemedicine and connected health devices. The demand for app-based medical examinations has soared. This has placed the industry’s leading supplier Teladoc ( NYSE: TDOC ) in pole position.
Now that the end of the pandemic is in sight, some investors believe the vast majority of patients will forego the ease and convenience of digital dating in favor of a return to in-person visits, but the evidence does not support this view. Recent studies suggest that most people will continue to use telemedicine. According to research conducted by Accenture, a survey of 2,700 patients revealed that 90% found that the quality of care received during app-based video visits with their doctor was as good, if not better, than regular outpatient visits.
Teladoc’s findings paint a convincing picture. Revenue increased 98% in 2020, while total patient visits increased 206%. While the final results were confused by acquisition-related costs and income tax complications, the company’s Adjusted EBITDA increased 298%.
The recent acquisition of Livongo Health places Teladoc at the forefront of another booming trend: the use of connected devices to manage chronic diseases. With over 147 million patients with at least one chronic condition, taking care of it regularly can be time consuming and expensive. By providing timely reminders and tips via connected devices and apps, patients enjoy a better quality of life. The process also lowers the cost of health care, to the benefit of insurers, creating a real benefit for all.
The combined addressable market of Teladoc and Livongo exceeds $ 64 billion. When taken in the context of the $ 1.09 billion in revenue Teladoc delivered in 2020, it illustrates the long track for future growth.
Teladoc (NYSE: TDOC) shares rose last year, gaining 139%. At this time, however, long-term investors can buy stocks at a significant discount. Teladoc has been involved in the rotation of tech stocks and has fallen 40% in the past two months, with no specific company news.
Conclusions
It’s important to note that these three stocks aren’t cheap in terms of traditional valuation metrics, which are pretty useless when evaluating high-growth stocks. Roku, NVIDIA, and Teladoc sell for 26, 21, and 15 times their sales, respectively, when a good price / sell ratio for a stock is generally between one and two.
However, given the industry-leading position, age-old favorable winds and huge addressable market for each of these companies, as well as their market gains over the past year, investors have been willing to pay for robust revenue growth and the potential that your profits will grow exponentially.