2020 was one of the best years in recent times for technology stocks. The S&P 500’s information technology industry was up around 40% year to date as of December 2020. For the same time frame, the S&P 500 was up 14.8 percent. Investors do not expect technology names to always outperform the market in this manner. However, the gradual digitization of shopping, working, and entertainment that the pandemic accelerated will begin to pay dividends for many tech names in 2021. Before you get started in angel investing, here are ten of the best technology stocks that you must analyze to invest in 2021.
1. Apple (AAPL)
Apple is the largest publicly traded company globally. With a market cap of over $2.2 trillion, it is one of the most profitable privately held company ranking at around $57.41 billion in just over the last 12 months. iPhone has historically been the cash-cow for Apple, but the tech giant is also exploring new avenues for profit generation. Recent reports published in Nikkei Asia said that Apple is planning to increase iPhone production by as much as 30%, leading to further bolstering of its income prospects.
2. Sonos (SONO)
Sonos is primarily an audio hardware company that builds sleek and smart speakers for home or corporate deployments. The company has a relatively small valuation of around $2.7 billion, which may lead some to question its growth prospects, but the firm has thrived in this competition-driven environment and has built a respectable user base. Sonos is in direct competition with Apple, Alphabet, and Amazon owing to its smart speaker offerings, but this factor could also lead it to become the target acquisition by these larger players in the long run. Industry experts expect the sales revenue of Sonos to grow by at least 10% in F.Y. 2021.
3. Adobe (ADBE)
Adobe has emerged as a behemoth in the creative content creation space. It is arguably one of the most optimistic stocks to own to bet on the aspects of human creativity. The company has numerous highly successful products in its portfolios, such as Adobe Acrobat Reader, Dreamweaver, InDesign, Photoshop, and Premier. The company is aggressively dominant in the digital media segment and is worth around $240 billion, with the prospects to grow by 10%-20% annually. It was also listed as one of U.S. News’ best stocks to buy in 2021.
4. Match Group (MTCH)
Match Group is an online dating company, which is perhaps the only option for investors looking to capitalize on the growing emergence of online matchmaking platforms. It is the parent company of Tinder, Match, OkCupid, Hinge, Plenty of Fish and forms an overall industry of its own. Match Group stock isn’t to buy and hold for 2021 alone; rather, it comes as a long-time bet that incentivizes the core aspect of humanity in this digital age. It is one of the shares that is guaranteed to provide the best returns in the long run.
5. Cisco Systems (CSCO)
Cisco is a highly mature, less risky blue-chip communication equipment company. It manufactures data center equipment, routers, switches, and other networking equipment, pays a 3.2% dividend with just 57% of its profits. Unlike several other tech stocks in the run-up to 2021, CSCO shares are still trading at a low multiple of 18 times earnings and 14 times forward earnings.
6. Alibaba Group (BABA)
Alibaba is another of the strongest tech stocks to invest in 2021, the Chinese counterpart of Amazon with a strong e-commerce market and thriving cloud division. Unlike Amazon, which has a forward P/E of more than 70, Alibaba has a forward P/E of just over 20 – and it is rising faster than the US-based e-tailer. BABA has increased revenue by 46.2 percent a year over the last five years, relative to Amazon’s 25.8 percent compound sales increase over the same time. BABA shares have room to expand in 2021 and beyond, thanks to the huge and rising consumer base that is the Chinese middle class.
7. Spotify (SPOT)
Spotify has effectively transformed digital music into a sharing activity, allowing friends to quickly curate and exchange playlists, as well as see what their connections are listening to right now. There is one thing to keep in mind about Spotify, which saw monthly active users (MAUs) increase by 29 percent to 320 million in the most recent quarter: it is not yet profitable. This is expected to change in the coming years, especially when Spotify expands into podcasts, which are expected to have higher margins than the music licensing industry. In a licensing deal worth more than $100 million, the most popular podcast on the planet will be exclusive to Spotify by the end of 2020.
8. Dropbox (DBX)
Dropbox, cloud storage, and sharing companies are relatively inexpensive in comparison to many other technology stocks. DBX trades at 24 times forward earnings; sales increased 13.8 percent last year, and non-GAAP earnings per share increased 100 percent year over year. The number of paid users increased to 15.25 million from 14 million a year ago, while the total revenue per paying customer increased to $128.03 from $123.15 a year ago. Dropbox, while working in a dynamic market, has effectively competed with storage behemoths and expanded steadily since its launch in 2007. In total, the organization has over 600 million registered users in 180 countries.
9. Facebook (FB)
Facebook, another part of the best tech stocks to buy that has entered the overall list of best stocks to buy, has been virtually too relevant for investors to overlook. With an estimated 3.21 billion daily active users through its family of applications, which includes Facebook, Messenger, Instagram, and WhatsApp, the company’s offerings are used by a sizable portion of the internet-connected population every month. The biggest risk heading into 2021 is regulation, but the fact is that if Facebook is forced to divest Instagram and WhatsApp, as some authorities have suggested, splitting these firms off into their stand-alone enterprises could unleash much more profit for FB shareholders.
10. AT&T (T)
AT&T is the last of the best tech stocks to invest in for the year. It lacks the growth prospects of most of the other names, but it excels in another area: relative stability and its dividend yield, which is currently 7.2 percent. T stock, which trades at about nine times forward earnings, is the type of dependable, grounded brand that a portfolio of tech stocks requires to help minimize uncertainty. AT&T’s acquisition of the Warner Bros. studio, along with the comparatively recent HBO Max subscription network, gives AT&T a convincing portfolio of 2021 movie releases that will be available exclusively on HBO Max at the time of their theatrical debuts.
This is perhaps one of the best times to park your money in a booming tech stock. With the increasing trend of digitization and the rising prevalence of cloud-based services, the future of the tech industry looks very bright in the medium to long term.