Winners & Losers: Tech Investing Special Report, Part III

Let's get to the nitty-gritty -- stock by stock

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Intel

Intel (NASDAQ:INTC) has suffered as its core PC market has slowed and its late entry into mobile continues to take a toll. CEO Paul Otellini announced in 2012 he would be stepping down and the company will undoubtedly be looking for a replacement who “gets” mobile. Will Intel’s Ultrabook standard gain traction in 2013 (especially now that it has touchscreen capability as a requirement)? Will rumored talks with Apple result in Intel chips in iPhones and iPads? After missing the boat and losing out to ARM Holdings (NASDAQ:ARMH), Qualcomm (NASDAQ:QCOM) and others, will Intel crack the mobile market in a big way in 2013? If any of these pan out, Intel stock could see significant gains on the year.

Barnes & Noble

Barnes & Noble (NYSE:BKS) joined the ranks of technology companies with the release of the Nook e-reader in 2009, expanding its offering into a line of e-readers and tablets. At one point (pre-Kindle Fire), the Nook tablet was the bestselling non-iPad tablet in North America. Despite a $605 million investment from Microsoft in 2012, the Nook business has suffered as Amazon’s Kindle Fire, Google’s Nexus 7, then Apple’s iPad Mini ate into the small tablet market the Nook once led. The question in 2013 is will Barnes & Noble spin off the Nook unit (a deal is rumored to be in the works with Microsoft), will it exit the e-reader and/or tablet market altogether or will it try to stick it out?

Amazon

With bricks-and-mortar retailers like Best Buy (NYSE:BBY) fighting back against “showrooming” by matching Amazon’s pricing, increased competition in the tablet space, ongoing litigation about e-book price fixing and DRM, and rumors of a Google same-day shopping service tie in to local merchants, Amazon faces many challenges in 2013. The company has invested a fortune in building up infrastructure ranging from order fulfillment warehouses to cloud data centers and makes little money selling its Kindle devices — instead counting on them to draw in buyers of its digital media (e-books, movies and music). This has translated to modest profits ($82 million profit on $16.07 billion in revenue in the first quarter) and any competition could eliminate that slim profitability.

However, the core numbers have been increasing. In the first quarter, Amazon reported revenues up 22%, gross margins of 26.6% (up from 24% the previous year) but profit margin slipped to 1.1% from 1.5% a year earlier. Amazon’s investments are paying off, and 2013 could see the trend continuing.

Google

Google Glass, tablets, Chromebooks — with its increased focus on physical products in 2012, the company needs retail stores. But it still derives the vast majority of its revenue and profit from selling online ads. 2013 is shaping up to be the year that hardware starts to be more than just a blip on Google’s balance sheet, even as the revenue from those search engine-fueled ads continues to grow at an impressive clip. In its last quarter, Google reported revenue of $11.01 billion, up 35.3% from the previous year, with net income up 15.8%.

Facebook

The most recognizable social media company made the wrong kind of splash in 2012, with a disastrous IPO. Facebook (NASDAQ:FB) has struggled to prove to investors that it has a formula to monetize its hundreds of millions of users in a way that justifies its share price. Constant tweaking of its service — changing its Timeline and News Feed services to be more ad-friendly and the introduction of Graph Search — may result in attracting more advertising revenue, but also risks alienating users. The company is also working to get a handle on the shift to mobile from desktop. At the same time, it’s at a mature stage in terms of adding new users and is facing the prospect that key demographics (such as the younger users that advertisers covet) may be jumping ship to other social media platforms.

Samsung

If Apple was the elephant in the room last year, Samsung could well hold that spot this year. It had a string of hits in 2012, including the Galaxy S III smartphone and Galaxy Note II “phablet” and despite being sued constantly by Apple, still managed to move a ton of gear, taking the world’s top mobile phone seller crown from Nokia. It’s also got a head start in China, dominating Apple with over 30 million smartphones sold in that increasingly important market in 2012 (triple the iPhone’s numbers).

Coming into 2013, the Galaxy S 4 was one of the most anticipated phones of the year, Samsung is releasing the Galaxy Note 8 tablet to directly take on the iPad Mini, other mobile manufacturers are now copying its “bigger is better” approach and it’s churning out everything from TVs to refrigerators, offering “smart” connected options for them all. Samsung — more than any other consumer electronics company — is in the position to establish a foothold in the “connected home,” starting in the living room, the pocket, the office (computer) and even the kitchen and laundry room.

Conclusion

Investing in technology stocks can be very rewarding — as the Nasdaq shows. But timing is everything … and staying on top of the information is critical to knowing when to buy, when to bail and when to hold on. If you bought Apple stock at the start of 2012, your investment is still above water and you own shares in a company that’s producing some of the world’s most popular consumer electronics. But if you saw the warning signs — including ho-hum reaction to the iPhone 5, slipping tablet market share, growing smartphone market saturation in the U.S. and manufacturing challenges with sophisticated new products — and sold back in September, you would have been up nearly $250 or more a share, even if you waited until the stock began its slide.

Stay informed and know the companies, trends and variables in play and you’ll make the most of your technology stock investments.

At the time of publication, Moon had no positions in the securities mentioned.


Article printed from InvestorPlace Media, http://investorplace.com/2013/05/winners-losers-tech-investing-special-report-part-iii/.

©2014 InvestorPlace Media, LLC

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