When it comes to technology stocks, there are certainly opportunities to snag massive returns.
Imagine if you bought shares in cutting-edge tech companies like Microsoft Corporation (MSFT), Amazon.com, Inc. (AMZN) or Oracle Corporation (ORCL) in the early days.
As for now, there is no lack of exciting technology. Just some of the megatrends include mobile, cloud computing, the Internet of Things and big data. No doubt, there will be lots of opportunities for wealth creation.
OK then, what are some of the most cutting-edge tech companies right now? Well, here’s a look at five that stand out.
Cutting-Edge Tech Stocks: Tesla Motors Inc (TSLA)
The vision of Tesla Motors Inc (TSLA) is to lead the “next technological era of the automotive industry.” And so far, the company has been making good on this.
At the core of Tesla is the cutting-edge tech of its dual-motor powertrain, which uses two electronic engines that allows for better performance, efficiency and distance.
Of course, a key part to this is the innovative battery packs, which are based on lithium-ion cells and combine high storage density as well as cooling systems, charge balance and durability. In fact, the battery packs are likely to become a major business outside Tesla’s sales of autos. To this end, the company has built a massive Gigafactory, with the goals of driving down the price of battery packs by more than 30 percent and to achieve net-zero energy usage.
Keep in mind that another cutting-edge technology is the use of power electronics. In other words, Tesla has had to develop systems that efficiently distribute power to generate torque and allow for charging of batteries (such as by capturing energy from the wheels).
Oh, and of course, Tesla also has used other technologies like forward radar, long-range ultra sensors and sophisticated software algorithms to allow for vehicle stability and auto piloting. Hey, the company even has a Bio-Weapon Defense Mode! Essentially, this is a filtration system that removes nearly all particulate exhaust pollution, allergens and bacteria.
All this is amazing, right? Absolutely. But this also means that TSLA stock is far from cheap, with a forward price-to-earnings ratio of a hefty 66X. What’s more, the stock has a history of extreme volatility.
So for investors looking at TSLA stock, it is usually a good idea to wait for a drop when thinking of making a buy.
Cutting-Edge Tech Stocks: Alphabet Inc (GOOG, GOOGL)
Among technology stocks, Alphabet Inc (GOOG, GOOGL) gives investors an extensive portfolio of cutting-edge tech, which the company refers to as moonshots.
Just some of the projects include:
- Energy Kites: A new-age wind turbine that, yes, is tied to kites.
- Project Wing: The use of drones to deliver packages.
- The Spoon: A medical device that helps make it easier for those with Parkinson’s disease to eat food.
- Smart Contact Lenses: These will do much more than just correct your vision. Smart lenses will be powered by the sun and help collect information about your health, such as glucose levels and blood-alcohol levels.
Granted, there will be a plenty of flops. After all, there are already signs that the Nest business — which creates automated thermostats — is in trouble.
But the good news is that Google has a solid history of commercializing cutting-edge tech, such as with Android.
Besides, the company has several major business — like search, video and mobile apps — that continue to grow and throw off substantial amounts of cash flows. And the valuation on Google stock is attractive, with the forward price-to-earnings multiple 19X. This is not a bad price for a company that continues to remain highly innovative.
Cutting-Edge Tech Stocks: Rewalk Robotics Ltd (RWLK)
When Dr. Amit Goffer tragically became a quadriplegic, he did something about it. He founded a company, called Rewalk Robotics Ltd (RWLK), to create light, battery-powered wearable exoskeletons to make it possible for wheelchair-bound people to walk. The system relies on tilt-sensor technology as well as motion sensors, which detect a person’s center of gravity — allowing for natural motion.
Now, RWLK is still in the early stages, with revenues of $2.1 million in the latest quarter. As should be no surprise, a major customer is the Veteran’s Administration.
But going forward, there is lots of room for growth. For example, RWLK recently secured a contract for comprehensive coverage with a private insurer.
While the ability to walk again is incredible, there are other medical benefits of RWLK. Let’s face it, being confined to a wheelchair can result in secondary medical problems like osteoporosis, diabetes, heart disease, loss of lean mass and difficulty with bowel and urinary functions.
Finally, the market opportunity is large. In the US, the population of those with spinal cord injuries is about 273,000 and is growing by about 12,000 cases a year.
Cutting Edge Tech Stocks: Arista Networks Inc (ANET)
Arista Networks Inc (ANET) is a top developer of cloud-based networking systems. The platform, which is called the Extensible Operating System (or EOS), is highly customizable and also provides for in-depth analytics, network visibility and improved workflows.
All in all, these are the kinds of things that IT people want when it comes to managing their complex networks.
And in the case of ANET, the company has a stellar tech team. The co-founder and chief development officer is Andy Bechtolsheim, who was the co-founder of Sun Microsystems. He then went on to build Granite Systems, which he sold to Cisco Systems, Inc. (CSCO).
By the way, Andy was the first investor in Google!
Then there is the CEO, Jayshree Ullal. Her career in networking technology spans over 30 years. Actually, before ANET, she was at Cisco, where she was responsible for the $10 billion data center, switching and services unit.
OK, what’s the main goal with ANET? Really, it’s to get a big piece of Cisco’s business. In fact, the networking giant has filed a lawsuit regarding patent infringement.
But the legal situation does not seem to be a worry for ANET customers. In the latest quarter, revenues jumped by 35.3% to $242.2 million and the non-GAAP margins came in at a hefty 64.4%.
Then again, it seems like customers are making a major shift to cloud-based solutions, which should mean that ANET will continue to crank out strong growth for the long haul.
Cutting Edge Tech Stocks: New Relic Inc (NEWR)
When I recently talked to Lew Cirne — the founder and CEO of New Relic Inc (NEWR) — he said he was getting ready to code at an upcoming hackathon.
No doubt, he has a great engineering background, having worked at companies like Apple Inc. (AAPL). Then in the late 1990s, he started Wily Technology and sold it to CA, Inc. (CA) in 2006 for $375 million.
But he was way too young to retire, so he launched New Relic. For Lew, he saw that the IT market was poised for transformation because of the cloud and mobile. As a result, he developed a platform to help companies “collect, store and analyze massive amounts of software data in real time” so as to improve application performance, customer experience and business success.
This is something that has definitely been resonating with customers. In the latest quarter, revenues shot up by 57% to $52.5 million and the customer count came to over 13,500, up from more than 5,700 three years ago.
But the opportunity is still in the early innings. For example, New Relic currently has over 1,500 enterprise accounts but only 1% generate more than $1 million or more per year. In other words, there is a $1.5 billion revenue opportunity just within the existing customer base.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.