- (0:45) – Secret Tech Companies You Should Be Watching
- (2:30) – Latin American E-commerce Stocks: MELI & PAGS
- (7:45) – GrubHub and Etsy
- (14:15) – Should You Own Match Group or IAC?
- (21:00) – Episode Roundup: [email protected]
Welcome to Episode No. 142 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
In this episode, Tracey is going solo due to a round of illness taking over the Zacks office in Chicago.
With everyone out sick, she ditched this week’s topic and focus on another area that is intriguing: growth-based tech stocks.
Tech Stocks: Growth Is in the Niche
While many investors already own the FAANG stocks, which have been great performers, they are often neglecting the other part of the story for tech stocks: the niche players.
These are tech stocks that specialize in an area many once believed would make them vulnerable to the dominance of bigger players, but, instead, their expertise has offered them some protection.
They include online retail and online payment systems in Latin America, restaurant delivery, online dating, an artist marketplace and home services.
Competition from the FAANG companies has actually elevated their game instead of bringing them down.
These tech stocks are having breakout quarters but is it too late to get in?
The Amazon of Latin America
One place investors can look for growth opportunities is in Latin America.
MercadoLibre (NASDAQ:MELI) is often called the “Amazon of Latin America” because it’s also an online retailer with a marketplace. But it’s much more than that.
The company has been expanding its mobile payments and wallet business. In the second quarter, digital wallet payer growth jumped 302%.
It’s payment system, MercadoPago, saw total payments rise 40.4% in USD to $4.4 billion in the second quarter.
As the middle class expands, there will be a demand for financial services, especially payment systems, that products like Pago can provide.
Shares are up 12% this year but analysts are bullish on the long-term prospects.
Elevating Their Platforms
Restaurant delivery giant GrubHub (NYSE:GRUB) has been acquiring competitors over the last few years, but it still faces competition from Door Dash, Caviar and Amazon Restaurants.
However, its recent acquisition of LevelUp, a platform that manages digital ordering, payments and loyalty programs for restaurants, could take GrubHub to another level.
Etsy (NASDAQ:ETSY) is another tech company that is putting money into its platform. Long known as the marketplace for artists and creatives Etsy is investing in its search capabilities and making structural improvements to SEO.
It seems to be paying off as revenue was up 30.2% in the second quarter. The shares have soared 121% in 2018.
Dating and Home Services
Online dating hasn’t gotten much respect from the Street over the years, but Match Group (NASDAQ:MTCH) has put together a strong portfolio of some of the top dating names such as Tinder, Match.com, Plenty of Fish and OkCupid.
With a forward price-to-earnings ratio of 36, it’s expected to grow earnings by 82% in 2018.
Angie’s List is no more as its merged with Home Advisor to create ANGI Homeservices (NASDAQ:ANGI).
This is the smallest of these niche companies, with a market cap of $1.3 billion.
Last quarter, revenue was up 17% year-over-year with European growth jumping 14%.
Where else should investors be looking for niche tech stocks?
Listen to this week’s podcast to find out.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report