When all is said and done, I think history will look back at the 2020 coronavirus market selloff as a once-in-a-lifetime opportunity to buy top tech stocks — and that’s why I’m using recent market weakness to find the top stocks to buy on the dip.
The logic is fairly simple.
The coronavirus pandemic — formally dubbed Covid-19 — is a big, scary and very serious issue. We need to direct all of our resources towards stopping the spread of this pandemic.
But, as big and as scary as it is, it’s also a temporary problem. China and South Korea are proof that social distancing works to defeat the virus, and in a relatively short time. If the rest of the world follows in their footsteps, then modeling suggests that “peak coronavirus” will strike in late April or early May. The virus — and related consumer hysteria — will fade thereafter.
Even if that doesn’t happen — and the virus drags on for several months — the big picture idea is that, at some point, the pandemic will end. Just like every single pandemic before it. The 1918 Spanish Flu. The 1957 Asian Flu. The 1968 Hong Kong Flu. All of those were very serious pandemics. All of them ended within a few quarters, thanks to a combination of herd immunity and other factors.
All in all, then, the coronavirus pandemic is a near-term headwind. Top tech stocks, however, are supported by long-term tailwinds. By 2025 or 2030, coronavirus headwinds will be long gone. Technology sector tailwinds won’t be. And top tech stocks will be way higher than where they are today.
With that in mind, here’s a few top tech stocks to buy on this dip:
- Facebook (NASDAQ:FB)
- Shopify (NYSE:SHOP)
- The Trade Desk (NASDAQ:TTD)
- Square (NYSE:SQ)
- Roku (NASDAQ:ROKU)
Top Tech Stocks to Buy: Facebook (FB)
There is general concern out there that, because the coronavirus pandemic has killed consumer discretionary spending across the globe, marketers are cutting their ad budgets. Such cuts mean that Facebook — which gets 99% of its revenue from digital advertising — is going through a significant slowdown right now.
That’s probably true. I can’t imagine that many companies are upping their ad spend during this pandemic (except for companies that sell hand sanitizer and face masks).
But, this slowdown is also temporary. Regardless of whether it’s two months or 12 months, the coronavirus pandemic will pass. Once it does, consumers will get back to spending, and advertisers will re-up their digital ad budgets. When they do, the bulk of that spend will make its way into the Facebook ecosystem, because that ecosystem has unparalleled global reach and engagement in the digital world.
Big picture: ignoring the temporary slowdown, Facebook remains a 20%-plus revenue growth company, which, thanks to a 2.7 billion user base, dominates the secular growth digital advertising market. Long term, FB stock won’t just rebound from this near-term selloff — shares will explode higher on the back of robust digital ad spending growth.
One of the market’s top tech stocks over the past several years has been e-commerce solutions provider Shopify. From early 2016 to early 2018, Shopify stock rose a jaw-dropping 2,300%.
The huge rally can be chalked up to the fact that Shopify is powering the future of e-commerce. That is, back when shopping was done in the physical world, every retailer needed a physical storefront. Now, though, a ton of shopping is done in the digital world. That means every retailer needs a “digital storefront,” or an e-commerce enabled website.
Shopify makes those websites. And they do a better job of making those websites than anyone else. As such, as retailers across the globe have invested heavily in upping their digital selling capabilities over the past few years, they’ve increasingly trusted Shopify to help them do just that.
Nothing about this growth narrative has changed because of the coronavirus. Consumers are still migrating from physical to digital shopping. Retailers are still going from investing in physical storefronts, to investing in digital storefronts. All the pandemic has done is put this growth narrative on hold, as consumers pause discretionary spend and retailers pause business investment amid the outbreak.
Once the pandemic passes, consumers will re-up spending, and retailers will re-up investments. The Shopify growth narrative will resume at full-speed. Shopify stock will rebound … and continue to charge way higher over the next several years.
The Trade Desk (TTD)
Alongside Shopify, programmatic advertising leader The Trade Desk has been one of the market’s top tech stocks over the past three years, a stretch in which TTD stock has risen 465%.
The multi-year strength in TTD stock can be attributed to the multi-year strength in the programmatic advertising space. Long story short, programmatic advertising uses data, algorithms and artificial intelligence to automate and improve the ad transaction process. That is, marketers previously relied on humans and guess-and-check processes to allocate ad spend. The Trade Desk automates and improves that process with data and technology.
Because programmatic advertising is simply better than traditional advertising, marketers of all shapes and sizes have pivoted towards programmatic advertising over the past several years. And, because The Trade Desk is the top demand-side platform in this space, these marketers have mostly chosen The Trade Desk as their demand-side programmatic ad platform.
The coronavirus pandemic will not derail this secular pivot from traditional to programmatic advertising. What it will do is depress ad spending trends for the next few months. That will weigh on The Trade Desk’s growth rates in the first and second quarters. But, once the virus is fully contained, that weight will be lifted. Ad spending trends will rebound. The programmatic ad spend pivot will continue. The Trade Desk’s growth rates will rebound.
So will TTD stock. And this rebound won’t be a near-term phenomena. Over the next several years, TTD stock will head meaningfully higher, on the back of secular tailwinds in programmatic advertising.
The long-term bull thesis on Square stock is pretty simple.
Through a series of first-class technology solutions centered around cashless payments processing, Square has turned into the payment technology backbone of small-to-medium sized businesses. Over the next several years, these businesses will continuously need to modernize themselves to keep up with rapidly changing consumer habits. They will spend more and more on Square’s payment tech products to help them do just that.
Long term, then, Square stock looks great, supported by increasing small business investment into payment tech.
Near term, though, the coronavirus has created an existential crisis for Square. Small businesses simply aren’t doing any business right now. And many of them don’t have the resources to withstand this sudden downturn. Many of Square’s customers are consequently looking at potential bankruptcy … soon.
But, help is on the way, through a $2.2 trillion stimulus package that should give small businesses appropriate resources to weather this current crisis. Thereafter, once the virus passes, pent-up consumer demand will drive a huge sales rebound. The small business growth narrative will get back to firing on all cylinders. Square will also get back to firing on all cylinders.
As will SQ stock, which at current levels, is woefully undervalued considering the company’s long-term growth potential.
In 2019, one of the market’s top tech stocks was streaming device maker Roku. Over the course of just 12 months, ROKU stock rose an impressive 300%.
That’s because, throughout 2019, it became increasingly clear that Roku is transforming into the cable box of streaming TV. The company has developed a centralized ecosystem which consumers use to access their streaming services, and which streaming services use to reach their customers.
In this sense, the company has created a digital marketplace that connects all the supply in the streaming TV world, to all the demand — much like a cable box did in the linear TV world.
This is a very valuable position to be in for Roku. There are billions of ad dollars sitting in the linear TV world, just waiting to chase consumption into the streaming TV realm. Over the next several years, that’s exactly what will happen. Billions of ad dollars will migrate from linear to streaming TV. As they do, a healthy portion of those dollars will flow into the Roku ecosystem, because the platform is where tens of millions of consumers across the country start their streaming TV consumption.
Sure, this growth narrative hit a snag with Covid-19 due to the pandemic depressing ad spending trends. But the pandemic won’t last forever. Neither will depressed ad spending trends. Once all of this reverses course, the Roku growth narrative will resume with exceptional momentum.
When it does, ROKU stock will get back to its long-term winning ways.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the best stock pickers in the world by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long FB, SHOP, TTD, SQ and ROKU.