The novel coronavirus pandemic is starting to rear its ugly head again, as the number of cases and hospitalizations across various states has risen amid looser economic and mobility restrictions. Wall Street’s worried, and stocks are falling off a cliff — even tech stocks who were, for the most, the superstars of the big March, April and May market rally. From its early June highs, the tech-heavy Nasdaq-100 index has shed 5%. That equals the index’s biggest plunge since the massive March selloff. So is it time to ditch tech stocks? Or is time to look for tech stocks to buy on the dip?
Here are three important reasons it’s the latter:
First, this “second wave” of Covid-19 won’t be as bad as the first wave. Our hospitals are better prepared. We have more ventilators and effective treatments to fight against the virus. Most Americans are wearing masks and practicing social distancing. Most businesses are adhering to CDC guidelines. And, perhaps most importantly as it relates to the economy, most consumers and policy-makers aren’t that scared of the virus anymore, i.e. we likely won’t see any more shutdowns on the scale we saw in March, April and May, and consumers won’t kill their spending like they did in those months, either.
In other words, while a second wave appears to be on the way, the worst of the Covid-19 crisis is over, and this second wave won’t stop the economy from reopening. It’ll just make things choppy. But, overall, economic activity will continue to trend higher from here into the end of the year.
Second, amid a chop in the physical economy reopening process, tech stocks will outperform. That’s because many tech companies don’t need the physical economy to be fully reopen for their business to fire on all cylinders. So long as consumer and enterprise spending continues to trend higher and the job market continues to improve — all of which should happen — then tech stocks will head higher, and meaningfully outperform the rest of the market which is more reliant on the physical economy being fully reopen.
Third, rates are at zero, and will stay there for a while. In a zero-rate world, tech stocks outperform, because lower rates mean lower discount rates, which means that future profits are worth more today, and future profits are where most growth/tech stocks derive all of their value.
All of that is just a long-winded way of saying buy the dip in tech stocks in June. And, with that in mind, the 15 best tech stocks to buy on the dip in June are:
- Shopify (NYSE:SHOP)
- LivePerson (NASDAQ:LPSN)
- Okta (NASDAQ:OKTA)
- The Trade Desk (NASDAQ:TTD)
- Twilio (NASDAQ:TWLO)
- Snap (NYSE:SNAP)
- Roku (NASDAQ:ROKU)
- Splunk (NASDAQ:SPLK)
- Benefitfocus (NASDAQ:BNFT)
- Chegg (NASDAQ:CHGG)
- Adobe (NASDAQ:ADBE)
- Pinterest (NYSE:PINS)
- Sprout Social (NASDAQ:SPT)
- Cardlytics (NASDAQ:CDLX)
- Facebook (NASDAQ:FB)
Tech Stocks to Buy: Shopify (SHOP)
E-commerce solutions provider Shopify was, at one point in the middle of May, up more than 90% year-to-date, on the idea that the Covid-19 pandemic would spark an unprecedented shift in commerce towards the online channel.
It did. In April, Shopify said they were handling Black-Friday-type traffic levels every single day.
Now, with the physical economy reopening, the e-commerce frenzy is cooling and consumers are once again shopping in-stores. Presumably, this has caused Shopify’s traffic volumes to fall off those peaks levels, which is why SHOP stock has dropped 6% off its recent highs.
But, Shopify is still the infrastructure and technology backbone of e-commerce, and e-commerce is still a growing global sector with a ton of a long-term potential. In other words, even though consumers are shopping in-stores again, the consumption shift towards e-commerce and Shopify-powered websites will continue for the next few years.
As it does, Shopify will sustain robust revenue and profit growth. So, amid recent weakness, SHOP stock is a great long-term stock to buy.
LivePerson (LPSN)
Another huge beneficiary of the enormous e-commerce pivot amid the coronavirus pandemic was LivePerson, a small tech company which provides AI conversational commerce tools that power smart chatbots across various online selling channels.
Because of this e-commerce boost — and LivePerson’s strong first quarter numbers — LPSN stock was, in mid-May, up more than 100% from its March lows.
Shares have since shed more than 12% on the idea that the broad coronavirus-inspired e-commerce tailwind is losing some momentum.
It is. But in the big picture, that doesn’t really matter.
LivePerson is one of the best stocks to buy for the next decade — not just during the coronavirus pandemic — because conversational commerce is the next big thing in e-commerce. That is, thanks to advancements in natural language processing, LivePerson is able to create smart chatbots which actually feel like real sales associates and meaningfully improve the online shopping experience. Over the next several years, you will see these smart chatbots pop up everywhere, and LivePerson’s growth trajectory will remain robust.
As it does, LPSN stock could soar to prices well above $100.
Okta (OKTA)
The proliferation of work-from-home policies amid the coronavirus pandemic created strong demand tailwinds for Okta, whose core Identity Cloud solution is the perfect cloud security solution in a world where employees are working remotely.
That is, as opposed to designing a centralized security system, Okta has designed a decentralized security system wherein identity is the security perimeter, meaning that an employee (and his/her data and workflows) are protected, regardless of where that employee is working.
Consequently, Wall Street pushed OKTA stock up nearly 70% year-to-date through late May.
But over the past few days, as some companies have laid out plans for their employees to return to the office, OKTA stock has dropped 10%.
This is a “buyable” dip in OKTA stock because the coronavirus pandemic did permanently change the work landscape in favor of Okta’s Identity Cloud solution.
That is, while some companies are returning employees to the office, a lot of forward-thinking companies are not. Facebook, Twitter (NYSE:TWTR) and Square (NYSE:SQ) are among a handful of companies that have shifted to quasi-permanent remote work for several employees. Shopify’s CEO even said the era of “office centricity is over.”
In other words, the elevated presence of remote work is permanent. So are the growth tailwinds supporting robust adoption of Okta’s mobility-first Identity Cloud solution, meaning recent weakness in OKTA stock is a great buying opportunity.
The Trade Desk (TTD)
Although the advertising industry was hammered in March and April, investors pushed up shares of programmatic advertising leader The Trade Desk to all-time highs on the idea that the pandemic accelerated the shift towards efficient, data-driven digital advertising.
Now, mostly in sympathy with other tech stocks, TTD stock has dropped more than 3% over the past few days.
This dip is a buying opportunity.
The shift towards efficient, data-driven advertising in a secular pivot. It was underway well before Covid-19 hit the economy. It will last long after Covid-19 goes away. And The Trade Desk will leverage its position as a leading demand-side programmatic ad platform to turn enormous data-driven advertising tailwinds into equally enormous revenue and profit growth over the next several years.
It also helps that the physical economy reopening over the next few months, will boost consumer spending, and in turn, boost brand advertising. Boosted brand advertising will create a tailwind for The Trade Desk. Not just because The Trade Desk is an ad platform. But also because corporate ad budgets will still be tight, and data-driven ad platforms like The Trade Desk offer companies the best way to maximize those tight ad budgets.
All in all, TTD stock looks ready to rally in a big way both into the end of the year and over the next several years.
Twilio (TWLO)
In the absence of being able to physically communicate (since the world shutdown), demand for cloud communications tools soared amid the coronavirus pandemic, and shares of Twilio — widely considered the world leader in text-based, business-to-consumer (B2c) cloud communications — powered higher.
At one point in in mid-May, TWLO stock was up more than 100% in 2020.
Shares have since dropped more than 3% on concerns that the huge coronavirus-inspired surge in cloud communications demand will unwind as the physical economy reopens, and companies can once again lean into physical communications.
That’s true. But at the same time, the physical economy reopening will broadly boost total economic activity, increase corporate IT budgets and give companies more firepower to spend on cloud communications.
In other words, any momentum Twilio will lose from the reopening of physical communication channels, should be offset by increased IT spending. Twilio’s growth trends should remain robust over the next several quarters.
Zooming out, text-based, B2C communications is relatively niche today, but will one day become ubiquitous given how engaged consumers are with their smartphones. As it does, Twilio’s platform will become increasingly mission-critical for consumer-facing brands, sparking huge revenue and profit growth at this company for the next several years.
All of that means that recent weakness in TWLO stock is nothing more than a buying opportunity.
Snap (SNAP)
At first, digital ad stocks were hammered by the coronavirus pandemic, on the idea that the crisis would kill ad spending everywhere. Then, digital ad stocks rebounded strongly in April and May, as multiple digital ad companies reported much better than expected quarterly numbers, which broadly corroborated that ad spending trends have actually remained relatively healthy amid the pandemic.
One of those digital ad companies that reported strong quarterly numbers was Snap.
Not only was Snap on fire prior to the pandemic (with revenues rising 58% in January and February, the biggest revenue growth rate in recent memory), but the company weathered the coronavirus storm with impressive resilience, too (Snap sustained 25% revenue growth in March, and 15% revenue growth in April).
SNAP stock soared more than 130% from its March lows to its May highs, with strong earnings being the big catalyst behind the rally.
Shares have since shed nearly 5%, mostly in sympathy with the broader tech selloff. But SNAP stock shouldn’t be down at all.
That’s because the U.S. economy reopening is a very good thing for Snap. It will boost economic activity, consumer spending and ad spending. Boosted ad spending will create meaningful tailwinds for Snap. The company should soon return to 50%+ revenue growth rates.
As it does, SNAP stock will bounce back, likely to levels above $20.
Roku (ROKU)
Around the $110 level, streaming device maker Roku is one of the best tech stocks to buy right now.
Long-term, the bull thesis here is compelling. Roku is gaining momentum as the “cable box” of streaming TV. Consumption is rapidly shifting from linear to streaming TV. There are a bunch of ad dollars sitting in the linear TV ad world that will inevitably chase that consumption into the streaming channel. A ton of those ad dollars will make their way onto the Roku platform, since it’s a central streaming service access-point for tens of millions of users.
Significant ad volume growth over the next few years will spark meaningful revenue and profit growth at Roku. That meaningful growth will keep ROKU stock on a long-term winning path.
Meanwhile, in the near-term, Roku has a unique opportunity to turn what was record-high user growth in the first quarter of 2020 amid the coronavirus pandemic, into record-high revenue growth in the back-half of 2020 as the global economy normalizes and ad spending trends re-accelerate higher.
At $100, ROKU stock simply isn’t priced for this re-acceleration. My numbers suggest that this stock can and will head towards $130 over the next few months.
Splunk (SPLK)
The cloud-based, big data analytics revolution kicked into overdrive amid the coronavirus pandemic for two big reasons. One, the enterprise digital transformation accelerated amid physical office closures. Two, tight budgets forced companies to lean heavier into a data-driven analysis of their operations to cut costs.
As such, leading big data analytics platform Splunk reported robust first-quarter numbers that helped pushed SPLK stock to all-time highs in May.
SPLK stock has since dropped about 6% off those all-time highs, mostly because investors are concerned that the reopening of offices may provide a headwind to what is presently supercharged demand for Splunk’s big data platform.
That won’t happen to any meaningful degree. Instead, because data analysis is mission-critical to both physical and digital organizations alike, demand for Splunk’s Data-to-Everything platform will only increase as the volume and value of data across the world explodes higher over the next several years.
Consequently, near-term weakness in SPLK stock is simply a breather before the long-term rally resumes.
Benefitfocus (BNFT)
Unlike many of the other stocks on this list, BNFT stock actually tanked amid the coronavirus pandemic.
Why? A weak labor market.
Benefitfocus provides cloud-hosted employee benefits management solutions to both benefits buyers (employers) and benefits sellers (insurance carriers). But, over the past few months, companies have been firing employees left and right, so much so that the unemployment rate presently sits at record highs.
Obviously, that’s not great news for Benefitfocus. The less people that are working, the less companies and insurance carriers spend on benefits, and the less those clients spend through Benefitfocus’ benefits management platform.
That’s why BNFT stock is down more than 50% year-to-date.
But the labor market will rebound over the next few months, as the physical economy reopens, pandemic hysteria dies down and consumer and enterprise spending trends pick up. As the labor market improves — and companies spend more money on hiring and on benefits — Benefitfocus’ underlying growth trends will meaningfully improve.
As they do, severely beaten up BNFT stock will rebound in a big way.
Chegg (CHGG)
One of the strongest performing tech stocks during the coronavirus pandemic was Chegg, which saw demand for its connected learning platform soar amid physical school closures.
Chegg Services subscriber growth, which was running at 33% in January and February, spiked in March to push the Q1 final sub growth rate up to 35%. This acceleration continued in April, and management believes that Q2 sub growth will be greater than 45%.
For perspective, Chegg hasn’t reported 45%-plus sub growth since 2016, when the platform was about a third the size of what it is today.
In other words, the Chegg growth narrative caught fire amid the pandemic. That’s why CHGG stock, at one point in May, was up more than 65% year-to-date.
Shares have since dropped about 12% off their all-time highs on concerns that schools may reopen sooner than expected, and that this reopening will dampen demand for Chegg’s services.
That may happen. But not to a large extent. The truth is that Chegg’s connected learning platform isn’t a replacement for school — it’s a supplement. As students return to the high schools and colleges in the fall, they will continue to use Chegg as a necessary, supplemental academic assistance tool.
Longer-term, Chegg is in the early stages of its growth narrative, powered by the global virtualized education megatrend. One day, this company’s connected learning platform will become ubiquitous across all high schools and colleges. Chegg is tapping into a small portion of that potential today.
As such, I see CHGG stock rallying towards $200 or higher within the next few years.
Adobe (ADBE)
Cloud giant Adobe has been a huge winner amid the coronavirus pandemic for one very simple reason: the pandemic has accelerated the enterprise and consumer digital transformations.
That is, in the wake of physical office closures, companies have increasingly accelerated their paper-to-digital transformations (thereby boosting demand for Adobe’s Document Cloud solutions) and doubled-down on creating world-class digital experiences (thereby boosting demand for Adobe’s Experience Cloud).
At the same time, amid widespread stay-at-home orders, consumers have increasingly adopted cloud-hosted creative media solutions (thereby boosting demand for Adobe’s Creative Cloud solutions).
All in all, the Adobe growth narrative didn’t miss a beat during the pandemic. So ADBE stock powered to all-time highs.
The stock has dropped more than 2% over the past few days. The big concern is that the reemergence of the physical economy will dampen demand for Adobe’s digital-focused cloud solutions.
It won’t. Covid-19 has permanently accelerated the enterprise and consumer digital transformations. Companies aren’t going to go back to paper-and-pen processes, or reduce their investment in creating digital experiences. By the same token, consumers aren’t going to stop creating media products for digital channels, like Instagram and YouTube.
These are secular growth markets. They will keep growing long after Covid-19 passes. As such, Adobe’s growth trends will remain robust, regardless of how Covid-19 plays out.
For that reason, Adobe is one of the best tech stocks to buy on the dip in June.
Pinterest (PINS)
One of my favorite tech stocks to buy both now and for the long haul is Pinterest.
The 2020 bull thesis on PINS stock is shockingly simple. As pandemic hysteria fades and the economy reopens over the next few months, consumer spending trends will rebound. That will power a rebound in ad spending trends. As ad spending trends rebound, Pinterest’s growth rates with accelerate higher, because the company is one of a handful of major digital advertisers in the world with a multi-hundred-million user base.
Rebounding growth rates will power a rebound in beaten-up PINS stock.
The long-term bull thesis on PINS stock is also shocking simple.
Pinterest is a unique social media app with a differentiated value prop centered around product/idea discovery and inspiration. As such, its 300+ million user base is exceptionally sticky. Pinterest is in the early stages of monetizing that sticky user base with ads. The company will be very successful in ramping this nascent digital ad business over the next few years, both because ads will seamlessly integrate into Pinterest’s visual-heavy, full-page feed and because Pinterest’s users are intent-driven and therefore more likely to interact with relevant ads.
In other words, over the next few years, Pinterest will create a very big digital ad business with high conversion rates.
As the company does that, PINS stock will roar higher — by 100% or more.
Sprout Social (SPT)
Another one of my favorite tech stocks to buy both now and over the next 10 years is Sprout Social.
The small-cap technology company provides cloud-based social media management software solutions, through an end-to-end platform that helps brands to do everything related to social media, from deciding what to post, posting, tracking the post, responding to posts and everything in between.
Demand for these solutions will surge in the near-term thanks to the coronavirus pandemic increasing the amount of time consumers spend on social media, and therefore, increasing the amount of time consumers spend interacting with brands through social media.
But that’s just the tip of the iceberg.
Long-term, Sprout Social’s social media management platform will become both ubiquitous and mission-critical for all consumer-facing brands, as companies increasingly sell product through social media channels (a part of something I like to call the social commerce boom).
Net net, Sprout Social is in the top of the first inning of a long-term, megatrend-powered growth narrative. That’s why I think SPT stock is one of the best tech stocks to buy for the next 10 years.
Cardlytics (CDLX)
Much like Sprout Social, Cardlytics stock is one of the best small-cap stocks to buy for the next 10 years.
Cardlytics is a $1.8 billion payment cards data company, which leverages the huge world of credit and debit card data to create data-driven bank loyalty programs that optimize spending by pairing relevant promotions and products with interested consumers.
It’s a genius idea that uses purchase intelligence to improve bank loyalty programs.
Data-driven bank loyalty programs will become the norm over the next few years. As they do, most of them will be powered by Cardlytics, which is a head-and-shoulders leader in this market with multiple big bank partnerships and data on one out of every two card swipes in the U.S.
Consequently, this small-cap company is in the first few innings of huge growth. That huge growth will power CDLX meaningfully higher than where it sits today, on the heels of coronavirus-related weakness.
Facebook (FB)
Last, but not least, on this list of top tech stocks to buy on the dip in June is Facebook.
Facebook stock surged to all-time highs amid the Covid-19 pandemic on two big ideas.
One, the company’s advertising trends held up with impressive resilience in March and April, and looked positioned to rebound meaningfully as the economy recovered in the second half of 2020. Two, the launch of Shops — a new end-to-end commerce solution that integrates into Facebook and Instagram — appears to be the perfect solution Facebook needs to crack the social commerce code and turn into a huge online retail marketplace over the next few years.
Although FB stock has dropped 5% off its all-time highs in June, those two growth drivers remain vigorous today.
A sooner-than-expected economic reopening across the U.S. implies a sooner-than-expected and bigger-than-expected rebound in digital ad spending trends. Meanwhile, Shops is still positioned to turn Facebook into a big e-commerce player soon.
As such, rebounding growth in its huge digital ad business and accelerating growth in its nascent e-commerce business mean that the recent selloff in FB stock will be abrupt. It will end. Soon. And when it does, FB stock will get back to rallying … maybe all the way to $1,000.
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 SHOP, OKTA, TTD, SNAP, ROKU, ADBE, PINS, FB and SQ.
