Tech stocks are some of the most exciting businesses in the stock market. Not only do many of these companies generate substantial growth, but the stock can generate substantial gains.
The stories that management tell, the rapid advances in their products and services and their evolving businesses are fun. It makes following these companies lively and exciting. Furthermore, many of these companies make products that we not only use as consumers, but actually love.
While the stock market continues to make new high after new high, not all stocks are enjoying the same ride. Some are. But certainly not all. As we slog through August and approach the last four months of the year, I want to take a closer look at tech stocks.
Specifically, I want to look at seven tech stocks to buy heading into year-end.
- Advanced Micro Devices (NASDAQ:AMD)
- Pinterest (NYSE:PINS)
- Roku (NASDAQ:ROKU)
- Zoom Video (NASDAQ:ZM)
- Salesforce (NYSE:CRM)
- BigCommerce Holdings (NASDAQ:BIGC)
- Amazon (NASDAQ:AMZN)
Tech Stocks to Buy Into Year-End: Advanced Micro Devices (AMD)
While not all tech stocks are hitting new all-time highs, this one certainly is. Advanced Micro Devices recently exploded higher, rallying more than 30% in six straight, high-volume sessions following earnings.
The interesting thing is that AMD stock initially dipped on earnings. I couldn’t believe it, not only because the quarter was so strong, but because the stock had been consolidating for so long before that.
Not too long ago, I offered that AMD should eventually enjoy a big rally much like Nvidia (NASDAQ:NVDA). Like AMD, NVDA was doing quite well but the stock was stuck in a consolidation phase. It then exploded higher on earnings.
Now with some pep in its step, I like AMD going into year-end. The stock is giving us an excellent pullback opportunity to buy. While it’s always possible AMD underperforms the market or gets swept up in a market-wide correction, it looks like it could be at the beginning stages of a new uptrend.
After a year of quiet price action, this one may finally reward patient bulls.
One stock not hitting new highs? Pinterest. This stock was absolutely buried on earnings, suffering a one-day drop of 18.2%. Now down almost 40% from its all-time high, shares are approaching the May low.
My how things can take a big turn in just one quarter. It wasn’t long ago that PINS stock was knocking on the door to $90 a share, inevitably putting $100 in play should it have cleared this level. Now it’s trying to find its footing in the $50s.
The worst part is, Pinterest is doing quite well from an earnings and revenue perspective. Its balance sheet is strong and its margins are incredibly attractive. From a business perspective, this is an excellent holding. However, there’s one major issue: users.
The company reported a drop in monthly active users. When it comes to social media companies, investors could seemingly care less about the headline numbers and profit margins, as their main focus is on user growth and monetization.
Pinterest has a users problem and that could weigh on the stock. One could argue that the warm summer months combined with eased Covid-19 restrictions have hit just about every social medium. That’s true. But Pinterest needs to prove itself here.
If you think this is just a one- or two-quarter issue, stepping into a high quality business that’s down between 40% and 50% may be worthwhile.
Tech Stocks: Roku (ROKU)
Roku is in a similar position to Pinterest, although it appears less dire when you look at the price action. Shares recently notched a new all-time high, which is somewhat surprising when considering the bear market we just saw in growth stocks in Q2.
In any regard, ROKU stock did a good job shaking that selling pressure off — even though it has come back under pressure since earnings.
While the company crushed estimates across the board and delivered solid guidance, its users were also below Street expectations. Again, with the summer in full swing, people taking trips and spending time with each other, we had to assume streaming video platforms would dip, right? That’s especially true given the year-over-year comps and what the world looks like now vs. one year ago.
While active accounts did grow 28% to 55.1 million, analysts were looking for “at least” 55.8 million. Further, “streaming hours in the quarter rose 19%, to 17.4 billion.” Personally, those numbers look pretty good to me (and the slight miss on the first number seems like a bad reason to sell a good business).
As we enter the back half of the year amid a resurgence in Covid cases and a backdrop of secular growth via cord-cutting, Roku seems like it could be a winner.
Zoom Video (ZM)
And if you want to talk about a play on growing Covid cases, look no further than Zoom Video. While this one has found some upside vs. its 2021 low, it’s still well off the highs. Specifically, ZM stock is still down about 40% from the highs it hit in October.
Here’s an interesting observation about Zoom Video: The company was growing revenue impressively and was free-cash flow positive and profitable before Covid-19 was a global pandemic. It had a lofty valuation, but an absolutely incredible business. It was a really attractive business before all of this mess came along and it doesn’t seem like investors realize that. Obviously the stock exploded once Covid was here, as it may be the best business for such a situation.
In any regard, Covid cases are again starting to climb around the world. Despite that, Zoom Video isn’t gaining much traction. Maybe that’s a red flag for some investors, but it’s likely an opportunity for others.
Shares are well off the highs even though business remains quite strong, down about 42.5%. On the plus side, that’s allowed the valuation to come down considerably.
Tech Stocks: Salesforce (CRM)
Why could Salesforce be set for a second-half run? Because it’s been sitting on the bench for so long, it should be very well rested!
From late-August 2020, shares of CRM stock are down about 8% vs. a 27% gain for the Nasdaq 100 index. Clearly the acquisition of Slack is weighing on the stock a bit, as investors digest the acquisition.
Still, this type of underperformance is uncalled for. That’s especially true with analysts calling for 22% revenue growth this year and 20% growth next year. That’s forecast to continue for many years ahead. I don’t know when Salesforce will eventually rally, I just know that it will likely do so. Maybe that time isn’t all that far away.
When you look at Salesforce’s long-term performance, its growth has been consistent and impressive. I think that eventually, this performance will come back into play and the stock will find some momentum.
BigCommerce Holdings (BIGC)
Most investors are likely familiar with the stocks on this list. However, BigCommerce Holdings may not be one that everyone knows. Since going public a year ago, we’ve seen a lot of ups and downs in this one.
The company describes itself as a software-as-a-service (SaaS) e-commerce platform that “empowers merchants of all sizes to build, innovate and grow their businesses online.” In other words, think Shopify (NYSE:SHOP) or even ContextLogic (NASDAQ:WISH)… only without the latter’s woes.
After popping higher, shares dropped hard, falling almost 40% just a few days after setting its post-IPO high. But then BIGC stock more than doubled not too long after that.
Since those heavy volatility days, BigCommerce has settled into a calmer range, albeit one that has resolved lower to new lows since the IPO. I think that’s a good thing, though. The decline in price gave investors a few more quarters to evaluate the business, while allowing the valuation to come in a bit. Now firming up a bit, this one could enjoy a nice ride into year-end.
Analysts expect about 30% revenue growth this year and 22.5% growth next year. If BigCommerce can deliver the goods, this stock could see a nice rally in the next few months.
Tech Stocks: Amazon (AMZN)
Yes, the irony of following BigCommerce with BIG commerce isn’t lost on me. However, as a stock, this one just can’t seem to find its footing. Almost all of the other FAANG stocks have found some sort of groove, but not Amazon.
Interestingly, AMZN stock gave traders one of the cleanest breakouts I’ve seen in quite some time. Shares exploded up through long-term resistance, as the stock continued to consolidate for the better part of a year.
The breakout occurred just after Jeff Bezos handed over the reigns as CEO. But that post-Bezos pop didn’t last long. Once Amazon delivered a rare revenue miss and disappointing guidance, the stock quickly tumbled.
Now finding buyers near key support, I wouldn’t be surprised if this one eventually found its groove in the fourth quarter. We already know Amazon will dominate the holidays and its cloud business remains as strong as ever. There may be some bumps along the way, but we’re just a stock split away from seeing a major rally in this name.
On the date of publication, Bret Kenwell held a long position in AMD, PINS and ROKU. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.