When Russia decided to invade Ukraine, it deeply miscalculated the West’s response. The Society for Worldwide Interbank Financial Telecommunication (SWIFT), a global provider of financial messaging services, sanctioned a selection of Russian banks. This crippled much of Russia’s financial system and contributed to the country’s counter-response in shutting down its stock market. American firms in the consumer goods industry also said they would curtail or shut down their businesses in the country.
Technology companies followed suit. The operational shut-down from leading firms in the information technology sector is critical. Russian military relying on computer hardware cannot update their systems. In a small way, it will set a time limit to Russia’s invasion. As the West supplies Ukraine with military equipment and related technology, Russia must rely on its aging equipment. Admittedly, technology companies that are predominantly consumer-facing may have a smaller impact on the Kremlin. Still, Apple (NASDAQ:AAPL), Intel (NASDAQ:INTC), and Airbnb (NASDAQ:ABNB) boycotting the country will hurt Russian consumers. The more inconvenienced they become, the more likely Russian citizens will question their government’s decision-making.
There are seven tech stocks investors should buy as the above-mentioned firms lead the boycott. They are:
- Apple (NASDAQ:AAPL)
- Airbnb (NASDAQ:ABNB)
- Meta Platforms (NASDAQ:FB)
- IBM (NYSE:IBM)
- Intel (NASDAQ:INTC)
- Microsoft (NASDAQ:MSFT)
- Netflix (NASDAQ:NFLX)
Tech Stocks to Buy: Apple (AAPL)
Apple announced on Mar. 1, 2022, that it would stop sales in Russia. In response to Russian President Vladimir Putin invading Ukraine, the consumer technology giant said it would suspend all product sales. It also removed Russian news apps. This includes Sputnik and Russia Today, news services that the Kremlin backs.
Apple’s stand against the invasion is a rare move. The company typically avoids taking a stand against governments. For example, Apple appeased the Chinese government by loosening some of its privacy policies in China.
Apple cannot afford to continue doing business in Russia. The hostile attack is against Apple’s core company values. If it did nothing, Apple fans may question what it means to support the company’s products. Furthermore, this war does not stop at military conflicts on the ground. It involves a misinformation war. Apple cannot let Russia’s government spread false information in the West or in Russia.
Apple’s growth in 2022 will not likely slow. The company announced a much-needed update to the affordable iPhone SE. The SE 3 will have 5G, a better processor, and a better camera.
Airbnb (ABNB)
To voice its opposition to Russia invading Ukraine, Airbnb said it would suspend all operations in Russia and Belarus. The announcement may look like a negligible stance. Airbnb would have no revenue from the region anyway after most airlines stopped flying to Russia at the time of the decision. Still, the company is supporting Ukrainians. It is offering temporary housing to up to 100,000 refugees fleeing Ukraine.
Beyond the boycott and war, markets are forgetting the company posted strong fourth-quarter (Q4) results. Q4 revenue grew by 38% compared to Q4 2019. When compared to the pandemic-hit Q4 2020 period, revenue grew by 80% year-over-year (YOY). Airbnb earned $55 million in income, a company record. Adjusted EBITDA of $333 million made this the company’s most profitable fourth quarter.
The company benefited from guests discovering thousands of small towns and rural communities. Domestic and non-urban travel bookings rose by 45% compared to Q4 2019. Customers are feeling more comfortable booking at urban destinations. Look for cross-border travel restrictions continuing to ease. This will result in higher revenue for Airbnb.
Tech Stocks to Buy: Meta Platforms (FB)
After reeling from a poor quarter, Meta Platforms is in the news again. In response to Russia’s internet censorship agency blocking Facebook, Facebook is allowing for more controversial posts.
On Mar. 11, 2022, Facebook said it would allow war posts. These posts are urging violence against Russian invaders on Facebook and Instagram. The stance is contrary to the company’s hate speech policy. Still, a Meta spokesperson said, “We still won’t allow credible calls for violence against Russian civilians.”
FB stock already traded in a highly bearish pattern since posting weak quarterly results on Feb. 2. Bottom-fishers tried to bet on the stock rebounding that month. After Russia invaded Ukraine, the stock continued on a downtrend.
Meta stock is highly bearish because investors are worried that Facebook and Instagram users will spend less time on those platforms. To counter the long-term slowdown, Meta is investing billions of dollars in its metaverse. Risks are high that the virtual reality platform will fail. In the last decade, technology firms tried, but failed, to transition gaming to virtual reality (VR) and augmented reality. They could not convince consumers to wear a VR headset. People preferred the computer screen or a non-3D OLED television instead.
IBM (IBM)
On Mar. 8, IBM said it would suspend all business in Russia.
IBM’s separation of Kyndryl on Nov. 3, 2021 is a turning point. The spin-off will allow IBM to concentrate on the hybrid cloud, software, and consulting. In Q4, IBM posted revenue of $16.7 billion. Software revenue rose by 8% and included around 5 points from external sales to Kyndryl. Consulting revenue rose by 13% YOY.
James Kavanaugh, IBM senior vice president and chief financial officer, highlighted IBM’s research and development efforts. The company is increasing spending in that area. It acquired 15 companies to strengthen its artificial intelligence (AI) and hybrid cloud capabilities. IBM stock is an inexpensive approach for investors to benefit from the automation, data, AI, and security sector.
The company ended the quarter with $12.8 billion in cash from operating activities. It held $7.6 billion in cash. Its debt of $51.7 billion includes financing debt of $13.9 billion. This did not prevent the firm from paying investors $5.9 billion worth of dividends in 2021. This makes it one of the best tech stocks to buy now.
Tech Stocks to Buy: Intel (INTC)
Intel said it would suspend all shipments to customers in Russia and Belarus. It will also raise funds to support relief efforts. Its decision aligns with the U.S. government sanctioning Russia. For example, the U.S. Department of Commerce limited the export of microelectronics and telecommunications.
Intel is a dominant supplier of processors that power computers. But investors get more than a PC supplier with Intel. On Mar. 7, the company’s Mobileye unit confidentially filed for a U.S. initial public offering (IPO). Mobileye develops technology that powers driverless cars.
The IPO may value Mobileye at over $50 billion. In 2017, Intel bought the Israeli company for just $15.3 billion. Investors will benefit from the capital gains windfall. Intel needs to monetize the unit before the technology sector falls further. It is spending billions to expand its manufacturing capabilities.
As a separately run firm, Intel will still have a close connection to Mobileye. It will remain relevant in the automotive chip market. More importantly, Intel will turn its focus back on growing its computer business, which is good news for the stock.
Microsoft (MSFT)
Microsoft suspended sales in Russia on Mar. 4. It is also coordinating its efforts closely with the U.S., European, and U.K. governments. This will increase the effectiveness of the government sanctions and help Ukraine. Microsoft is most keen on protecting Ukraine’s cybersecurity. The company is helping the country’s cybersecurity officials in Ukraine defend itself from Russian attacks.
For weeks following the invasion, Nasdaq’s selling worsened. This hurt MSFT stock. It also gives growth investors a better entry point as its price-to-earnings ratio declines.
Microsoft has multiple tailwinds ahead. To sustain the growth of its Office app, it updated the home screen. It also updated the Office app and Office.com to more tightly integrate Word, Excel, OneNote, and other Office apps. To increase the adoption of cloud technology, Microsoft is charging just $40 for Azure courses.
Slow adoption for Microsoft’s Windows 11 is a headwind. To encourage users to switch, the company introduced a new search experience and improved the file explorer tabs. Consumers will appreciate the better user interface. The higher satisfaction should drive Windows operating system sales higher.
Tech Stocks to Buy: Netflix (NFLX)
Netflix stopped its services in Russia on Mar. 6. NFLX stock, which plunged from over $500 to around $350 after posting results in January, is approaching attractive levels from here.
Investors punished the company’s stock after it posted weak customer growth. Although it issued a light outlook on customer growth for the quarter, the streaming giant has an attractive product. On Mar. 10, the streaming service raised subscription prices in the U.K. and plans to do the same in Ireland. Netflix will re-invest the higher cash flow to deliver quality U.K. production. It will also “’offer a wide variety of curated quality shows and films.’”
Netflix’s strategy to attract customers with better content instead of better prices will work. It cannot compete with larger, well-funded studios that have a bigger budgets. Runaway costs and high cancellations could damage the business permanently. Instead, Netflix will have an attractive library of content that suits its audience by region.
NFLX stock is at low historical price-to-earnings multiples. It only needs to post a quarter of strong subscription growth to win back investors.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
