Other than some temporary hiatuses, technology stocks have had a stellar year so far and they are expected to continue to outperform in 2021. Technology companies that have been integral to the ongoing digital transformation have especially witnessed stellar growth in revenues this year thanks to the pandemic-led changes in consumer and business behavior. These companies are involved in improving the shopping experience, providing digital financial services, and connecting people virtually.
It is estimated that the size of the technology sector will reach $5 trillion in 2021, which would represent a year-over-year growth of 4.2%. This should bode well for many tech stocks.
Companies like Square, Inc. (SQ), Snap Inc. (SNAP), Sea Limited (SE), and Pinterest, Inc. (PINS) are at the forefront of digital transformation. They are working on emerging areas like e-commerce and virtual reality. There has been a significant spike in their stock prices this year and this trend is expected to continue in 2021.
Square, Inc. (SQ)
SQ develops and markets a point-of-sale software globally. Their platform helps users with digital receipts, sales reports, inventory, along with providing analytics and collecting feedback. SQ’s stock has gained 232.1% so far this year.
SQ has recently launched two major updates to their services. Square KDS helps users manage their kitchen by providing digital tickets, notifications and timers. Square Online Checkout allows vendors to receive payments through shareable links without the need for a website.
SQ’s trailing-twelve-month revenue grew at a CAGR of 55.1% over the last three years. The company’s forward five-year average EBITDA year-over-year growth rate is 51.1%. SQ is expected to witness revenue growth of 387.2% for the current quarter and 37.8% in 2021. The company’s EPS is estimated to grow 44.9% in 2021 and at a rate of 38% per annum over the next five years.
How does SQ stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating
The stock is also ranked #23 out of 236 stocks in the Financial Services (Enterprise) industry.
Snap Inc. (SNAP)
SNAP operates a social media app that allows users to send and receive images and short videos. The company’s app also offers a range of filters and virtual reality features. SNAP’s stock has gained 177.2% so far this year.
SNAP recently launched Spotlight on its app that allows users to submit snap videos to win prizes. Users can also simply view the Spotlight and pick their favorite snap videos. SNAP has also released Camera Kit, which will allow developers to add Snapchat’s VR features to their own apps.
SNAP’s trailing-twelve-month revenue grew at a CAGR of 45.2% over the last three years. The company’s forward five-year average year-over-year working capital growth rate is 38%. SNAP is expected to witness revenue growth of 51.2% for the current quarter and 41.5% in 2021. The company’s EPS is estimated to grow 344.4% in 2021 and at a rate of 67.4% per annum over the next five years.
It’s no surprise that SNAP is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Buy and Hold Grade, and Industry Rank. In the 58-stock Internet industry, it is ranked #9.
Sea Limited (SE)
SE has several diversified businesses including digital entertainment, financial services, and e-commerce. The company primarily operates in the Greater Southeast Asian region. SE’s stock has gained 358.4% so far this year.
SE’s e-commerce platform Shopee is collaborating with CapitaLand to help retailers in Singapore digitize their operations and diversify their offerings. Shopee has also signed a five-year strategic agreement with Visa (V) to help MSME’s digitize their businesses and also offer shoppers a more convenient shopping experience.
SE’s trailing-twelve-month revenue grew at a CAGR of 111.7% over the last three years. The company’s forward five-year average year-over-year capex growth rate is 118.84%. SE is expected to witness revenue growth of 78.9% for the current quarter, and 47.2% in 2021. The company’s EPS is estimated to grow 30.8% in the current quarter and 48.7% in 2021.
SE’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” in Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. It is ranked #10 out of 58 stocks in the Internet industry.
Pinterest, Inc. (PINS)
PINS operates as a social media platform that allows users to share and comment on photos and other digital assets. The platform also enables users to create theme-based photo collections based on hobbies, events, etc. PINS stock has gained 252.9% so far this year.
PINS recently released the Pinterest Shop: Holiday Collection, which is a list of the most searched for holiday gift ideas on the platform. The company has also released a range of new features for merchants to reach customers on the platform through faster Catalogs feed ingestion, videos for collections, conversion insights and analysis, and improved product tagging.
PINS’s trailing-twelve-month revenue grew at a CAGR of 36.5% year-over-year. The company’s forward five-year average year-over-year working capital growth rate is 47.4%. PINS is expected to witness revenue growth of 60.7% for the current quarter and 41.5% in 2021. The company’s EPS is estimated to grow 117.2% in 2021 and at a rate of 152.3% per annum over the next five years.
It’s no surprise that PINS is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Buy and Hold Grade, Peer Grade, and Industry Rank.
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SQ shares were trading at $200.33 per share on Tuesday afternoon, down $7.45 (-3.59%). Year-to-date, SQ has gained 220.22%, versus a 14.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks.4 High-Growth Tech Stocks to Own for 2021 appeared first on StockNews.com