ROKU - Meltdown-Resistant Tech Stocks
Big Tech reached record highs since March lows, but the wheel of fortune keeps turning and now, the tech meltdown is pushing the market down. However, even if this wreck continues, there are stocks which are more insulated than others as the world can no longer imagine living without their products and services.
Amazon
Bank of America reported that the online retailer’s seller ecosystem contributes as much as 44% to total online sales in the US. Yet, Amazon (NASDAQ:AMZN) is much more than an e-commerce emperor whose model many have unsuccessfully tried to copy.
Amazon Web Services (AWS) is Amazon’s much greater cash cow as companies were increasingly shifting to cloud framerworks before COVID-19 started its relentless march across the globe. Revenue of this segment grew by 29% over the last reported quarter with full yearrevenues exceeding $43 billion. Its margins are way more attractive than retail or ad-based margins. Strong double-digit growth in AWS is fueling Amazon’s operating cashflow and this is expected to remain the case in the near-future.
Last Thursday, Amazon revealed the upgraded and lower version of its Fire TV Stick that hosts the content of Netflix (NASDAQ:NFLX), Disney’s (NYSE:DIS) Hulu and Disney+ and other streaming providers. With improved user experience, Amazon aims to gain a competitive edge over Roku (NASDAQ:ROKU) and Apple’s (NASDAQ:AAPL) Apple TV by including Dolby’s (NYSE: DLB) Dolby Atmos and offering video calling. To put it simply, Amazon is everywhere where it pays off to be as its business model is built to capitalize on worthwhile trends.
Fastly
Despite the wreck, the value of cloud computing services provider Fastly (NYSE:FSLY) cannot be reduced. It enables companies to deliver their content to final users as quickly and securely as possible. The importance of this capacity has only grown in emphasis with the pandemic as offices were forced to move to home mode and perform their operations in an entirely digital framework.
During its most recently reported quarter, Fastly enjoyed greater demand from its existing clients which were willing to spend more but also from new clients that came on board since its IPO. However, Fastly’s operating margin is expanded by existing clients increasing their spending. The only downside is that company still has a way to go to reach profitability.
Palo Alto Networks and Datadog
Cybersecurity offers perhaps the greatest safety net of the tech bunch because hackers won’t go away once the battle against COVID-19 has been won. Protecing a company’s network has become a basic need with Palo Alto Networks (NYSE:PANW) and Datadog (NASDAQ: DDOG) set to benefit from this trend.
Palo Alto has aggressively expanded its security solutions portfolio through acquisions. These investments have made it appealing to small and mid-size companies which will in turn allow the company to maintain a double-digit growth over the long-term.
As for Datadog, its shares have been on fire since the beginning of the year, gaining more than 100%. Consequently, the cloud monitoring dog is expected to go far with its upcoming earnings release. It was just less than a year ago that Datadog made its public debut, and besides delivering impressive results, it became an indispensable tool to companies. But it has competitors with a pedigree such as Amazon, International Business Machines Corporation (NASDAQ: IBM) , Microsoft (NASDAQ: MSFT), Cisco (NASDAQ: CSCO), and Alphabet (NASDAQL GOOG) as well as younger start-ups, including Splunk Inc (NASDAQ: SPLK), Elastic, New Relic Inc (NYSE: NEWR), and Sumo Logic (NASDAQ: SUMO) among many others which greatly increases competitive risk.
When it comes to social media, Facebook (NASDAQ: FB) dominates the field by large with 2.7 billion monthly active users. This figure becomes 3.14 billion if you add Instagram and WhatsApp users. Along with Facebook Messenger, these four platforms are among the seven most-visited social platforms across the globe. Therefore, advertisers know they cannot afford to skip Facebook. More importantly, there is so much growth potential ahead. Besides monetizing Instagram and Whatsapp, the social media giant is also moving beyond advertising revenue with Facebook Pay service and Virtual Reality where it is in for a first-mover advantage.
Takeaway
Although unprecedented, 2020 is just like any crisis in the sense that it forced some companies to fight for existence whereas those that caught the right wave at the right time will emerge out of it even stronger. Each story has its winners and losers. Social media, online retail, cyber-security and the speed in which offerings are delivered will remain relevant in any doomsday scenario, positioning the above companies even beyond the COVID-19 era and insulating them from any further tech meltdown.
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