While the majority of businesses struggled to survive since the onset of the pandemic, the technology industry thrived because of changing consumer and business behavior. While tech stocks witnessed some correction in the last two months because of gradual sector rotation, uncertainty over fiscal stimulus, and antitrust laws to stop the monopoly power of tech titans, the industry has immense growth potential in the long-run with permanent changes in lifestyle and business operations.
While the overall outperformance of tech stocks has been quite strong, this week the news that the Pfizer vaccine has 90% effectiveness is driving a rotation from tech stocks into areas like value, travel, and small-caps. Some believe the dip is a buying opportunity, while others think it could continue longer.
For investors who are intrigued by the long side, the Robinhood 100 Most Popular list is widely-used to identify stocks that are popular for some reason. It’s no surprise that the list comprises several technology stocks. So, betting on some fundamentally sound technology stocks from the list could be wise now.
Alibaba Group Holding Ltd (BABA), Facebook, Inc. (FB), and Activision Blizzard, Inc (ATVI) are three such stocks on the Robinhood 100 list that have plenty of upsides left based on their regular new features and innovations.
Alibaba Group Holding Ltd (BABA)
Based in China, this leading platform for global wholesale trade has been making headlines. BABA operates through three core businesses — Alibaba, Taobao, and Tmall. Not only limited to retail, but BABA has also expanded in other domains with its affiliates like Cainiao, Ant Group, and Alibaba Cloud to name a few. The 11.11 Global Shopping Festival, or ‘Singles Day,’ held on November 11th every year is expected to see huge gains. BABA is on the Robinhood 100 Most Popular list having 96% of the analyst ratings as ‘Buy.’
BABA’s strong quarter results (for the quarter ended September 2020) was driven mainly by the robust growth of Alibaba cloud. BABA’s total revenue increased 30% year-over-year to $22,838 million. Cloud Computing revenue increased 60% year-over-year to $2,194 million. Alibaba Cloud is expected to turn profitable by March 2021. The annual active consumers increased by 2% sequentially to 757 million. The EPS increased 37% year-over-year to $0.33.
Analysts expect BABA’s revenue to increase 60.4% for the quarter ending December 2020 and 45.3% in 2021. The company’s EPS is expected to increase by 35.1% in 2021, 21.3% in 2022, and at a rate of 3.8% per annum over the next five years. Moreover, BABA has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.
BABA unveiled a series of artificial intelligence (AI) powered solutions during the Apsara Conference 2020. The company unveiled its first cloud computer and its autonomous logistics robot for last-mile deliveries. BABA joined forces with Farfetch and Richemont this month to provide luxury brands with better access to China and accelerate digitalization.
On a year-to-date basis, BABA has rallied 41.4% to close yesterday’s session at $290.53. During the past six months, BABA soared 53.7%. With the Chinese economy recovering much faster, the company’s growth story is expected to continue. Moreover, with the Ant Group IPO temporarily suspended, this can be a good time to buy the dip in the stocks.
How does BABA stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating
You can’t ask for better. The stock is also ranked #1 out of 115 stocks in the China industry.
Facebook, Inc. (FB)
Founded in 2004, Mark Zuckerberg led FB brought in a new era of social media. Advertising has been the main revenue driver for the company. Besides it has also made several strategic acquisitions over the years namely, Instagram, Whatsapp, YouTube, and Oculus VR. FB is on the Robinhood 100 Most Popular list having 84% of the analyst ratings as ‘Buy.’
FB’s revenue increased 21.6% year-over-year to $21.47 billion for the third quarter ended September 2020. Monthly Active Users (MAUs) increased by 12% year-over-year to 2.74 billion. Family monthly active people (MAP) increased by 14% year-over-year to 3.21 billion. Average Revenue per User (ARPU) increased by 8.7% year-over-year to $7.89. EPS increased 27.8% year-over-year to $2.71 surpassing the consensus estimate by 41.9%.
Analysts expect FB’s revenue to increase 24.3% for the quarter ending December 2020, 18.9% this year, and 23.2% next year. The company’s EPS is expected to increase 22.7% for the quarter ending December 2020, 11.7% next year, and at a rate of 16.6% per annum over the next five years. FB’s earnings surprise history looks impressive with the company missing the consensus estimate in just one of the trailing four quarters.
Last month, the company introduced the First AI Model M2M-100 that translates hundreds of languages without depending on English. FB has also started on its long-term plan of monetizing Whatsapp which can be a great boost to the growth of the company owing to its huge user base. The stock has gained 43% year-to-date and is currently trading 9.3% below its 52-week high of $304.67 which it hit on August 26th.
FB’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade, Peer Grade, and Industry Rank and a “B” for Buy & Hold Grade. Among the 58 stocks in the Internet industry, it’s ranked #5.
Activision Blizzard, Inc (ATVI)
Based in Santa Monica, California, ATVI develops and distributes content and services on video game consoles, personal computers (PC), and mobile devices. The company's main product franchises include Call of Duty, World of Warcraft, Diablo, Hearthstone, Overwatch, and Candy Crush. Operating through three segments - Activision Publishing, Blizzard Entertainment, and King Digital Entertainment, ATVI creates interactive gaming and entertainment experiences. ATVI is on the Robinhood 100 Most Popular list having 87% of the analyst ratings as ‘Buy.’
ATVI delivered strong third-quarter results (ended September 2020) based on its ability to execute efficiently. Net revenues increased 56.9% year-over-year to $408 million. Activision reported Monthly Active users (MAUs) of 111 million, Blizzard had 30 million while King had 249 million MAUs. Net income for the company increased 196.1% year-over-year to $604 million.
Analysts expect ATVI’s revenue to increase by 3.1% for the quarter ending December 2020, 27.8% this year and 1.9% next year. The company’s EPS is expected to increase by 52% in 2020, 3.2% in 2021, and at a rate of 24.7% per annum over the next five years. ATVI has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters.
ATVI’s highly anticipated World of Warcraft Shadowlands is expected to be launched on November 23rd. The delay enabled the company to fine-tune the game to suit market needs. Madness at the Darkmoon Faire as part of Hearthstone is also expected to be released this month. Tony Hawk’s Pro Skater 1 and 2 are already available worldwide. The stock has gained 26.9% year-to-date. It is currently trading 16.3% below its 52-week high.
It’s no surprise that ATVI is rated “Buy” in our POWR Ratings system. It also has an “A” for Trade Grade and a “B” for Buy & Hold Grade, Peer Grade, and Industry Rank. In the 15-stock Entertainment - Toys & Video Games industry, it’s ranked #2.
Author: Aaryaman Aashind
4 Stocks to Avoid if there is Another Coronavirus Lockdown
Primary Ticker: Marriott International, Inc.(NASDAQ:MAR)
Secondary Tickers: DAL, CCL, HTZ
Teaser: There may be another coronavirus lockdown in the United States as the number of new cases keeps on rising. If that happens, companies that operate in the already-struggling travel industry such as Marriott (MAR), Delta Air Lines (DAL), Carnival (CCL), and Hertz (HTZ) could witness further business decline. So, these stocks should be avoided for now.
The coronavirus cases have been continuously rising. On Friday, the United States broke another record and reported 126,480 new cases in a single day. The President-elect Joe Biden has promised to take more proactive steps to curb the spread of the virus.
If there is another round of lockdown, businesses that have already struggled this year in the “new normal” may face an even more difficult time. In particular, the travel industry has been the worst hit due to travel restrictions, and people preferring to stay at home.
Companies like Marriott International, Inc. (MAR), Delta Air Lines, Inc. (DAL), Carnival Corporation (CCL), and Hertz Global Holdings, Inc. (HTZ) have faced significant losses so far this year. Even though their stocks surged yesterday on the news about Pfizer’s trial vaccine, the long-term recovery of these companies could be more difficult if another lockdown measure is taken to resist the second wave of the virus. For now, it would be wise to avoid these stocks.
Marriott International, Inc. (MAR)
MAR operates, franchises, and licenses luxury hotels and properties globally. The company runs through The Ritz-Carlton Destination Club, The Ritz-Carlton Residences, Grand Residences by Marriott, and Marriott Vacation Club. The stock has fallen 31.4% so far this year.
The company is facing a penalty of $23.8 million from the UK’s ICO relating to a data breach that affected the privacy of 339 million guests in 2014. The company is facing low occupancy rates due to the spread of the coronavirus and global lockdowns and is attempting to incrementally bring more business by offering a special package for remote workers.
During the third quarter, the company’s net income fell 74% year-over-year to $100 million. The company’s constant dollar RevPAR declined 65.9% worldwide compared to the same period last year.
MAR’s revenue is expected to fall 47.4% during the quarter ended December 2020 and 47.1% in 2020. The company’s EPS is estimated to decline 105.5% in 2020 and at a rate of 7.3% per annum over the next five years.
MAR is rated a “Sell” in our POWR Ratings system, with an “F” in Trade Grade and a “D” in Buy & Hold Grade and Peer Grade. Within the 14-stock Travel – Hotels/Resorts industry, the company is ranked #9.
Delta Air Lines, Inc. (DAL)
DAL offers scheduled air travel for travelers and cargo in the United States and internationally. The company has operations in two segments — airline and refinery. DAL’s stock has lost 46.3% so far this year.
Recently, the company has suspended flights to 16 cities in the United States due to coronavirus-related fears. If the US goes into another lockdown and extends federal travel restrictions, there would be a significant negative impact on the airline industry. The company has also postponed the relaunch of flights between the US and South Africa until 2021.
During the third quarter, the company’s revenue saw a decline of 76% compared to the same period last year and it was even lower than analysts’ expectations. The company’s adjusted EPS was -$8.47 per share compared to $2.31 a year ago.
DAL’s revenue is expected to fall by 66.1% during the quarter ended in December 2020 and 64% in 2020. The company’s EPS is estimated to decline 242.8% in 2020 and at a rate of 22.4% per annum over the next five years.
DAL is rated a “Sell” in our POWR Ratings system, with an “F” in Buy & Hold Grade and a “D” in Trade Grade and Industry Rank. Within the 22-stock Airlines industry, the company is ranked #6.
Carnival Corporation (CCL)
CCL offers cruise services in the United States and internationally. The company operates through Carnival Cruise Lines, Costa Cruises, P&O Cruises, Holland America Lines, and more. CCL’s stock has declined by 72.1% so far this year.
Currently, most of the company’s cruise operations are on hold due to coronavirus-related fears. The company is expected to resume cruises in the US after December 1st. However, this schedule could be stopped again if there is another lockdown.
During the third quarter, the company reported an adjusted net loss of $1.7 billion. CCL is expected to remove a total of 18 less-efficient ships from its fleet to streamline its operations.
CCL’s revenue is expected to fall 96% for the quarter ended in November 2020 and 72.4% in 2020. The company’s EPS is estimated to decline by 267% in 2020 and at a rate of 37.8% per annum over the next five years.
CCL is rated a “Strong Sell” in our POWR Ratings system, with an “F” in Trade Grade, Buy & Hold Grade, and Industry Rank. Within the 5-stock Travel - Cruises industry, the company is ranked #4.
Hertz Global Holdings, Inc. (HTZ)
HTZ provides cars and trucks for rent or lease in the United States and internationally. The company engages in four segments — US car rental, international car rental, worldwide equipment rental, and other operations. HTZ’s stock has declined by 92.7% so far this year.
The company has recently filed for bankruptcy caused by the severe hit that the travel industry took due to the coronavirus. However, the company is in talks to gain financing to the tune of $1.65 billion as part of the Chapter 11 proceedings. Additionally, the company has secured financing of $4 billion to refresh its vehicle fleet.
During the second quarter, the company’s total revenues declined 70% year-over-year. The company’s vehicle utilization was 28% compared to 82% a year ago.
HTZ’s revenue is expected to fall 42% for the quarter ended in December 2020 and 43.3% in 2020. The company’s EPS is estimated to decline 632.6% in 2020 and at a rate of 17.3% per annum over the next five years.
HTZ is rated a “Sell” in our POWR Ratings system, with an “F” in Buy & Hold Grade and a “D” in Trade Grade and Peer Grade.
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BABA shares were trading at $269.74 per share on Tuesday morning, down $20.79 (-7.16%). Year-to-date, BABA has gained 27.18%, versus a 11.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.3 Tech Stocks on the Robinhood 100 to Buy in November appeared first on StockNews.com