My 3 Favorite Tech Stocks
Now is the time to go bargain hunting on some amazing growth company stocks.
This week has been a blood bath for growth stocks. The Omicron variant is spooking investors and thus stocks are taking a beating. But this beating gives investors a great opportunity to go bargain hunting on some high-quality businesses. Here are some names to consider adding to your portfolio.
PayPal: PayPal is a powerhouse when it comes to FinTech. PayPal currently has 361 million active users with 22% or 70 million year-on-year growth as of Q3 2020. 87.5% of online buyers use PayPal. PayPal also owns payments app Venmo. Venmo alone generated $450 million in 2020 and is projected to make $900 million in 2021. Venmo’s payments volume has grown from $2.3 billion in 2014 to $159 billion 2020. The US is relatively in the early stages of online payments. While half of China’s population (which is 621 million) use mobile payments like AliPay and WeChat Pay, many in America are still accustomed to using cash and credit cards. As mobile technology further develops in the United States and more Americans find mobile payments to be more user friendly and convenient compared to carrying cash and credit cards, expect Venmo’s growth to skyrocket. In 2021 America’s consumer spending was $6075.38 billion. Only $159 billion is processed through Venmo. Majority of this consumption is done through credit cards and cash. As more sectors in the US economy and consumers go cashless, cashless payment processors will only grow. The numbers are on PayPal and Venmo’s side. Currently the stock is trading at a 45 P/E ratio, which is relatively a cheap stock during these high valuation period. The stock is also down 40% from its highs due to investor fear of the Omicron variant. Now is the perfect time to buy some PayPal stock.
Square (now called Block): Square is my second favorite stock right now. If you got to any mom and pop store, your favorite local hipster coffee shop, or any stall in the local fair, majority of these vendors are using Square to process your payment. Square is more than just a credit card machine for Vendors. Square’s Cash App’s revenue has gone up from just $17 million to $4.03 billion. Cash App, similar to Venmo, is a payments app. But the Cash App is more than just payments. Cash App just introduced non-commissioned stock trading to compete directly with Robinhood and Bitcoin trading. Square also holds 1% of its assets in Bitcoin. In Q3 of 2021 Square’s Bitcoin revenue was $1,815,662. Basically, Sqaure is a Bitcoin company. With Jack Dorsey leaving Twitter he will have more time to focus on Square, Bitcoin, and Blockchain. Square’s purchase of Afterpay will only grow the company even more. Sqaure operates in the US, UK, Canada, Japan, Australia, and Ireland.
As more people in the West feel comfortable trading, investing, buying cryptos, and paying through their phone expect Venmo and Square to soar.
Sea Limited: Sea Limited is my favorite stock during the tech sell-off. Imagine if Amason, Shopify, Affirm, Square, Venmo, Zynga, and Tencent were all one App. Sea Limited is a consumer technology powerhouse which has seen its growth explode during the pandemic. Per the firm’s Q3 2021 earnings presentation revenue has gone up from $1.2 billion in Q3 2020 to $2.7 billion in Q3 2021. Gross profit is up from $400,000 in Q3 2020 to $1 billion in Q3 2021. Seal Limited’s three main business areas payments, e-commerce, and gaming are areas that are fast growing in Southeast Asia. E-commerce in Southeast Asia only has a 3% penetration rate which is the lowest in the world. The region also has the highest growth prospects when it comes to E-commerce with 35% potential growth in e-commerce penetration. As of 2018 the most popular app in Indonesia, Taiwan, Vietnam, and Thailand was the Shopee e-commerce app owned by Sea Limited. It is not only in Southeast Asia where Sea Limited is making an impact. Shopee overtook Mercado Libre to be the top e-commerce app in LATAM. Brazil has overtaken Indonesia to be Shopee’s largest market. Here at Armchair Banker we have discussed the rise of “Super Apps” and how Southeast Asia will be the next center of economic and technological developments. As e-commerce and payments become increasingly popular in emerging markets watch out for Sea Limited. For a deep analysis on Sea, I highly recommend Hayden Capital Fred Liu, CFA’s deep analysis on Sea Limited.
With the tech sell off tech is looking like a bargain. Some of the FAANG + Microsoft stocks like Facebook, Apple, Alphabet, and Microsoft are looking really cheap. As I mentioned before these names can be used even as an inflation play. I truly believe that similar to how the FAANGs + Microsoft were the high growth stocks of the 2010s, expect Square (Block) and PayPal to soar in the 2020s. Similar to how Web2 growth powered the FAANGs + Microsoft expect Web3, FinTech, E-Commerce, and Bitcoin to power companies like Square, PayPal, and Coinbase. These technological innovations combined with a rising tech scene and growing middle class in emerging economies like Asia and Latin America will help companies like Sea Limited grow exponentially.
What I write here is not investment advice. I write these for informational and educational purposes only. Please consult a professional before investing. Investing involves risk.
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