Facebook and Alphabet have generated impressive returns for investors over the past five years, but the challenges are mounting. Every business comes under scrutiny linked to the spread of disinformation in the United States, and new regulations in markets such as the European Union and Australia could eat into every company’s profits. These big tech leaders are feeling the pressure, but the wider tech sector is still welcoming companies that have attractive growth prospects and the potential to generate huge gains for shareholders.
To help readers identify promising companies, we assembled a panel of Motley Fool contributors and asked each member to spotlight one tech action that looks set to thrive even as some industry leaders come under pressure. . Read on to see why they think Zynga (NASDAQ: ZNGA), Pinterest (NYSE: PINS), and Magnite (NASDAQ: MGNI) have what it takes to be big winners.
Image source: Getty Images.
This stock has many ways to earn
Keith Noonan (Zynga): It would be an understatement to say that the tech industry seems volatile right now. Between new regulatory hurdles facing industry giants, valuation concerns for the broader sector and the tech-adjacent electric vehicle space, and indications that a cyclical market shift in the The energy and commodities space could be underway, technology investors have a lot to consider at the moment. While the tech sector may be poised for greater short-term volatility, Zynga stock stands out as a relatively low risk game that could generate big returns.
Zynga is a leading publisher of mobile games, and the company’s impressive collection of video game development studios and franchises, strong track record and favorable outlook for the industry indicate that the stock is a long term winner. Zynga used to generate the majority of its revenue from games hosted on Facebook, but the company has orchestrated a successful shift to mobile platforms, and is now well positioned to take advantage of the growing global gaming industry. games.
Beyond abandoning Facebook in favor of mobile, the company’s successful comeback has had two main components: releasing content updates that extend the lifecycle of successful games and acquiring new ones. studios to accelerate growth. Both of these catalysts helped the company grow its bookings 61% year-over-year in the fourth quarter, and it looks like Zynga’s long-term growth story is just beginning.
In addition to great growth potential, Zynga may come with relatively low downside risk – an attractive feature amid the current volatility in tech stocks. Acquisitions have played a big part in Zynga’s recent success, but the company itself also stands out as a likely acquisition target. Industry leaders including Microsoft, Tencent, and Electronic arts bought out video game publishers at a higher price, and it wouldn’t be surprising to see a larger company decide to buy Zynga.
Magnite’s selling depths are unwarranted
Jamal Carnette (Magnite): Shares of ad tech firm Magnite are being hammered by the wider sale of the tech, with shares falling nearly 40% in the past month. It’s no surprise that the stock is returning gains (stocks are still 250% higher than a year ago), but Magnite is also being unfairly punished because of an Alphabet announcement.
Previously, Alphabet had announced that it would eliminate third-party cookies (web trackers) by 2022 and this week followed another statement that essentially ruled out any individual tracking in favor of larger anonymized APIs. In response, the actions of companies defending the replacement of cookies by email by email Unified ID 2.0 – The commercial counter, Pubmatic, and Magnite – dropped.
As Jeff Green, CEO of The Trade Desk, pointed out, cookies only affect around 20% of data-driven advertising today. Most importantly for Magnite, cookies have no impact on Connected TV Advertising (CTV). In the fourth quarter, the company doubled the format by acquiring CTV specialist SpotX. Combined (SpotX and Magnite, pro forma) revenues from CTV and video would have accounted for 67% of total revenues. Additionally, Magnite delivered 53% year-over-year growth from CTV during the quarter.
Magnite shares were expensive before the recent plunge, but are now trading at 11.5 times revenue (including SpotX) and are mostly in a high-growth advertising sector that will not be affected by Alphabet’s announcements. Investors should put this on their watch lists and buy if it falls as Magnite could explode when the market correction ends and sanity resumes.
The new social star
Joe tenebruso (Pinterest): Not all social media platforms are hotbeds of political disinformation and hate speech. Pinterest is where people go to share inspirational content. The site seeks to help its users “create a life they love.”
This positivity clearly resonates with people. Pinterest added more than 100 million users in 2020. Its revenue, in turn, soared 48% to $ 1.7 billion, while its adjusted net profit was more than 15-fold for reach $ 283 million.
Pinterest sees itself as a “visual discovery engine”. People can use its platform to search for images related to their passions. Pinterest’s advanced artificial intelligence (AI) technology enables it to display relevant recommendations, some of which are advertisements. These digital ads convert well for advertisers, in part because many Pinterest users are actively looking to “turn inspiration into reality,” according to the company.
As marketers cut spending on sites deemed too controversial, Pinterest is poised to take advantage. Advertisers are increasingly trying to place their ads on sites that make their prospects happy, in order to associate their brands with more positive feelings. Few social media sites do this better than Pinterest.
So if you are looking for an alternative to Facebook or Google, take a look at Pinterest. You may find what you are looking for.
Find out why Pinterest is one of the top 10 stocks to buy now
Motley Fool co-founders Tom and David Gardner have spent over a decade beating the market. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *
Tom and David just revealed their top ten stock picks for investors to buy right now. Pinterest is on the list, but there are nine more you might not know.
Click here for the full list!
* The portfolio advisor returns on February 24, 2021
Suzanne Frey, executive at Alphabet, is a member of the board of directors of The Motley Fool. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of its CEO, Mark Zuckerberg, is a member of the board of directors of The Motley Fool. Jamal Carnette, CFA owns shares of Magnite, Inc. Joe Tenebruso has no position in any of the shares mentioned. Keith Noonan owns shares of Zynga. The Motley Fool owns shares and recommends Alphabet (A shares), Alphabet (C shares), Facebook, Magnite, Inc, Pinterest and Zynga. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
