Should Investors Buy These Top Tech Stocks As They Dip?
Tech stocks have been powering the Nasdaq and S&P 500 to record highs this year amid the coronavirus pandemic. But the saying of “what goes up must come down” couldn’t be more true in recent weeks. The quickest recovery on record from a bear market bottom to fresh highs is unprecedented. Now history seems to be repeating itself. Top tech stocks that led the monstrous rally since March 23 low are now weighing down on the broader market.
The volatility we saw in recent weeks has been particularly pronounced in the tech sector. The tech giants or the FAANG stocks that have powered the U.S. stock market to all-time highs were in the red in recent weeks. And of course, the tech wreck was pushing the broader stock market lower. But any seasoned investor would know that turbulent times could produce great buying opportunities. Isn’t that a good thing? Buying high-quality companies at bargain prices?
Big Tech Continues To Tumble
Tech heavyweights such as Tesla (TSLA Stock Report) and Apple both tumbled 20% and 16.3% respectively since September started. Well, considering how much these stocks have rallied, some corrections are inevitable. You can’t expect it to go all the way up, can you? After all, volatility is the price of admission to the theme park known as the stock market. If you can’t stomach the corrections, perhaps it’s time to reconsider your strategy.
The less satisfactory US economic data in late August might have dampened the bullish sentiment. That included a report showing slower services sector growth in August. This is in addition to the higher than anticipated unemployment rate and unexpected big trade deficit in July. Economic uncertainty and a possible second wave of the virus could introduce more volatility in the coming months. But if you are investing for the long term, it doesn’t really matter if a stock goes one dollar up or down today. While the rally in tech stocks may not be over, September’s dip serves as a good reminder to investors that stocks can move in two directions.
Top Tech Stocks To Buy [Or Avoid] In October 2020: Apple
Apple (AAPL Stock Report) was the first company to reach the 2 trillion dollar mark. This came after the 4-for-1 stock split announcement earlier last month. However, the largest tech company saw its shares slide 16% this month along with other tech juggernauts. Now, shareholders and customers are watching in anticipation of the launch of the new 5G iPhones. The upcoming launch could be just weeks away, and many are holding their breath. While the company has made progress in wearables and services, the iPhone still comprises around half of Apple’s annual revenue.
Like many other companies, Apple is not providing guidance due to the uncertainty around COVID-19. Nevertheless, analysts are forecasting revenue and earnings growth of 4.9% and 9%, respectively, for this fiscal year. Looking ahead, analysts are looking at revenue growth of 13.2% and earnings growth of nearly 20% next year. Certainly, many have high expectations, but they don’t sound too lofty.
After its recent dip, it provides a nice setup for investors to buy AAPL stock at a discount. All in all, if you truly believe in the potential of what the company may bring to the table, you wouldn’t mind paying a dollar more or less today. Because in the long run, it would just keep going higher if all things go well.
Top Tech Stocks To Buy [Or Avoid] In October: Roku
Media-streaming technology expert Roku (ROKU Stock Report) is on a wild ride in recent weeks. Instead of experiencing some pull-back along with the broader tech sell-off, ROKU stock seemed to have held up quite steadily. The company’s business strength has been made clear during the coronavirus pandemic. While many digital advertising companies saw revenue decline or slow significantly, Roku’s revenue soared 46% year over year.
Last week, Comcast and Roku reached an agreement in which NBCUniversal’s streaming service Peacock will now be available for Roku customers. With the growing streaming video ecosystem, Roku could benefit in multiple ways. And with such concentrated consumer viewing on its platform, it could only be a matter of time before its position gets stronger as competition in the streaming space grows and media companies need to stand out. With the growing amount of streaming content available, Roku allows investors to bet on streaming without picking one streaming provider over another.
Roku is not only resilient during the pandemic, but it is showing itself as a respectable player in the game. Second-quarter revenue grew 42% year over year to $356 million. What’s interesting is that the stock is trading at a decent valuation given to the company’s strong growth prospects. At less than 10 times analysts’ forecast for next year’s revenue, is ROKU stock a steal?
Top Tech Stocks To Buy [Or Avoid] In October: Fastly
Tech investors have been drawn to Fastly (FSLY Stock Report) for its fast growth. For investors who’ve never heard of the company, Fastly helps companies speed up their websites, apps, and videos. After reaching a low of $72 per share on September 11, it has rebounded to $91 per share. Yet, that is actually still lower than its meteoric highs from just a couple of months ago. As you may or may not know, the company was already generating substantial sales growth prior to the pandemic. The push to remote work environments has made Fastly’s offerings more important than ever.
Even though it is far from the size of Amazon Web Services (AMZN Stock Report) or Microsoft’s Azure, Fastly has become a trusted brand of some of the major tech companies in the world. Among them are Shopify (SHOP Stock Report), Etsy (ETSY Stock Report), Yelp, and TikTok, just to name a few. With the recent drama on TikTok taking a breather, the correction on FSLY stock is probably overdone.
Many expect the market to be volatile with elections weeks away and the uncertainty about the recovery of the U.S. economy. Yet, within the rough seas, Fastly is a beacon on a firm footing. Analysts that took a closer look at Fastly like it a lot, and they are able to justify its lofty stock price. I don’t know about you, but I do believe there’s a great chance that FSLY stock would rise. It could serve as a long term growth investment after the recent market rout.