Are These Two Top Tech Stocks On Your Watchlist In 2020?
During the last few years, tech stocks have really separated themselves from the rest of the market sectors. Technology has become more intertwined into every facet of our everyday lives, including work, play, and everything in between. The top tech stocks behind these innovative technological advancements have provided massive growth for investors.
In the last 5 years, the Technology Select Sector SPDR Fund (XLK stock report) has given investors with total gains of 139%. More than double the S&P 500’s 57% growth.
Just imagine, the top five biggest U.S. publicly traded companies are the best tech stocks to watch, or have some form of technological component that’s vital to their business.
What Is The Impact Of The Covid19 Pandemic For Tech Stocks?
The Covid19 pandemic has resulted in a large increase in internet traffic due self-imposed quarantines, as well as the growing popularity of e-commerce and online streaming services. This has forced the hand of data center operators to upgrade their capabilities to handle the increase in traffic.
For example, China giant Alibaba (BABA stock report) recently reported that it will spend roughly $28 billion over the next 3 years to strengthen its data center infrastructure in preparation for a post coronavirus pandemic environment.
A recent study reported that the U.S. data center construction market is expected to generate revenues of nearly $12 billion over the next four years.
Another report showed the demand for cloud computing services is expected to increase at an annual rate of 12.5% through 2021, led by software stocks.
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#1 Top Tech Stocks To Watch In 2020 Covid19: Amazon
The e-commerce juggernaut has seen no signs of slowing down during this pandemic. Amazon stock is up 32.2% since the start of 2020 and has been one of the few winners for investors. The global shutdowns of large retailers, consumers flocked to the e-commerce giant to buy essential items during the pandemic.
When most of us think of Amazon and it’s revenue potential, we think of an e-commerce website that can fulfill the demand for general household items such as; cleaning products or groceries.
A lot of investors aren’t aware that a large portion of Amazon’s revenue growth comes for its cloud computing business, Amazon Web Services also known as AWS.
In Q1 of this year, AWS operating income amounted for almost 77% of Amazon’s overall operating income. That’s an increase from the 50% share of total income in the same period last year.
AWS Is The Market Leader For Cloud Computing Services
According to a report by Gartner in July 2019; AWS is the global leader of the of the infrastructure-as-a-service (IaaS) public cloud market with an astounding 48% of market share. Microsoft (MSFT stock report) being in second place, with roughly 16% of the market.
The research firm published a separate report that estimated the worldwide public cloud services market is forecasted to grow 17% in 2020 to a total of $266.4 billion, up from $227.8 billion in 2019.
Why Does This Matter For Investors?
These reports mentioned above were pre-covid19 pandemic. The demand for general cloud computing services has increased significantly as companies have transitioned to remote working. According to Canalys, spending on cloud infrastructure services hit a record high in Q1, gaining 34% to $31 billion.
As companies, and workers continue to adjust to the remote lifestyle, Amazon is positioned to capitalize from the increase in demand of cloud computing services.
#2 Top Tech Stocks To Watch In 2020: ROKU
It’s so surprise that video streaming has surged during this covid19 crisis. Tech stocks like Netflix (NFLX stock report) reported a record 15.8 million added subscribers in the first quarter. While Disney’s Disney + (DIS stock report) moved passed 50 million global subscribers shortly after its launch last November.
With consumers around the world spending more time in their homes, the demand for video streaming has gained significantly. Obviously, there’s no better tech stock to watch that can capitalize on this massive growth more than Roku.
Leader In The Streaming Revolution
Roku is the U.S. leader in Connected TV. This is a result of its partnerships with Smart TV providers and popular devices.
According to a report from eMarketer, Roku users make up 32.9% of all internet users domestically and nearly 46.9% of connected TV users.
The CTV platform also saw a boom from the pandemic as account activations jumped 37% from the prior year to 39.8 million, and hours streamed gained 49% to 13.2 billion.
Those trends saw continued growth in April.
What Does this Mean For Roku Stock?
Roku stock is still down nearly 40% from hitting its all time high last September. This is mainly because of the negative impact the pandemic has had on its advertising business.
The company recognized that its ad revenue and gross profit would increase at a slower pace this year than previously reported.
Regardless, we are still seeing a huge shift from linear TV to the connected style. With the recent launch of Comcast’s Peacock (CMCSA stock report), and AT&T’s HBOMax (T stock report) we should continue to see an acceleration of this transition.
As companies continue to work diligently to get back to 100% operating capacity, the advertising business will inevitably rebound. Roku is well positioned to cash in on the increased demand for video streaming. This could potentially lead to new highs for Roku stock.
Obviously, the novel coronavirus has taken the global economy by storm, having a crippling impact on a number of industries. Through it all, Wall Street has continued its bullish stance on tech stocks. As the demand for cloud computing services and video streaming continues to skyrocket, we could see these tech stocks move higher in 2020.
I believe this pandemic has created “the perfect storm” for some of the best tech stocks like Amazon and Roku.