Top Tech Stocks To Watch In May 2020
Why hasn’t the stock market crashed even more? Is this lingering in your mind? You are not alone. Many investors are questioning if the rebound we have seen is actually sustainable. They are in disbelief on how disconnected the stock market is from our real economy. Basically, what we are experiencing in the stock market today is quite different from the previous financial crisis.
In today’s world, we are witnessing an acceleration of “digitization” of society with the consequent increase in the use of digital channels. From leisure, work, education to shopping, we have seen an increase in web traffic in all aspects in the digital world. That means tech stocks are benefiting, to a certain extent, from the current coronavirus crisis. Therefore, the stock market, where big tech companies weigh heavily, have recovered from March lows and thus leave a big crash unlikely.
What Will The World Look Like When This Is All Over?
We have been seeing headlines on how the world will look like in the post-COVID-19 era. My bet is, we will see a major shift with habits of the population. Where technology will play a more important role in every aspect of our life. Thus, I expect to see more tech companies emerge stronger from the crisis.
Zoom Is The Market Leader In Web Conferencing, Will That Last?
We have seen a majority of the global workforce working from home in the past couple of weeks. This trend has increased the demand for video conferencing services at an unprecedented speed. As such, Zoom Video Communications (ZM Stock Report) has been an absolute gem for investors since the company went public last year.
However, Zoom might find it difficult to sustain user growth in the long run when the pandemic is over. Furthermore, Zoom’s explosive growth in users isn’t coming from its paying subscribers. Meaning, the company has to find alternative ways to monetize the business to ensure sustainable growth and keep investors interested.
Despite having a head start in the web conferencing market, Zoom may find it increasingly difficult to compete with larger, better-funded players seeking to enter this market. Given the elevated valuation of ZM stock, the business model has to adapt swiftly to justify these valuations in the long-run.
Is The World’s Largest Streaming Services Virus-Proof?
One stock that saw gains despite the pandemic is Netflix (NFLX Stock Report). The company witnessed a huge spike in its subscription across Asia, Europe, and Latin America as COVID-19 continues to disrupt our daily routines. The NFLX stock saw an increase of 20% in paid subscriptions in the last quarter.
The streaming giant has recently reported its earnings, beating estimates on revenue and earnings. But missed widely on new subscriber growth. What is this signaling us? As lockdown eases in some parts of the world, will NFLX stock continue to experience a high subscription rate? Possibly. Growth aside, don’t we all miss cinemas and popcorns?
Netflix Continue To Benefit From Cord-Cutting Phenomenon
According to a report from Leichtman Research Group, Netflix will continue to benefit from cord-cutting phenomenon as major pay-TV operators lost close to five million customers in 2019. The number of streaming subscriptions in both the U.S. and Canada has been growing exponentially. Last year, the number of streaming services subscribers surpassed cable-TV subscribers for the first time. As such, we are expecting the same trend to continue globally.
What Netflix is trying to do is not only increase its viewership, but the time spent using its service. That’s how the company is assessing its growth opportunities. This is because the company found that even in its most mature market, the United States, streaming hours on Netflix only consists of 10% of total TV usage. Cable and satellite TV providers still dominate the market for now.
Therefore, we believe there is still ample room for Netflix to grow and for the stock to climb higher despite the competition from Disney (DIS Stock Report). As more people are switching to streaming services in the coming decades, Netflix remains one of the best tech stocks to buy now.