Tech stocks have gone from being the best-performing sector of the past decade to the worst performers this year. Tech-heavy Nasad 100 It has gained 4,000% over the past 30 years, but is down 26% in 2022. Other broad-based indexes aren’t doing much better.
But despite the sector’s dismal performance, smart investors see this as an opportunity to pick up shares of today’s disproportionately underperforming tech growth stocks. The following are a pair of leading tech stocks to buy this year and own in the years to come.
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Social sharing platform Pinterest (Pin 0.93%) It fell sharply last year as people found outdoor activities during the lockdown. When people were forced to collaborate, they used Pinterest’s virtual corkboard technology to promote their homes or activities they could do as a family. Once freedom of movement was allowed again, curtailing ideas online became a backburner, and monthly active users fell 9% to 433 million last quarter.
Lately, though, Pinterest has been hit with advertising cuts due to the economic downturn as well Apple Updating its privacy settings to allow users to opt out of being tracked by advertisers, since almost all of its revenue comes from advertising. When it comes to Pinterest, however, these may be overblown concerns.
SnapFor example, its revenue growth was blunted the other day by a dramatic drop in ad sales, but Pinterest is an advertiser’s dream. Snap and other social media platforms are trying to push an ad-based model into their apps, but Pinterest users are typically looking for things to spend money on, so it fits perfectly with the ad model.
Certainly, a recession weakens consumers’ purchasing power, but this is a relatively short-term threat. Global revenue per user was still up 28% in the first quarter, indicating that Pinterest can still monetize its users. And after losing more than three-quarters of its value in the past year, Pinterest stock is at a point where investors with a long-term mindset and patience for its growth into an online e-commerce powerhouse are at risk.
Amazon
Amazon (AMZN 10.36%) Like Pinterest, it has experienced a similar decline in its stock (the e-commerce giant is down “only” 37 percent in the last 12 months), although its growth seems to be confirmed. The two-day Prime Day sales event brought in $12 billion in sales worldwide, a new record and best-ever single day sales. JD.comA three-week long 618 sales gain. While JD racks up over $56 billion in sales, that works out to less than $2 billion a day. Amazon was making more than $6 billion a day for the event.
But that’s not the fun part for Amazon, because its cloud services business, Amazon Web Services, is the fastest-growing part of its business and is still very profitable. The segment’s revenue rose 37 percent last year, hitting $62 billion, up a similar percentage in the first quarter.
Amazon is further expanding the capabilities of AWS for technologies such as video streaming, online gaming, and augmented and virtual reality by creating “local zones” that bring storage and database infrastructure closer to the customer. Doing so allows for second-by-second data travel time, which increases efficiency.
Amazon recently completed a 20-for-1 stock split, putting the stock at $114 per share. Although shares trade for 45 times next year’s earnings estimates, Wall Street expects the company to grow earnings at a compounded annual rate of 33% for the next five years, making Amazon a growth tech stock in every sense of the word and one to buy and hold for years to come.
John McKee, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of the Motley Fool’s board of directors. Rich Duprey has no position in the mentioned stocks. He has spots in the Motley Fool and recommends Amazon, Apple, JD.com, and Pinterest. The Motley Fool advises the Nasdaq and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
