The technology industry is enormous, with several subsets such as hardware manufacturers, software designers, network operators, content distributors, semiconductor manufacturers, and cloud computing service providers. Companies that offer services or goods that are significantly dependent on technological advancements are typically classified as operating in the technology industry.
Companies in the software industry are rapidly adopting the subscription-based Software as a Service (SaaS) business model. The software firm receives a steady stream of income as a result of this.
Semiconductor chips are the power source for all of that equipment. Companies in the semiconductor industry create and/or produce the many different types of chips used in modern electronics. These chips include CPUs, GPUs, memory chips, and many others.
Tech industries include wireless service providers like telecoms. Video streaming services that make high-quality content accessible on-demand are another example, as are the cloud computing providers that enable them.
Source – https://stockapps.com/uk/
Tech Stocks
The technology industry is home to a significant portion of the world’s most valuable corporations. Here are a few of the most powerful and amazing technology stocks that traders and investors should think about purchasing this quarter:
Amazon
In addition to being the most successful online store, it also dominates as a provider of cloud computing infrastructure. The departure of founder Jeff Bezos in July marked the beginning of a new era for the industry-leading technology firm.
iPhone
Manufactures Apple’s iOS devices and Macs. Strong brand loyalty guarantees a steady stream of returning consumers, and Apple’s expanding suite of services makes the company’s environment hard to leave.
Microsoft
Famous for its Windows PC software and Office productivity suite, is a formidable software developer. In addition to being the biggest OS vendor, Microsoft is also a major player in the cloud computing market.
Intel
Is undoubtedly a leader in the semiconductor industry. Intel is a company that develops and produces central processing units (CPUs) for personal computers and servers, in addition to other types of chips used in areas like artificial intelligence. The firm is placing a significant stake on manufacturing, with intentions to produce chips for other businesses.
Netflix
Spends billions of millions annually on programming to keep its ever-expanding subscriber base hooked, making it the undisputed leader in the video streaming sector.
Alphabet
Is the business behind the Android mobile operating system and the ubiquitous Google search engine.
Has more than 2 billion monthly active users across Facebook, Instagram, Messenger, and WhatsApp, making it the biggest social media firm. The development of VR is considered crucial to the company’s long-term success.
Cisco Systems
Provides the majority of the internet’s backbone gear for large-scale networks.
The FAANG stocks are a collective name for Fb, Amazon, and Netflix. These firms are at the forefront of their respective markets, and their stock prices have appreciated significantly in recent years.
Impact of Covid19
There have been primarily favorable effects for the IT sector from the epidemic. Even if competitors like Walmart (NYSE:WMT) and Target (NYSE:TGT) have ramped up their e-commerce game, Amazon has continued to grow as customers turned strongly toward e-commerce. Amazingly for a firm of Amazon’s size, second-quarter 2021 sales grew by 27%, reaching $113.5 billion. In spite of this slowing growth, the recent uptick in the delta variation might scare off customers once again.
Demand for Microsoft’s collaboration software, gadgets, games, and cloud computing services has been strong as consumers spend more time at home. The first few months of 2021 saw continued robust sales of personal computers, which benefited the corporation in a number of ways. This past quarter, Microsoft had a 21% increase in sales and a 47% increase in net profits. As PC sales continue to rise in the wake of the epidemic, Microsoft is getting ready to release Windows 11.
It was initially uncertain how well sales of Apple’s costly devices would perform during the epidemic, but people have been buying them in droves. All of the company’s products had increased sales in the most recent quarter, but the core iPhone business increased sales by 50%. Launching new iPhones in September, Apple hopes to maintain consumer interest in the brand.
Intel has benefited from the market’s need for electronic gadgets. Worldwide semiconductor scarcity and supply chain concerns have complicated the situation, although laptop sales have risen as more people choose to work from home. By putting a lot of money into production, Intel hopes to become a powerful player in the foundry industry. With U.S.-Chinese relations at an all-time low, the corporation benefits from being located in the United States.
Advanced Micro Devices, a competitor to Intel (NASDAQ:AMD), has also been doing well. The newest Ryzen 5000 PC CPUs from AMD outperform its Intel counterparts in practically every statistic, leading to further losses in market share for Intel.
As a result of clients postponing upgrade expenditure due to the pandemic, Cisco took a hit. However, the business has now made a full recovery. Cisco’s recent quarter saw an increase of 8% in revenue, and the business expects a prosperous year. With $15 billion in software sales in 2017, Cisco has established itself as a global leader in the software industry. WebEx, Cisco’s video conferencing technology, had growth spurred by the epidemic, which aided the cause.
As more individuals remained inside due to the outbreak, Netflix’s popularity soared. The company’s primary North American market has begun to lose consumers and growth has slowed significantly in 2021. The post-pandemic era will be a challenging one for Netflix in terms of benchmarking against other services.
Disney’s (NYSE:DIS) Disney+ isn’t the only streaming service seeing rapid expansion. More than double the number of people who were Disney+ customers a year ago are now paying for the service. After the completion of the megadeal between HBO owner AT&T (NYSE:T) and Discovery (NASDAQ:DISC.A) next year, HBO will have a new big opponent.
Both Fb and Alphabet are ad-based businesses, so the early-on drop in advertising revenue from sectors like travel was a blow to both. Facebook’s revenue grew by 56% year over year in the 2nd period, and Alphabet’s by 62%.
One potential factor that may bring these advertising behemoths down, however, is antitrust action. In October of 2020, the United States Department of Justice and eleven state attorneys general filed a lawsuit against Alphabet’s Google, accusing it of anticompetitive activities in the search advertising market.
In December of 2020, Facebook was sued by the FTC and forty-six state attorneys general. A number of lawsuits claim that the social media behemoth made strategic acquisitions to remove potential competitors. The Federal Trade Commission is investigating legal options for compelling Facebook to sell Instagram and WhatsApp. A court dismissed the FTC’s first complaint in June, but the agency immediately launched a new one in August.
Analyzing Stocks
The price-to-earnings ratio is a helpful tool for evaluating established IT businesses with a history of profitability. The market’s current valuation of a company’s profits may be calculated by dividing the stock price by the earnings per share. A greater multiple indicates that the market is putting a larger value on expectations for future earnings growth.
Unfortunately, the price-to-earnings ratio is not a reliable metric for assessing the value of technology businesses since so many of them are not profitable. For such fledgling businesses, revenue growth is of utmost importance. You should make sure an unknown investment has good growth potential before putting money into it.
It is also crucial that the bottom line be trending upward from losses for IT businesses that now have none. It is expected that a company’s sales and marketing budget would become more efficient as it expands. It may be a sign of trouble if it isn’t, or if expenditure is increasing in relation to income.
A solid tech stock is one that is now trading at a fair price relative to its expected growth in the future. The challenging element is in accurately estimating such growth potential. Paying a premium for shares might make sense if you anticipate massive profits growth in the years ahead. Of course, your investment might fail if your projections for future development prove to be inaccurate.
One option to reduce risk is to purchase shares of an exchange-traded fund (ETF) that is only invested in technology companies. Another choice is the ARK Innovation ETF (NYSEMKT:ARKK), while the fund’s wagers on high-flying tech firms may prove riskier than those of the tech titans mentioned above.
