Major stock market indexes have rallied to all-time highs so far in 2019, lifting many of the most promising tech names to dizzying heights in the process. This has made it much more difficult to differentiate overpriced technology stocks from those that still trade at a discount relative to their long-term potential.
To that end we asked each of three top Motley Fool contributors to choose a tech stock he thinks investors would do well to buy this month. Read on to learn why they like 2U (NASDAQ: TWOU), eBay (NASDAQ: EBAY), and Yandex (NASDAQ: YNDX).
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Educate yourself while this pullback lasts
Steve Symington (2U): Shares of 2U have plummeted nearly 40% since early May, and seemingly with good reason. That's when the online-education platform leader modestly reduced its full-year revenue guidance, sparking a flurry of analyst downgrades. The reduction in guidance was the result of a decline in student enrollments in 2U's five largest graduate programs -- specifically a decline of about 20%, albeit from an unusually high starting point. In particular, during the subsequent conference call, 2U cofounder and CEO Chip Paucek blamed the guidance reduction on a combination of lower student applications, increased selectivity from university partners in the admissions process, and a temporary delay in the launch date of one of its largest projected programs.
But long-term investors should note first that overall enrollments are still climbing, up 3% at its top 15 programs and 32% excluding its top five. This near-term hiccup should be little more than a bump in the road; 2U's current domestic graduate program (DGP) launch pipeline is poised to approximately double its DGP base to 100 by 2021, and the company maintains a longer-term goal of 250 such programs.
What's more, that doesn't even account for 2U's international graduate program potential, or incremental growth from its recently formed "alternative credentials" segment, which includes nondegree short courses and tech "boot camps" via its acquisitions of GetSmarter in 2017 and Trilogy Education in April.
For patient investors willing to buy now and watch that growth story unfold, this pullback could be a golden opportunity to open or add to a position.
A middleman with a strengthening business
Demitri Kalogeropoulos (eBay): It's possible that eBay can capitalize on another technical slip by market leader Amazon (NASDAQ: AMZN) during its annual Prime Day sale this month. But there are more fundamental reasons to like the e-commerce marketplace's stock right now.
eBay's latest earnings report showed hints of a growth rebound, with sales rising 4% to comfortably exceed the guidance that CEO Devin Wenig and his team had issued. Yes, that's far from the 9% boost that Amazon recently reported on its product volumes. Yet eBay's asset-light selling approach is far more efficient, with a 23% operating margin that trounces Amazon's 6%.
eBay now thinks it can grow its core revenue by around 3% this year rather than its prior 1% target. Profits should expand faster as it shifts spending toward more attractive areas like its emerging payments and advertising businesses. Even modest success here should translate into solid returns for investors despite the fact that the e-commerce giant's sales growth has been slower than that of fully integrated merchants like Amazon and Walmart (NYSE: WMT).
The "Google of Russia"
Leo Sun (Yandex): Yandex owns the largest search engine in Russia. It processes 49% of the country's online searches, according to StatCounter, compared to a 47% share for Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google.
Yandex generated 73% of its revenues from online ads last quarter. 20% came from its ride-hailing service Yandex.Taxi, which is integrated with its food delivery service Yandex.Eats. The rest came from other businesses, like its car-sharing service Yandex.Drive, its music streaming platform Yandex.Music, hardware devices like phones and smart speakers, and payment services.
Yandex's core ad revenues rose 25% annually last quarter, Taxi and its other businesses both generated triple-digit growth, and its total revenues rose 45%. Only the ad business is profitable, but it expects Yandex.Taxi to become profitable this year. By comparison, Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT) seem likely to remain unprofitable for the foreseeable future. Yandex also plans to spin off Yandex.Taxi within two years, which could be a great stand-alone investment and boost Yandex's profits.
Yandex's entire business remains firmly profitable and generated 36% growth in adjusted net income last quarter. Wall Street expects its revenue and earnings to rise 36% and 37%, respectively, this year (in USD terms). Those are stellar growth rates for a stock that trades at less than 20 times forward earnings.
Yandex is often overlooked by investors, many of whom focus on bigger search companies like Google or China's Baidu (NASDAQ: BIDU). Some investors are also wary of buying Russian stocks given current geopolitical tensions. Nonetheless, I think Yandex is a worthy buy at these levels, with plenty of room to run.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Demitrios Kalogeropoulos owns shares of Amazon. Leo Sun owns shares of Amazon and Baidu. Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends 2U, Alphabet (A shares), Alphabet (C shares), Amazon, and Baidu. The Motley Fool recommends eBay, Uber Technologies, and Yandex. The Motley Fool has a disclosure policy.