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5 Best Technology Stocks To Buy Now

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·10 min read
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This is the second part of our article titled 10 Best Technology Stocks to Buy Now. We discussed why technology sector is the best place to look for long-term winners as well as how we determined the best stocks within this sector in the first part. You can read the first part of this article here.

5. VISA INC (V)

American international financial services company Visa Inc. (V) is headquartered in Foster City, California. It enables electronic money transfers all across the world, most frequently using Visa-branded prepaid, debit, and credit cards. Visa Inc’s 2022 Q2 average shareholder price is $206.76 and has a market cap of $445 billion. 

Visa Inc had a net revenues of $28 billion over the last 12 months. One of the main revenue drivers for Visa Inc is consumer payments, new payments, and value added services. Visa inc is digitizing its consumer payments. Moreover, the pandemic affected consumer choices and actions. People started to use mobile payments for transactions more. Now people are using technology to make the smallest to biggest transactions. Based on the 2021 Visa Annual Report, tap to pay now is 70 percent of the in-person transactions, beside the United States. Visa is keeping investing in resources that support its growth levers, its network of networks capabilities, and the larger payments ecosystem. 

Visa Inc has a P/E ratio of 31. It is one of those stocks that never trade at a cheap multiple The risk factors of investing in Visa Inc, include regulatory risks, Litigation Risks, Technology. Cybersecurity, and Structural & Organizational Risks. Visa can face barriers of reimbursement rates, domestic processing requirements, point-of-sale transaction rules and more by regulation. Moreover, global payment technology is intensive. There are numerous payment providers on the internet that are evolving payments such as fintech and other companies. 

Hand touching brain of AI, Symbolic, Machine learning, artificial intelligence of futuristic technology. AI network of brain on business analysis, innovative and business growth development.

Visa Inc’s goals for inclusive, and sustainable economic growth is to empower SMBs through digital enablement, capacity-building and partnerships, expand access to digital payments for the unbanked and underserved. Furthermore, protecting the planetContinue sourcing 100 percent renewable electricity, maintaining LEED or other green-building certification,  continuing to improve energy efficiency. 

Here is what Polen Global Growth Fund has to say about Visa Inc. (NYSE:V) in its Q1 2022 investor letter:

“We added to both Visa and Mastercard during the final quarters of 2021, based on the belief that both businesses were trading at attractive prices and poised to deliver, double-digit returns over the next three to five years. Cross-border transactions–a highly profitable business segment for both companies–represent roughly 10% of Visa and Mastercard’s volumes and 25% of their gross revenues, so lockdowns have severely impacted this segment due to stifled travel. While it was impossible to know when people would begin traveling again, we accepted this reality with the belief that travel would eventually return. Both companies have commented that as soon as a country or geography reopens, cross-border volumes reignite, amplifying each business’s growth and profitability. We think these near- term headwinds have created an attractive long-term investment opportunity.”

 

4. Meta Platforms Inc (META)

The American international technological corporation Meta Platforms, Inc. (META) now doing business as Meta (META) and formerly known as Facebook, Inc. is situated in Menlo Park, California. The firm, among other things, is the owner of Facebook, Instagram, and WhatsApp.  

Meta Platforms now has a trailing PE ratio of 13 as the stock lost nearly half of its market value recently. Numerous people do not invest in Meta Inc stock because of the risks such as regulatory risk, decline in advertising rates, and traffic growth risks. While people are right to be skeptical about Meta Inc, it is a good technology stock to invest in long term as a lot of the negative risks are already priced in.

Here’s what Giverny Capital has to say in its Q1 2022 letter about Meta Inc:

The rub, however, is that despite the bad earnings news the economics of Meta’s social media businesses remain exceptionally good. In 2021, for every dollar of revenue generated Meta spent 63 cents on expenses and reported 37 cents of pretax profit. That was considered disappointing, even though very few businesses generate 37% profit margins. On top of that, fully one-third of expenses, or 21 cents on the dollar of revenue, is spent on research & development, which is investment in future growth. In Meta’s case, this amounts to about $25 billion a year invested in various new projects, the most important of which is the metaverse.

3. Alphabet Inc  (GOOG, GOOGL) 

Alphabet Inc. (GOOGL) is an American global technological conglomerate holding company. Company is one of the most valuable companies in the world and is the world’s third largest technology company. The parent of Google has a $1.5 trillion market cap, and owns YouTube, Nest, and Waze.

Alphabet’s key revenues are coming from cost-effective online advertising; cloud-based solutions that provide customers with infrastructure and platform services and collaboration tools; sales of other products and services, such as apps and in-app purchases, digital content products, and hardware; and fees received for subscription-based products such as YouTube Premium and YouTube TV. Company’s mainly expenses are attributed to sales and marketing, general and administrative functions and R&D.

Overall, the technology market is one of the most growing industries in the market and globally, the US IT sector holds a 33% market share. Alphabet Inc is gaining competitive advantage in the industry by buying other companies, gaining new technologies, patents, and improving its products and services. We believe Alphabet Inc is undervalued given its double digit topline growth rate.  Current Alphabet Inc share price is $117.  We like Alphabet because of its exposure to artificial intelligence and autonomous driving opportunities. Moreover, Alphabet Inc makes investments in data centers, information technology assets and grow its current services and products at a rapid clip. Alphabet Inc reported a 13% revenue growth for the second quarter and has approximately %5 of free cash flow yield.  

While a company holds a lot of promise for the future, there are some risks to be careful about before investing. Most of Alphabet’s revenue is coming from advertising. Companies might cut their advertising budgets sharply during recessions. Moreover, there can be regulation problems. Antitrust, data privacy, and Section 230, gives online platforms the freedom to control content while shielding them from accountability for posts made by their users, are among the issues that may negatively affect the company in the future.

Alphabet Inc manages Environmental, Social and Governance relationships well. One of its goals is to make net-zero emission in its operations and value chains by 2030. It also aims to replenish more water than it uses by 2030. Company’s long term prospects are to preserve the environment and help people with technology. According to the ESG reports Google wants to develop AI responsibly and thoughtfully. They are emphasizing the importance of building AI ethically and socially beneficially. 

Alphabet Inc is doing well on the growth front and is one of the best companies to invest in as digital transformation carries on. Ensemble Fund describes Google as “one of the most extraordinary businesses of the digital age. Its mission is “to organize the world’s information and make it universally accessible and useful. “When you think about the mass adoption of the Internet, smartphones, social and digital media, and ecommerce among billions of users every day, and the exponential growth of data that has brought, we all know how valuable Google’s role in collecting, organizing, and filtering all that information has become in our daily lives”. 

2. Microsoft Inc (MSFT)

Microsoft Corporation (MSFT), also known as Microsoft, is a multinational technology company with headquarters in Redmond, Washington, in the United States. It manufactures computer software, consumer electronics, personal computers, and related services. The Windows range of operating systems, the Microsoft Office package, and the Internet Explorer and Edge web browsers are some of its best-known software offerings. Nevertheless, its stock price went up nearly 1000% over the past decade or so because it transformed itself into a cloud computing company. 

Microsoft is focusing on innovating AI and ALT tech innovations. Microsoft makes most of its money from its cloud computing business. Microsoft Cloud revenue was $25 billion in Q2 and it was up 28% year over year.  Because of its strong cloud business, the market awarded MSFT with a trailing PE ratio of 29.

Here is what Polen-Capital-Global-Growth-Funds has to say about Microsoft in its Q1 2022 investor letter:

“ Microsoft and Accenture’s businesses are both firing on all cylinders and continue to enjoy an acceleration in their respective fundamentals because of the increase in digitization around the world. Nearly every company today is searching for ways to become more digital, and both Microsoft and Accenture are positioned to provide many of the solutions these companies seek. This inflection in fundamentals was not lost on the market, and each business’s stock performed exceptionally well in 2021”

Baron Opportunity Fund was also bullish on Microsoft Corporation (NASDAQ:MSFT) in its Q1 2022 investor letter:

“Shares of mega-cap software company Microsoft Corporation (NASDAQ:MSFT) pulled back with the broader software sector. The company posted another solid quarter, highlighted by total revenues increasing 20% and Microsoft Cloud revenues, now 45% of total revenues, growing 32%. These results were driven, in large part, by strong demand for large Azure contracts. We believe Microsoft can compound revenue in the low double digits for the next three years, underpinned by its expansion in its total addressable market and market share gains.”

 

1. Amazon.com Inc. (AMZN)

Amazon Inc (AMZN) is a technology company that immerses itself in e-commerce, cloud computing, digital streaming, and artificial intelligence. Amazon Inc is one of the biggest American Technology companies such as Alphabet, Apple, Meta Platforms and Microsoft. Company’s current share price is $140, up more than 35% over the past couple of months. Amazon, Inc has a market capitalization of $1.4 trillion.  

Amazon produces books, DVDs, music CDs, videotapes, and software), apparel, baby products and more. Amazon also focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence. Amazon has made Prime, Prime Air, Alexa, Kindle, Cloud Computing. Key drivers of Amazon are subscriber growth, its fulfillment strategy, and cloud revenue. It is really a cloud computing company but most investors see it mostly as an online retailer. 

Amazon is indeed the largest internet retailer and e-commerce giant, but it derives the bulk of its value from cloud computing services. A couple of months ago its market value declined to $1 trillion. Insider Monkey valued the value of Amazon's AWS at $1 trillion which meant investors could have bought the rest of the company (i.e. the biggest online retailer in the world for free). That's probably why it is the number one stock among hedge funds (see 30 most popular hedge fund stocks). 

Amazon Inc, also has family support programs, free mental resources, and a Career Choice Program. Amazon, Inc is committed to be net-zero carbon by 2040. Amazon Inc is the biggest corporate buyer of sustainable energy. Amazon Inc, currently has 274 projects. 

 Here’s what Alphyn Capital Management has to say in its Q1 2022 report for Amazon Inc: 

“We doubled our position in Amazon after the price declined due to market worries regarding cost/wage inflation and the need for increased capital expenditure. In contrast to many “covid beneficiaries,” Amazon’s sales are proving resilient, as the convenience of online shopping for everyday items has led to habit formation. To accommodate the increase in business, Amazon increased its operating square footage by 60% and 40% in 2020 and 2021. It plans to grow a further 25% in 2022.6 Future revenues will benefit from this increase in capacity, and margins should expand as capital expenditure moderates.” 

You can also take a look at This Analyst Is Bearish on These 15 Retail Stocks Amid “Soft Landing” Expectations and 10 Best Stocks For Inflation According to Redditors

Disclosure: None. 5 Best Technology Stocks To Buy Now is originally published at Insider Monkey.