In this article we discuss the 5 best app stocks to buy today. If you want to read our detailed analysis of these stocks, go directly to the 10 Best App Stocks to Buy Today.
5. Activision Blizzard, Inc. (NASDAQ: ATVI)
Market Cap: $71.3 billion
Popular Apps: Candy Crush, StarCraft, Call of Duty
Activision Blizzard, Inc. (NASDAQ: ATVI) is an entertainment and video game company based in California. The company also distributes its content to various gaming platforms globally. Activision Blizzard, Inc. (NASDAQ: ATVI) is the parent company of Blizzard Entertainment, Activision, and King. The company as a whole owns some of the most popular franchises in the gaming industry, including Call of Duty, World of Warcraft, Candy Crush, StarCraft, Destiny, etc.
In Q1 2021, Activision Blizzard, Inc. (NASDAQ: ATVI) generated over $2.2 billion in revenues, up from $1.7 billion during the same period last year. Call of Duty remained central to Activision’s revenue, accounting for 72% growth in the revenue. The franchise’s monthly active users grew by 40% year-over-year, with Call of Duty: Warzone’s MAUs reaching 100 million in Q1 2021. Blizzard’s MAUs stood at 27 million in Q1 2021, with revenue growing by 7% year-over-year. King recorded a solid Q1 with revenue growing by 22%, majorly derived by Candy Crush. It has the largest number of MAUs at 258 million.
The ATVI stock’s performance remained smooth throughout, with stock price gaining 20% in the past year. Earlier in May, the Bank of Montreal upgraded the stock to ‘Outperform’, raising the price target to $116.
Like Electronic Arts Inc. (NASDAQ: EA), Match Group, Inc. (NASDAQ: MTCH), Yandex N.V. (NASDAQ: YNDX), and Apple Inc. (NASDAQ: AAPL), Activision Blizzard, Inc. (NASDAQ: ATVI) is one of the best app stocks to buy today.
Cooper Investors released its Q1 2021 investor letter and mentioned Activision Blizzard, Inc. (NASDAQ: ATVI). Here is what the firm has to say:
“The portfolio established a position in video game publisher Activision Blizzard. As a watchlist company we have followed Activision for several years. As a reminder the role of the watchlist is to allow us to focus on a select group of companies where we seek to observe important signals around either value latency, industry trends or management behaviour that portend attractive investment propositions.
Technology can often play a disruptive role in content, however video games are a clear beneficiary of technology, both in terms of more immersive and realistic gaming experiences as well as the monetisation opportunities this creates.
In order to benefit from these trends, video game publishers must be owners of unique IP. Activision Blizzard fits this bill perfectly boasting a portfolio which includes franchises such as Call of Duty, World of Warcraft and Diablo just to name a few.
The business is run by CEO Bobby Kotick, who together with Chairman Brian Kelly purchased the foundation assets for the company for US$400k in the early 1990s. Today Activision has a market capitalisation of over US$70bn. Over the last few years Bobby and his management team have refocused resources onto their best IP, with the goal of capitalising on the aforementioned industry tailwinds.
We saw the benefits of this in 2020 with the release of Call of Duty Mobile and Free-to-Play versions (with in game micro transactions) complimenting the traditional core console game. Engagement increased materially and due to the very favourable economics of content publishing, Operating Income more than doubled for the Call of Duty Franchise. Even adjusting for the impact of lockdowns, this is a phenomenal outcome.
Activision has 3-4 key pieces of IP with which they plan to repeat this playbook over the next couple of years. If they can replicate the success of Call of Duty, even in part, we see material upside to the free cash flow power of the business. Further, revenue sources are broadening which will move the profile away from a traditional lumpy annual release cycle of the old video game model towards one of a more recurring nature. This will transition Activision from a publishing to a services business, likely attracting a higher multiple than the current mid-low 20x FCF which is broadly in line with the market. To summarise, we see significant value latency and a pathway to double digit returns over the medium term.”
4. Tencent Holdings Limited (OTC: TCEHY)
Market Cap: $722 billion
Popular Apps: WeChat, QQ, QQ Wallet, Qzone
Tencent Holdings Limited is a China-based technology company. It owns some of the famous apps, including instant messaging service WeChat, Tencent QQ, Qzone, and also fintech apps; QQ Wallet, LiCaiTong, WeChat Pay, etc. The company ranks fourth on our list of the best app stocks to buy today.
Tencent’s WeChat and QQ are widely used in China, accounting for nearly two-thirds of its population. Moreover, the company also has investments in the U.S. gaming market, with a 40% of stake in Epic Games’ Fortnite Studio.
In Q1 2021, Tencent saw a 20% year-over-year increase in its revenue at $20 billion. Online advertisement and fintech revenue stood at RMB 21.8 billion and RMB 39 billion, respectively. The monthly average users for WeChat and QQ also increased in this quarter. The MAUs of WeChat grew by 3.3% year-over-year at 1.24 billion and for QQ, the number remained 606 million.
Tencent is also planning to contribute to carbon-neutral China by expanding its cloud computing industry and has signed an agreement with Chindata Group Holding Limited (NASDAQ: CD) in this regard.
3. Facebook, Inc. (NASDAQ: FB)
Market Cap: $964 billion
Popular Apps: Instagram, WhatsApp, Messenger, Oculus VR
Facebook, Inc. (NASDAQ: FB) is one of the widely used social media and networking services based in America. The company owns some of the most famous apps, including Instagram, Messenger, Oculus VR, WhatsApp, etc. In Q1 2021, the total number of MAUs of the company rose by 10% year-over-year and stood at $2.85 billion. Facebook, Inc. (NASDAQ: FB) generates revenue mainly through advertisements. In 2020, the ad revenue accounted for 98% of the total revenue of the company.
In Q1 2021, Facebook, Inc. (NASDAQ: FB) reported a 48% growth in its revenue, compared to the prior year at $26 billion. Instagram is the leading social media app by Facebook, Inc. (NASDAQ: FB). The app generated $13.86 billion in 2021 in add revenues in 2020 and is expected to reach $18 billion in 2021. The messaging service, WhatsApp is also used in over 180 countries and was downloaded 13 million times in April 2021. Along with these, Facebook, Inc. (NASDAQ: FB) also owns the VR company Oculus, a video monetization app LiveRail, and an Israeli mobile web company Onalu. The company to increase the revenue through ads in its virtual reality headsets by Oculus.
The FB stock has shown maximum growth, soaring by 40.9% in the past year and 26.9% year to date. Earlier this year, Morgan Stanley raised the price target of FB stock to $340.
Like Electronic Arts Inc. (NASDAQ: EA), Zynga Inc. (NASDAQ: ZNGA), and Alphabet Inc. (NASDAQ: GOOG), Facebook, Inc. (NASDAQ: FB) is one of the best app stocks to buy today.
In its Q1 2021 investor letter, ClearBridge Investments mentioned Facebook, Inc. (NASDAQ: FB) along with other stocks. Here is what the firm has to say:
“We continued to keep our learnings from 2020 in mind during the quarter as we sought to increase the up capture of the portfolio. We also made adjustments to the portfolio’s top 10 holdings to increase the participation of select stocks, including Facebook, while trimming our weighting to stable names, which now represent 47% of the portfolio. Our repositioning has been encouraging so far with the portfolio performing better on up days in the market while maintaining good down capture during more turbulent sessions.”
2. Alphabet Inc. (NASDAQ: GOOG)
Market Cap: $1.66 trillion
Popular Apps: Google Play Store, Gmail, Google Maps
Alphabet Inc. (NASDAQ: GOOG) is an American multinational company and became the holding company of Google in 2015. It ranks second on our list of the best app stocks to buy today. It mainly deals in web-based research, software applications, maps, etc., but the major chunk of its mobile revenue comes from its in-app advertisements using Google Ads. The digital service, Google Play Store, gives users a chance to choose from over 5 million apps, games, movies, music, and books. In 2020, the revenue of Play Store stood at $38.6 billion. Recently, following in Apple Inc’s. (NASDAQ: AAPL) footsteps, Alphabet Inc. (NASDAQ: GOOG) has announced to reduce the Play Store’s cut to 15% from 30%, in order to approach more developers.
In Q1 2021, Alphabet Inc. (NASDAQ: GOOG) generated over $55 billion in revenues, showing 34% growth year-over-year. The EPS stood at $26.2, beating the market estimate of $15.8. The advertisement segment remained the winner in Q1 2021, accounting for $44.68 billion of the revenue, up from $33.7 billion during the same period last year. YouTube adds generated $6.00 billion in revenues in this quarter.
The stock price has also soared by 66.9% in the past year and 40.3% year to date. Earlier in April, the board at Alphabet Inc. (NASDAQ: GOOG) announced a $50 billion stock repurchase after seeing growth in revenues for consecutive two quarters.
Artisan Partners, an investment management firm, released its Q1 2021 investor letter and mentioned Alphabet Inc. (NASDAQ: GOOG). Here is what the firm has to say:
“Large-cap tech companies have been resilient through the pandemic—Alphabet among them. A top contributor, Alphabet’s Play Store and Google Cloud are in demand as businesses accelerate online activity which, along with strong YouTube user growth, is helping stabilize temporarily weaker search ad revenue trends. Through the lens of our disciplined bottom-up research process, we view Alphabet as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bullet proof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
1. Apple Inc. (NASDAQ: AAPL)
Market Cap: $2.21 trillion
Popular Apps: App Store
Apple Inc. (NASDAQ: AAPL) tops our list of the best app stocks to buy today. It is an American technology company that manufactures and distributes electronic products and computer software.
Apple Inc. (NASDAQ: AAPL) also has an app platform, App Store, operated within the iOS software. Currently, the App Store has over 1.8 million apps available. App Store is central to the company’s business as the platform crossed $64 billion in gross sales in 2020. The gaming section of the App Store remains most popular amongst the users, accounting for 62% of the platform’s revenue. According to Apple’s official website, $1.8 billion generated during the last week of December 2020 were largely spent on the gaming section. Apple Inc. (NASDAQ: AAPL) has reduced its cut by half to 15% for developers generating less than $1 million in annual sales.
In Q2 FY21, Apple Inc’s. (NASDAQ: AAPL) revenue grew by 54% year-over-year at $89 billion. The AAPL stock has also soared by 48.4% in the past year.
ClearBridge Investments has released its first-quarter 2021 investor letter and mentioned Apple Inc. (NASDAQ: AAPL) in it. Here is what the investment management firm has to say:
“As we actively manage holdings and position sizes, we look to regularly recycle capital into more compelling opportunities. Maintaining our valuation discipline, we sharply reduced our position in Apple, whose shares more than doubled following our initial purchase in mid-2019 with an earnings multiple rising from the low-to-mid teens to nearly 30x.”
You can also take a peek at 10 Best Non Tech Stocks To Buy Now and 20 Best Social Media Apps in 2021.
