In this article we discuss the 5 technology stocks to buy for long term. If you want to read our detailed analysis of the tech industry, go directly to the 10 Best Technology Stocks to Buy for Long Term.
5. Zoom Video Communications, Inc. (NASDAQ: ZM)
Number of Hedge Fund Holders: 59
Zoom Video Communications, Inc. (NASDAQ: ZM) is a communications tech company that provides online chat and video-telephony services via peer-to-peer, cloud-based software platforms.
On April 19, Zoom Video Communications announced new $100 million Zoom Apps Fund venture, which is designed to enhance growth in the ecosystem of Zoom integrations, developer platform apps and hardware. It is created to stimulate growth of Zoom’s ecosystem of Zoom Apps, integrations, developer platform, and hardware. Portfolio companies will receive initial investments between $250,000 and $2.5 million to build solutions that will become core to how Zoom customers meet, communicate, and collaborate.
For Q4, the total revenue of Zoom Video Communications, Inc. (NASDAQ: ZM) was $882.5 million, up 369% YoY, while FY 2021 total revenue was $2,651.4 million up 326% YoY.
4. Twitter, Inc. (NYSE: TWTR)
No. of Hedge Fund Holders: 78
Twitter, Inc. (NYSE: TWTR) is one of the best tech stocks to buy for long term. The company saw a revenue of $1.04 billion in the first quarter, up 28% YoY. Reports suggest that Paul Singer Elliott Management added $200 million worth of shares of Twitter. Cathie Wood reportedly also increased her stake in Twitter, Inc. (NYSE: TWTR) by purchasing 468,256 shares via the Ark Next Generation Internet ETF and 843,194 shares via Ark Innovation ETF. The total purchase value is $72.4 million.
Twitter ranks 4th in our list of best technology stocks to buy for long term.
Greenhaven Road Capital, in its Q1 2021 investor letter, mentioned Twitter, Inc. (NYSE: TWTR). Here is what Greenhaven Road Capital has to say about Twitter, Inc. in its letter:
“I think there are many elements of Greenhaven Road that are contrarian, including the previously mentioned willingness to invest in SPACs and having a fund of funds (the Partners Fund). However, we don’t have to be contrarian all the time; often, the consensus is correct. There is a wisdom in crowds. I think our investment in Twitter (TWTR) falls into the category of “the crowd has this one right.” I have been a Twitter user for seven years. For several of them, I was puzzled by the fact that the company was spending hundreds of millions of dollars per quarter on research and development with no evidence of improvement. Allowing users to go from 140 to 280 characters did not seem like it should require billions of dollars of engineering. Twitter struggled to recreate community with poor monetization and lackluster growth. It fell into the category of “love the product but not sure about the management or the investment prospects.” In fact, one could have purchased Twitter shares at or below their IPO price just last year, seven years after their 2013 IPO.
There are a number of reasons for the dearth of innovation at Twitter, the seeds of which were laid in their growth strategy. Twitter was built by bolting on acquisitions. Over time, products focused on cell phone SMS technology became an advertising-supported social network. It’s not an easy feat to fix technical issues while running a product that has almost 200 million daily users sending over 500 million tweets per day. Rebuilding the airplane while flying takes a long time. In the case of Twitter, it took years, but we are finally on the other side of the effort. While resolving technical debt sounds mundane, it is enabling innovation with positive business implications. In fact, Twitter has a wave of improvements that substantially enhance the user experience and monetization opportunities. Company leadership laid many of these out in their recent investor day presentation, where they also promised a dramatic acceleration in the introduction of new features.
The headline is that the Twitter of next year looks much different than the Twitter of 2020, which should drive engagement and monetization. Changes include allowing users to follow by area of interest vs. just following people, which will both improve engagement and monetization, and improving monetization of content creation through “tipping” and subscription products. Twitter is supporting live audio events through Spaces, and is rolling out new ad formats and tools for advertisers. The company also is likely to enable e-commerce, which will encourage collecting of payment information as well as verifying users. The monetization options are nearly endless and, to date, have solely consisted of advertising.
Personally, I have found Twitter to be a valuable tool on the investment research front, connecting me with content that I never would have found otherwise. I can see the thoughts of investors I respect in real time. Often when a stock “moves,” I can get a better understanding of why it happened on Twitter than by using Bloomberg or other purpose-built tools. Twitter has the combination of network effects (the more people use it, the better it is) and user-generated content. The new technology stack offers many opportunities to improve engagement and monetization. Combined with activist investors, new board members, and a management team that has taken steps in the right direction, Twitter has the opportunity for continued revenue growth, earnings growth, and multiple expansion. Elliot Turner of RGA Investment Advisors was generous with his time and incredibly patient explaining the possibilities presented by the rebuilt backend technology at Twitter. As sometimes happens (not often enough), we had rapid appreciation in our Twitter shares and have sold the position. I suspect we will revisit Twitter as there are many attractive elements.”
3. Snap Inc. (NYSE: SNAP)
No. of Hedge Fund Holders: 63
Snap Inc. (NYSE: SNAP) is an America-based social media and camera company behind Bitmoji, Spectacles and Snapchat.
CFRA upgraded the stock to “Hold” from “Sell” after the company posted upbeat Q1 results. Adjusted loss in the period came in at 0 cents, while the Street was expecting a loss of 6 cents. Revenue in the period came in at $770 million, versus $743.8 million. Global daily active user count was 280 million vs. 274.62 million estimated by the Wall Street.
Snap ranks 3rd in our list of best technology stocks to buy for long term.
In its Q4 2020 investor letter, RiverPark Advisors highlighted a few stocks and Snap Inc (NYSE:SNAP) is one of them. Here is what the fund said:
“Snap shares were our top contributor for the quarter driven by the company’s blow out third quarter earnings. The company grew revenue 52% year over year to $679 million (exceeding Street expectations by $120 million), and management guided to continued strong revenue growth of 47%-50% for the fourth quarter (more than $100 million greater than current estimates). Revenue growth was driven by strong engagement as well as better-than-expected monetization: Daily Active Users grew 18% year over year, they spent more time on the app (total daily time spent by Snapchatters watching Shows increased by over 50%) and created more Snaps (average Snaps created grew 25% year over year), while average revenue per user (ARPU) grew 28%. Additionally, SNAP delivered its most profitable quarter as a public company–adjusted EBITDA turned positive to $56 million for an 8% margin, vastly exceeding expectations of a $45 million loss.
Snap, known for its mobile-only picture and messaging application Snapchat, has a large and growing user base (249 million DAU) that is extremely engaged, opening Snapchat over 30 times every day, and creating, on average, more than 4 billion Snaps per day. Additionally, with less than $3 billion in run rate revenue and an ARPU that is about 1/2 that of Twitter and 1/3 that of Facebook, Snap should be able to more fully monetize its audience as it continues to create more services—content, advertising, gaming and developer tools.”
2. Facebook, Inc. (NASDAQ: FB)
No. of Hedge Fund Holders: 242
Facebook, Inc. (NASDAQ: FB) is a behemoth that owns Facebook.com, Instagram, WhatsApp and several other companies. On May 4, 2021, Facebook said that they now had seven million paid subscribers in its Workplace tool. This was an increase of 40% from the previous year. Facebook Q1 revenue was $26.17 billion vs. expectation of $23.67 billion. EPS in the quarter came in at $3.30 per share, beating the Street’s estimates of $2.37. The daily and monthly active users were 1.88 billion and 2.85 billion respectively. The ARPU for the period was $9.27.
Truist Securities has raised its price target for Facebook stock to $400 from $350. JMP Securities also raised the price target to $395 from $355, calling the stock a “must own” for advertising.
Our calculations show that Facebook, Inc. (NASDAQ: FB) ranks 3rd in our list of the 30 Most Popular Stocks Among Hedge Funds.
As of the end of the fourth quarter, there were 242 hedge funds in Insider Monkey’s database that held stakes in Facebook, compared to 230 funds in the third quarter. SB Management, with 12 million shares of FB, is the biggest stakeholder in the company.
1. Alphabet Inc. (NASDAQ: GOOG)
No. of Hedge Fund Holders: 179
Alphabet Inc. (NASDAQ: GOOG) is one of the best technology stocks to buy for long term as the company is working on several long-term projects, apart from being the market leader in the advertising market.
In the Q1, Google ad sales increased by around 32% YoY, while Cloud sales increased 45.7% YoY. Last month, Alphabet CEO Sundar Pichai sold 3,000 shares of the company at $2,279.93.
Our calculations show that Alphabet Inc. (NASDAQ: GOOG) ranks 6th in our list of the 30 Most Popular Stocks Among Hedge Funds.
Baron Opportunity Fund, in its Q1 2021 investor letter, mentioned Alphabet Inc. (NASDAQ: GOOG). Here is what Baron Opportunity Fund has to say about Alphabet Inc. in its letter:
“Alphabet Inc., the parent company of Google, is discussed further in the Review and Outlook section above and the Top Purchases section below. Google is the world’s largest search and online advertising company, and a top cloud computing player. Shares rose in the quarter on strong fourth quarter results that saw solid revenue growth of 23% and expanding operating margins. Search grew 17%, YouTube grew 46%, and total cloud revenue grew 46%, with Google cloud computing meaningfully ahead. CEO Sundar Pichai began the earnings call with this statement: “The past year…accelerated the shift to cloud and adoption of online services. This has profound implications for all companies and consumers….Google’s products…have been a lifeline for millions of small, medium businesses hit hard by the pandemic.”
You can also take a peek at 15 Most Valuable Technology Companies in the World and Top 10 Artificial Intelligence Stocks to Buy.
