2020 was nothing short of a disaster, but there were some good points. If you invested in technology, a pandemic-driven race of many stocks that benefited from employees working from home was a consolation prize.
The increase in some of these technology names may continue into the new year. If you have $ 3,000 and waiting time, three of our Fool.com employees think Magnite (NASDAQ: MGNI), Roku (NASDAQ: ROKU)and Dell Technologies (NYSE: DELL) it may be worth some of your hard-earned money in 2021 and beyond.
Image source: Getty Images.
Digital ads are far from being spent
Nicholas Rossolillo: The Magnite advertising technology platform started late in 2020. A product of the merger between Telaria and The Rubicon Project, Magnite’s shares fell for most of 2020, before suddenly exploding after the company’s third quarter report. company in November. The stock is now showing a gain of more than 220% in the year.
There could be more good things to come in 2021. On the surface, Magnite’s 12% year-over-year increase in revenue in the third quarter (compared to Telaria and the Rubicon Project a year ago) is not particularly impressive. But the pace of growth is expected to accelerate. Management expects revenue to grow 18% sequentially in the fourth quarter compared to the third quarter. Another advantage is that this is still a very small name in a huge digital advertising industry.
In fact, even after its recent run, Magnite is just a $ 3 billion market capitalization business. In contrast, your partner The Trade Desk – a buying platform for advertisers, versus a selling platform like Magnite, which helps content producers monetize their content – has a market value of $ 45 billion. And the two pale in comparison to the size of the mega-cap of the advertising duopoly Alphabet and Facebook. Put another way, Magnite has ample room to grow, and even small waves in the global marketing industry, which involves hundreds of billions in spending every year, can represent big returns for this little player.
The table is being set to make waves. Magnite is generating most of its growth in the past year with the connected TV industry, but its digital data platform for content creators and advertisers may become increasingly important as consumer privacy becomes more restricted and requires some necessary changes, such as the end of tracking application activity.
A recovery in advertising after the economic crisis this year will also help. With less than 12 times sales in the last 12 months and quickly reaching break-even, stocks look reasonably priced due to potential. I think there are a lot more advantages for Magnite in the coming years.
2020 was great, but hardly a record
Anders Bylund: Streaming services are fast becoming the new normal distribution method for all types of media. This process began many years ago, but was accelerated by the coronavirus pandemic in 2020. Many investors are still unsure of what to do with this secular trend because they do not know exactly which streaming media services will win or lose in the long run.
With Roku (NASDAQ: ROKU), you can invest directly in the growing media streaming market without choosing winners in the video, music or podcasting sectors. In fact, it doesn’t matter who wins the content wars because Roku benefits from the expansion of the market as a whole.
The shares have risen 164% so far in 2020, but this is nothing new for Roku investors. Should I remember what the same stock did in 2019? Here it is:
ROKU data by YCharts.
That’s right. The stocks that excited investors nearly tripled in 2020, in fact, yielded even stronger returns in 2019, only raising far less eyebrows in the process. The pandemic roadblocks quickly raised Roku’s public profile, but did not really change the company’s long-term business prospects.
This company is a leader in standalone video streaming players and also the leading choice when manufacturers of smart TV sets need a proven software platform. Roku’s story goes back to the first decoder that supported Netflix streaming in 2008, and the company has been improving its user-friendly platform ever since. It’s the kind of competitive advantage that other companies can’t really copy.
We are witnessing the early days of an industry giant’s future here. I see no reason why stocks cannot double or triple again in 2021, and even so, this is just the beginning of a long history of wealth building.
Work at home trends plus a strong catalyst should boost this stock in 2021
Billy Duberstein: Dell Technologies emerged 36 years ago as a low-cost PC maker in Michael Dell’s dorm at the University of Texas. However, over the course of several decades, Dell has grown into a huge technology conglomerate, especially after EMC’s massive $ 67 billion acquisition in 2016.
Next year, Dell is looking to partially “undo” part of that acquisition, which could unlock a huge amount of value. With EMC came a major stake in hyperconverged software and cybersecurity company VMware, which also owns a minority share of its shares traded on the stock exchange. Dell is considering a spin-off of its current 80.4% stake in VMware for its investors, which would likely occur on or after September next year, when such a transaction would become tax-free for shareholders.
What is remarkable is that VMware’s share alone is worth about $ 48 billion today, compared to $ 54.6 billion for Dell as a whole. This means that the “other” parts of Dell are valued at just $ 6.6 billion. For reference, Dell’s non-VMware portion made just over $ 7 billion in operating revenue last year. This means that if the spin-off is quickly reevaluated for VMware’s current valuation, the remaining shareholders will receive Dell for less than once operating profit.
Not only that, but every Wall Street analyst has a target price at VMware that is higher than current stocks. In addition, while Dell’s core PC and server business is not the largest in the world, it should remain stable or growing, as consumer PCs continue to benefit from the home work environment, while the infrastructure storage segment would benefit from an economic recovery and business expenses.
In short, Dell appears to be a serious value in today’s otherwise sparkling technology industry.