3 tech stocks to invest in now

September 9, 2020

Technology has long been central to our lives, but this year has seen it become more important than ever. Even though Covid-19 has resulted in global lockdowns and social distancing measures, technology has enabled millions of people around the world to continue working and shopping, and stay connected. And thanks to our growing dependence on gadgets and software, the companies behind these innovations are making a killing.

Naturally, many shrewd investors are looking to profit from this new technological boom. Tech stocks have been of interest for some time — just look at FANG: Facebook, Amazon, Netflix and Alphabet (formerly Google Inc.). However, Covid-19 has caused some other big names to really come to prominence. Of course, we would never recommend that you dabble in stocks without doing your own research and weighing up the risks, but if you’re looking for some new opportunities, these are three of the tech companies you should consider.

SAP

The German tech firm is the leading provider of enterprise resource planning (ERP) software as well as other specialist software for processing data and managing business functions. Today, the company has over 220 million cloud users and the largest cloud portfolio. SAP is incredibly popular here in the UK, providing job opportunities throughout the country thanks to growing interest in the software across all sectors — major organisations including Nationwide and Vodafone have already implemented it.

SAP’s total revenue and operating profit were up in the first quarter of 2020, despite much new business being postponed by the emerging pandemic, and things continued to improve in the second quarter. “Our portfolio is key to drive the kind of business transformation our customers want as our applications run the world’s most mission critical business processes,” said SAP CEO Christian Klein. “As a result, our customers can emerge even stronger from the crisis.”

SAP’s resilience in the face of the Covid-19 has not gone unnoticed by investment managers either. In its Q2 2020 Investor Letter, Polen Capital Management recently highlighted additions to its position in SAP, predicting that they “will likely be less affected in the near term” by any further lockdown measures. The investment manager noted that although the world faces declining GDP, ERP software remains crucial for many businesses. Furthermore, although it appears that growth will take longer to recover in Europe, roughly 70% of SAP’s revenue is earned outside of the continent.

Cisco Systems

US conglomerate Cisco Systems specialises in computer networking products, and is also credited with coining the term Internet of Things. Unsurprisingly, it has benefited from the surge in employees working from home due to Covid-19, and become a leading provider of IoT products thanks to its networking expertise. Cisco’s aim is to transform how people connect and communicate, regardless of time, place or computer system.

Since the pandemic, demand for Cisco’s products has skyrocketed. In an interview with Bloomberg, CEO Chuck Robbins recalled: “We launched both free cloud security offers and free WebEx (a video conference platform) offers, and in the first 24 hours of putting that offer out we had 240,000 new users sign up.” He added that WebEx was now supporting up to five times the volume it had been built for.

However, the company hasn’t been completely immune to the effects of Covid-19 and has projected its first annual sales decline in three years. However, experts believe there may still be some promising developments to come. “While the WebEx platform does not represent a large portion of Cisco’s revenue stream, it should incrementally support its initiative of transitioning away from hardware with a greater emphasis on software solutions and recurring revenue streams,” Dan Eye, head of asset allocation and equity research at Roof Advisory Group, explained to Kiplinger. Cisco also currently has a Zacks Rank of #2 (Buy) and an average broker rating of 1.85 (also Buy).

Dropbox

Dropbox is a file hosting service, offering cloud storage and file synchronisation for individuals and businesses of any size. The company has previously been ranked as one of the most valuable US startups, with a valuation of just under $10 billion at the end of its first day of trading in March 2018.

As with Cisco, Dropbox was also able to take advantage of the increase in home working, and the technical requirements needed to do so. Its platform has been the perfect tool for sharing data and collaborating at a distance, and the organisation has improved its services to meet new demands. “For a lot of our customers, Dropbox is not just some folder on their desktop, it’s the place where all work happens. And we’re like, okay, that’s awesome,” CEO Drew Houston explained to Forbes. “One little issue – we never designed the product to do that.” Hence why the company has decided to add an array of new capabilities, such as a password storing and syncing tool and a backup feature.

This popularity has been reflected in Dropbox’s Q2 performance, with revenue up 16% year-over-year, and paying users rising to 15 million from 13.6 million last year. There has also been confidence in its stock, with Dropbox shares returning 29.3% this year, compared to the overall Internet Services market at just 16.4%. In fact, InvestorPlace markets analyst Luke Lango believes that Dropbox is the “best work from home stock to buy today” as it should be valued much higher than it is. Even though it isn’t necessarily essential for working at home, he argues there will still be a significant increase in demand that is set to last as remote working becomes a permanent change for many. “I fully expect DBX stock to rally more than 50% from here over the next 6 to 12 months,” Lango predicted, urging investors to buy before this happens.

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