2020 is a big year for tech stocks. Some high-growth names have doubled, tripled, or even more. So far, 2021 hasn’t come close to the realistic expectations of many of these companies.
However, that doesn’t mean the growth story is over. A new era of digital age is emerging. And some stocks could double again in 2021. Three of them have that potential: Square (NYSE:SQ), Applied material (NASDAQ:AMAT), and research (NASDAQ:LRCX).
Forget the crypto boom and bust cycle, digital payments is a growing industry digital.
Nicholas Rossolillo (Square): Square has gained a lot of attention because of its large size. Bitcoin Balance sheet holdings and Bitcoin revenue soared from trading on Cash App (Square subsidiary). Even after falling 40% from an all-time high, Bitcoin is still up nearly 450% since the start of 2020, unlikely. Surprisingly, Square shares gained about 250% during that same period.
But Square is more than a bet on the cryptocurrency craze. Square has cleverly used the Bitcoin Cash App̵7;s trading capabilities to welcome a large number of new users at low prices. Once in the ecosystem It will be able to cross-sell other functions such as digital payments and peer-to-peer money movements, debit cards linked to Cash App accounts, newly acquired tax preparation services. or integrations with Square’s major merchant networks.
Square continues to be heavily driven by Cash App’s pre-pandemic financial results year over year. cash app earnings (excluding Bitcoin-related revenue) increased 201% to $529 million in the first quarter of 2021. That incredible pace will no doubt slow down as 2021 progresses, but another catalyst is set. Take over: Square’s merchant ecosystem, which was hit hard by last year’s pandemic lockdown. When many merchants using Square were forced to close temporarily. The seller ecosystem grew 19% year-on-year to $1.02 billion in Q1, but it is likely that speed up in the next few quarters
Given the free cash flow, Square was unprofitable. At least not yet It is now spending a lot of money to boost its expansion in digital payments and financial technology. Free cash flow was just $16.2 million on $13.2 billion in revenue over the past 12 months, but Square would eventually be highly profitable. The gross margin was 57% in Q1 excluding the impact of Bitcoin, a significant increase from 49% last year due to the large number of new users. Growing up and down at a rapid rate It’s unthinkable that Square will double its value again this year from its current market cap of $101 billion.
The “early” of a decade-long growth trend
Anders Bylund (Applied Materials): Applied Materials, a supplier of semiconductor equipment and materials, has gained more than 150% in the past 52 weeks. This was driven by a global chip capacity shortage. When faced with limited production options Many microchip designers pay huge sums for the materials and processes they can do today. Applied Materials sales rose 41 percent year-on-year in last week’s second-quarter report. and the profit margin has increased And that’s just the beginning of a long-term growth trend, according to CEO Gary Dickerson.
“We remain in the early stages of a major secular trend to emerge over the next decade and drive the semiconductor and semi-device markets structurally higher,” the sheriff said on an earnings call. “For the first time, a client has been presented with several years of future capital expenditure guidance. which is a leading indicator of demand sustainability.”
Applied Materials stock returns are backed by excellent business results. The stock looks affordable after a massive 52-week rush, trading at 19x forward earnings and sevenx consecutive sales. The company has enjoyed both a short-term gain from the semiconductor shortage situation and a market with good long-term growth. I wouldn’t be surprised to see Applied Materials’ stock doubling again before the end of the year. And it’s also a solid stock for long-haul purchases.
This Stock Helps the Big Data Era
Billy Duberstein (Lam Research): Lam Research, a leader in semiconductor devices, grew 132% over the past year. But I wouldn’t be surprised to see more stock doubling. Check out these latest quarterly numbers: In Q1, revenue jumped 53.7% year over year. while earnings per share increased by 90.1%. But management has also guided strong continued growth for the current quarter.
Despite these blockbuster performances, Lam Research only trades at about 19 times forward earnings estimates. That is cheaper than all FAANG stocks and the market as a whole, although Lam posted superior growth metrics. I also think the average earnings estimates may be cautious.
It is true that Lam was a rather cyclical business in the past. and in the weak year Income may decrease or decrease in half cycle. But the long-term trend in both revenue and profit is clearer:
With so much demand we are seeing now due to the shortage of semiconductors. Some people may think that these results are just as good as what will happen. And there is a high probability that Lam’s strong growth will continue in the next few years.
The pandemic has accelerated the already emerging digitization trend across the industry. And with next-generation technologies like 5G, AI, wearables, and the Internet of Things, the growth of semiconductors is likely to significantly outpace overall economic growth in the near future. Add in the fact that every advanced country wants to have more semiconductor production capacity on its own shores and it seems nothing but good news for the semi-cap industry for the foreseeable future.
In addition, advanced semiconductors are pushing the limits of physics. Therefore, the production of smaller and more advanced chips costs more money with each model. For example, when the NAND flash module reaches its limit in terms of two-dimensional shrinkage. Lam’s embedded and milling machines have become essential for stacking NAND layers in 3D structures, a trend that continues today. Over the next few years, 3D architectures are likely to be used in logic chips and perhaps even DRAM. Lam has been the leader in these machines and has gained market share in recent years. So I expect the high performance to continue.
Finally, strong system sales today are paving the way for strong service growth in the future. cover upgrade spare parts and highly profitable services This helps increase productivity and maximize returns for customers. Lam’s service revenue, which accounts for about a third of its total revenue, is more tied to its installed base. And should be able to grow even if the machine sales will affect the soft patch.
With Lam earning an outstanding 70% on investment, growing more than 50% and trading at a lower price than the broader market, I expect Lam to outperform. and possibly double next year.
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