We asked three Motley Fool contributors to pitch their top tech pick for the new year. Read on to see why they think Glu Mobile (NASDAQ: GLUU), salesforce.com (NYSE: CRM), and Qualcomm (NASDAQ: QCOM) are on track to be huge winners.
Are you looking for huge payouts? Start small
Keith Noonan (Glu Mobile): When it comes to naming top tech stocks for 2021, Glu Mobile might sound like an odd choice, of course. If you were to ask video game fans and industry watchers to name the most powerful and influential companies in the industry, you probably won’t get many respondents who offer Glu Mobile.
Activision Blizzard, Tencent, and Take-Two Interactive are just a few of the many names in the industry that are significantly bigger and richer in resources than Glu. It’s a small-cap company valued at around $ 1.6 billion, but there’s a lot to like about stocks at current prices as well.
On the one hand, the valuation seems quite reasonable in the context of good performances and favorable winds for the long-term growth of the industry. The company’s shares are trading at around 17.5 times expected earnings this year and just 2.5 times expected sales. Glu may not be able to compete with the titans of the industry when it comes to development and marketing budgets, but it has a strong collection of video game properties that deliver reliable performance.
These franchises are showing strong results thanks to continuous content updates that keep players engaged and to management projects whose current lineup alone will be enough to drive bookings up to 8% to 10% year-round next. Glu is also expected to release four new intellectual properties in 2021, indicating the company could enter a spectacular new phase of growth.
In my book, Glu Mobile Stock currently embodies the concept of “growth at a reasonable price”. Its major franchises are showing strong performance, major new releases are underway and the company will likely undertake acquisitions in the near future to accelerate its growth. He’s also experimenting with integrating real-world e-commerce stores into his titles. The stock still looks cheap, and the success of even a small number of its growth bets could drive that small cap up.
The titan of cloud software
Joe Tenebruso (Salesforce): A successful technology investment often comes down to identifying powerful long-term trends. Cloud computing, big data and remote working are three of these megatrends – and at their intersection is Salesforce.
Salesforce is the global leader in cloud-based customer relationship software. It dominates the industry, with a market share greater than that of its four closest competitors combined.
Acquisitions have helped Salesforce enter new markets. Thanks in part to its purchases of MuleSoft and Tableau, Salesforce is now a leader in data integration and visualization. By helping its customers to better aggregate, analyze and understand their data, the cloud leader has taken root in its customers’ operations.
Today, Salesforce is focused on the fast growing business communications market. In December, he struck a deal to acquire Technologies Slack (NYSE: WORK). Salesforce intends to combine Slack’s workplace messaging platform with its cloud-based software to “transform the way everyone works in a fully digital world from anywhere,” says CEO Marc Benioff.
While acquisitions can be risky, Benioff and his team have a proven track record. They have succeeded in integrating past acquisitions and creating a whole that is greater than the sum of its parts. Salesforce’s strong financial results are a testament to its operational excellence. The cloud titan’s revenue climbed 20% year-over-year to $ 5.4 billion in the third quarter, while its operating cash flow increased 14% to $ 339 million .
With trends in cloud computing, big data and remote working still in their infancy, investors can expect much greater growth for Salesforce in 2021 and beyond.
A strong link with the benefits of 5G
Will Healy (Qualcomm): Thanks to 5G, investors can connect to this chip stock on a new level. Since Apple Now sells 5G compatible devices, the upgrade cycle has started in earnest. With 5G offering speeds exponentially faster than 4G, most users will likely upgrade at some point.
Qualcomm is taking advantage of this because it is the only maker of a critical 5G chipset. This should hold true at least for the foreseeable future. Last year, Qualcomm persuaded a court to overturn a ruling that Qualcomm was a monopoly.
Apple also dropped its lawsuits against Qualcomm in 2019. However, it bought Intelthe smartphone chipset company, presumably one day will offer a competing product.
We understand why Apple wants a share of this market. This business is so important that Grand View Research predicts a compound annual growth rate (CAGR) of 63% through 2027.
These increases have already started to materialize. In its last quarter, adjusted revenue increased 35% compared to the same quarter last year. Adjusted earnings per share jumped 86% over the same period.
Additionally, despite the recent growth in Qualcomm stock, investors may not yet appreciate the value proposition. Even with the upward movement, Qualcomm’s forward P / E ratio is around 21. It’s extremely cheap, especially given Qualcomm’s potential growth and market position.
Finally, when CEO Steven Mollenkopf retires, Qualcomm insider Cristiano Amon will take over. Amon led Qualcomm’s 5G strategy. As he takes the helm, Amon could bring additional focus on 5G that should help take Qualcomm forward in 2021 and beyond.