6 months ago • 2 mins
Tech stocks have been partying like it's 1999, but the free-flowing Champagne of easy gains might be drying up. So, before the house lights come on, you’ll want to try to spot the stocks that have more room to grow (horizontal axis) and offer a bigger bang for your buck when weighing up the upside versus the downside (vertical axis). The best prospects, then, appear in the upper-right quadrant of this chart from Goldman Sachs.
Goldman's top picks all share some common traits: they’re undisputed leaders in their respective markets, have a game plan to boost their margins this year, and many of the main headwinds are at least somewhat reflected in their share prices. And although Match Group, Expedia, and Etsy are all standing out in dramatic fashion in this quadrant, Goldman’s favorite three tech stocks (in order of preference) are:
Amazon: Its shares aren’t setting the world on fire right now, but the ecommerce giant could be gearing up for a rebound. The current price tag comes with a side of bad news already baked in, and there's a mixed bag of short-term wind in its sails (think: margin recovery, a sturdy Prime user base, and cross-platform expansion) and some long-term advantages too (AWS growth).
Uber: Despite a few bumps in the road, Uber's cruising toward recovery in its ride-share segment and is making headway on interlinking its delivery segment – basically, turning rides into deliveries, and vice versa. It’s got a global footprint and a management team that’s focused on accelerating profits, plus the potential to rev up equity value by putting balance sheet assets to work. And that’s making Uber look like a ride potentially worth booking.
Meta: The social media landscape is looking crowded, sure, but there's a treasure trove of untapped revenue in areas like messaging and short-form video. What’s more, some of the factors that have put pressure on the business (like a recent slump in advertising and changes in Apple’s privacy settings) could turn more positive going forward.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
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