Tech stocks have seen volatile trading in the first half of 2021, and there could be more swings on the horizon. However, no matter what happens in the short term, it is likely that the tech sector will continue to produce big winners and play a disproportionate role in fueling gains in the overall market.
With that in mind, a panel of Motley Fool contributors identified three promising tech stocks that have what it takes to crush the market. Read on to see why they think Impinj (NASDAQ: PI), Microsoft (NASDAQ: MSFT), and a next-gen cybersecurity player discussed below have what it takes to deliver incredible long-term performance.
Bringing “things” to the Internet of Things
Keith Noonan: It’s probably fair to say that the Internet of Things (IoT) hasn’t exactly taken the world by storm. At the very least, it’s taking longer than many tech insiders and analysts anticipated.
On the other hand, IoT technologies and services still have revolutionary potential, and the winners in the space could generate explosive growth. Impinj is a company that helps bring non-electronic things to the expanding world of network connectivity, and I think the stock has the makings of a multibagger for risk-tolerant investors.
Impinj manufactures radio frequency identification (RFID) tags, readers and software that can turn everyday objects into data transmitters. The basic configuration is similar to a more advanced version of the barcode system, but RFID has huge advantages and allows for much more advanced software integration.
Retailers, including Nike, Macy’s, and Zara are already using the company’s solutions to improve the speed and accuracy with which they measure inventory, identify consumer trends and reduce theft. Apparel and apparel companies currently generate most of Impinj’s sales, but retail is far from the only market for its technologies.
Impinj solutions are also already in use to track airline baggage, monitor drugs and supplies in hospitals, and improve manufacturing processes. Adoption of its RFID products is still in its early stages, but there could be an explosion of new use cases and demand over the next decade and beyond.
With a market cap of around $ 1.3 billion, Impinj is still small enough to generate explosive growth. The stock comes with relatively high risk, but it could generate explosive returns if the company’s vision for a connected future comes to fruition over the long term.
The Juggernaut of the Clouds
Joe tenebruso: People are often reluctant to invest in well-known large-cap companies for fear that the easy money has already been made. It is a mistake. Fortunes can be made even in the best known and largest companies – and often with relatively little risk.
Microsoft is one of those companies. The tech titan has crushed the market in recent years, fueled by the strong performance of its cloud-based business.
Microsoft is a giant in the growing cloud computing industry. Its Microsoft 365 productivity software suite, which contains cloud-based versions of Word and Excel, makes it easy for businesses to give their increasingly dispersed workforce the tools they need to succeed.
Another powerful engine for growth is Microsoft’s Azure cloud infrastructure platform. Azure’s 50% revenue growth helped boost the tech colossus’s revenue – to $ 41.7 billion – by 19% in the third quarter.
Even more impressive is Microsoft’s profit generation. Cloud-induced margin expansion drove net income up 44% to $ 15.5 billion.
Better yet, Microsoft likes to use its sky-high profits to reward its investors with bountiful stock buybacks and an ever-increasing dividend income stream. Together, this has helped fuel its wealth-creating stock price appreciation – and will likely continue to do so for many years to come.
America under attack: cybersecurity is now a national security issue
Jamal Carnette: Last month, cybercriminals temporarily crippled gasoline supplies across the Southeast, extorting $ 4.4 million from the Colonial Pipeline. While gas shortages received the most attention, it wasn’t even the most lucrative cyberattack this month, as meat processor JBS quietly paid $ 11 million.
It’s more than just a temporary inconvenience: food and gasoline are not optional items, but are essential to the functioning of our society. It’s easy to see why our government now views cybersecurity as a national security issue.
No company will completely prevent bad actors, but Okta (NASDAQ: OKTA) will play a major role. The company’s suite of Identity and Access Management (IAM) solutions ensure employees have access to the databases and tools needed to do their jobs while preventing cybercriminals from violating security protocols.
Okta’s growth thesis remains firmly intact. Companies have been investing for years in the digital transformation towards a culture of remote work. The growing use of cloud computing to collaborate, serve customers, and share documents will continue to grow and drive demand for Okta’s IAM suite of tools.
Okta’s product is sticky, which means customers are more likely to purchase additional services than cancel, as evidenced by Okta’s net dollar retention rate of 120% last quarter.
To date, Okta’s largest company has focused on workforce identity, but it also has an opportunity in Customer Identity and Access Management (CIAM). CIAM’s objectives are to ensure customer security but also to provide transparent transactions. Strong CIAM experience will increase engagement and lead to repeat purchases. Okta doubled in that total addressable market of $ 30 billion by purchasing Auth0 earlier this year.
The key to finding great stocks is to identify emerging companies offering market leadership in a critical industry. Okta certainly fits this bill.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.