As if investing in the tech sector did not carry enough risk, there’s a new threat to the tech part of your portfolio. There is a growing sense that the United States Congress will seek to regulate some of the largest tech companies.
At this point, it looks like several of the FAANG stocks (Facebook, Amazon, Apple, Netflix, and Alphabet/Google) may be the initial targets. Some regulation, particularly regarding data security and privacy – not to mention censorship - would be welcome. But we all know it’s not likely to stop there.
What will more extreme regulation look like? If the most vocal members of Congress hold sway, some of these companies may get broken up or face utility-like regulation. From an investment standpoint, it just adds uncertainty.
The good news is that the tech sector encompasses many companies that are likely to avoid government regulation. With areas like cybersecurity, support for remote work, and mobile gaming to continue to pick up steam, there are other areas that can help boost your portfolio.
And in this special presentation, we’ll give you seven of our picks for tech stocks that will avoid government regulation.
Quick Links
- Microsoft
- Roblox
- Crowdstrike
- Advanced Micro Devices
- Micron
- Asana
- Roku
#1 - Microsoft (NASDAQ:MSFT)
Although you won’t see any of the FAANG stocks in this presentation, it’s important not to ignore big tech altogether. With a 1.95 trillion market capitalization as of this writing, Microsoft (NASDAQ:MSFT) clearly qualifies as one of the biggest names in the tech sector.
MSFT stock rose sharply during the pandemic as the company’s collaborative Teams software facilitated remote work. However investing is usually about what have you done for me lately. Microsoft is trading near its all-time high set in April 2021.
One of the catalysts for the stock to move higher will be its Game Pass service for its Xbox gaming service. And I use the word service intentionally because Microsoft is taking a “Netflix (NASDAQ:NFLX) like” approach to bringing new games to market. Game Pass allows subscribers to access a curated library of over 100 games from their computers or mobile devices. And since 90% of the company’s new games will be released directly to Game Pass, there is a large incentive for consumers to sign up for the service which costs just $10 per month.
About Microsoft
Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services.
Read More - Current Price
- $426.94
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 27 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $509.90 (19.4% Upside)
#2 - Roblox (NYSE:RBLX)
Speaking of gaming, another tech stock that is showing a great deal of promise is Roblox (NYSE:RBLX). Roblox represents the future of gaming as it is a developer of mobile gaming that is built on user-generated content. There are a couple of things that makes Roblox intriguing. First of all, it targets kids which wouldn’t necessarily be interesting except that it’s apparent that kids are getting significant money from their parents for in-app purchases.
That explains why RBLX stock shot up to $69.50 after going public via a direct listing in March. And that was not without reason. The company’s Roblox app was the highest-grossing mobile game for the first quarter.
But after dropping after a disappointing earnings report, RBLX stock has climbed nearly 20%. Even when the company reported that its active users in May dropped slightly from April, the stock is still looking to hold support around its 50-day simple moving average.
One reason why it may do just that requires a closer look at the numbers. Active users were up significantly year-over-year and the average number of hours increased as well.
About Roblox
Roblox Corporation develops and operates an online entertainment platform in the United States and internationally. It offers Roblox Studio, a free toolset that allows developers and creators to build, publish, and operate 3D experiences, and other content; Roblox Client, an application that allows users to explore 3D experience; and Roblox Cloud, which provides services and infrastructure that power the platform.
Read More - Current Price
- $58.14
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 16 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $55.67 (4.3% Downside)
#3 - Crowdstrike (NASDAQ:CRWD)
Cybersecurity will be one of the hottest sectors for years to come. And Crowdstrike (NASDAQ:CRWD) is at the leading edge of this movement with its Falcon platform. Currently many companies have to use multiple software solutions for different aspects of cybersecurity. With Falcon, they get next-generation antivirus, endpoint detection and response, plus a 24/7 threat hunting service in a single bundled SaaS solution.
And the company has a tech alliance with Zscaler (NASDAQ:ZS) that will help further drive revenue and earnings growth. In fact Zscaler chose Crowdstrike over Microsoft.
The audience for the Falcon system is evident in the company’s revenue and earnings which spiked in 2020 and remain strong in 2021. Crowdstrike has already turned profitable on a non-GAAP basis.
A concern for investors is that the growth in CRWD stock has slowed considerably. Over the last 12 months, CRWD is up a whopping 128%. But in 2021 the stock price has only gained about 14%. The question is whether all the growth is priced into the stock.
About CrowdStrike
CrowdStrike Holdings, Inc provides cybersecurity solutions in the United States and internationally. Its unified platform offers cloud-delivered protection of endpoints, cloud workloads, identity, and data. The company offers corporate endpoint and cloud workload security, managed security, security and vulnerability management, IT operations management, identity protection, SIEM and log management, threat intelligence, data protection, security orchestration, automation and response and AI powered workflow automation, and securing generative AI workload services.
Read More - Current Price
- $347.20
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 33 Buy Ratings, 9 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $364.25 (4.9% Upside)
#4 - Advanced Micro Devices (NASDAQ:AMD)
Advanced Micro Devices (NASDAQ:AMD) stock is down over 13% in 2021. While some people could say that the stock was due for a selloff, I can’t help but believe this is a tremendous buy-the-dip opportunity.
The bears will point out that some hedge funds have exited their position. And there is some sentiment that Intel (NASDAQ:INTC) is finally going to regain some of the mojo (and market share) it has lost to AMD. Because Intel will be able to manufacture its own chips it could put pressure on AMD which is now entirely beholden to third-party suppliers to produce its chips.
However, it isn’t like Advanced Micro Devices has been resting on its laurels. The company continues to come out with innovative products and is already producing 7 nanometer transistors which has given it a sizable lead over Intel. It also allows AMD to be a strong competitor in all the sectors that are important to the high-performance computing wave.
About Advanced Micro Devices
Advanced Micro Devices, Inc operates as a semiconductor company worldwide. It operates through Data Center, Client, Gaming, and Embedded segments. The company offers x86 microprocessors and graphics processing units (GPUs) as an accelerated processing unit, chipsets, data center, and professional GPUs; and embedded processors, and semi-custom system-on-chip (SoC) products, microprocessor and SoC development services and technology, data processing unites, field programmable gate arrays (FPGA), and adaptive SoC products.
Read More - Current Price
- $123.95
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 27 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $191.96 (54.9% Upside)
#5 - Micron (NASDAQ:MU)
Another tech stock to consider amidst the global chip shortage is Micron (NASDAQ:MU). The company is one of the world’s top producers of NAND chips (i.e. flash memory chips) and DRAM chips. Micron saw its revenue drop by 8% in fiscal 2020 as a result of a drop in the price of memory and other pandemic-related factors in other sectors.
However as the saying goes, that was then. 2021 has been a much better story for Micron. Memory prices are up as demand is increasing in virtually every major customer base. Revenue is up 21% and earnings are up 43%. And the catalysts for that growth such as 5G upgrades, new gaming consoles, and remote work will remain in place. In fact, recent reports of new Covid-19 outbreaks in Asia may curtail the supply of DRAM chips into 2022. That will be a catalyst for the stock moving further.
Micron is reviewed by 34 analysts and receives a consensus buy including a rare Strong Buy rating. And the price target of over $107 per share would be a gain of over 32% from the current MU stock price.
About Micron Technology
Micron Technology, Inc designs, develops, manufactures, and sells memory and storage products worldwide. The company operates through four segments: Compute and Networking Business Unit, Mobile Business Unit, Embedded Business Unit, and Storage Business Unit. It provides memory and storage technologies comprising dynamic random access memory semiconductor devices with low latency that provide high-speed data retrieval; non-volatile and re-writeable semiconductor storage devices; and non-volatile re-writable semiconductor memory devices that provide fast read speeds under the Micron and Crucial brands, as well as through private labels.
Read More - Current Price
- $87.09
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 2 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $135.24 (55.3% Upside)
#6 - Asana (NYSE:ASAN)
Asana (NYSE:ASAN) went public via a direct listing in October 2020. Since then the stock price has nearly doubled. Growth like that leads to the question of whether there is more of a run left in the stock.
To the uninitiated, Asana offers companies a workflow management platform with a focus on organizing projects. The company cites the “three C’s” of communication, content and coordination as the pillars of its system. In simpler terms it lets teams collaborate on projects with a clear understanding of who needs to deliver what and when.
And it appears that there is strong demand for the company’s product. Asana just posted 71% year-over-year revenue growth in the first quarter of 2021, and the company is projecting similarly strong numbers for the rest of the year.
The question is that, by the company’s own admission, sustained profitability will take time. For the most part, investors are willing to overlook that as long as revenue growth is sustained. While the jury is still out on ASAN stock over the long-term, in the short-term it looks to be a solid play in the tech sector.
About Asana
Asana, Inc, together with its subsidiaries, operates a work management platform for individuals, team leads, and executives in the United States and internationally. Its platform helps organizations to orchestrate work from daily tasks to cross-functional strategic initiatives; manage work across a portfolio of projects or workflows, see progress against goals, identify bottlenecks, resource constraints, and milestones; and communicate company-wide goals, monitor status, and oversee work across projects and portfolios to gain real-time insights.
Read More - Current Price
- $21.12
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 10 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $16.53 (21.7% Downside)
#7 - Roku (NASDAQ:ROKU)
Roku (NASDAQ:ROKU) is an investment on the continued growth of streaming services. Roku is the agnostic lock that fits any number of “keys” meaning it will host almost any streaming service with its Roku device. The company also makes money through its advertising. However, Roku is also making a major investment to begin producing its own content.
In the past 12 months, ROKU stock is up over 186%. However, in 2021, investor sentiment has turned slightly bearish. The stock is up just 5% and the stock is not showing a strong entry point for investors at this time.
But if one analyst is to be believed, ROKU stock could be trading at a discount of nearly 40% based on projections for subscriber and platform revenue growth. That’s a narrative that will take time to play out. In the meantime, investors should look for an opportune time to buy this dip in ROKU stock.
About Roku
Roku, Inc, together with its subsidiaries, operates a TV streaming platform in the United states and internationally. The company operates in two segments, Platform and Devices. Its streaming platform allows users to find and access TV shows, movies, news, sports, and others. The Platform segment offers digital advertising, including direct and programmatic video advertising, media and entertainment promotional spending, and related services; and streaming services distribution, such as subscription and transaction revenue shares, and sale of premium subscriptions and branded app buttons on remote controls.
Read More - Current Price
- $75.28
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 9 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $83.81 (11.3% Upside)
If there’s any good news that investors can take away from the current state of affairs in Washington is that the Blue Wave has not become a tsunami yet. And with mid-term’s coming up in 2022, the window for regulatory action may close sooner than anyone expects.
However, anytime that the words “government regulation” get mentioned in the same sentence as a stock that you own, it’s cause for concern. And it may mean that it’s time to take some profits on stocks that you love. But a little prudence now can save you a lot of pain later.
So what’s a tech investor to do? Now is the time to take advantage of the economic reopening. The stocks in this presentation are leaning into the areas of the economy that are going to show the most strength for the rest of 2021 and beyond.
The bottom line is that you have options in the tech sector. And these seven stocks give you a good place to start the hunt for growth.
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