• Technology will continue to thrive- New leaders in 2021 are likely as the giants face headwinds

• Combining energy with technology with Enphase Energy (ENPH)

• Gambling and high-tech with DraftKings (DKNG)

   

• Look outside the box for companies with appealing or essential products with a technology edge

I was born in 1959. Baby boomers like me have witnessed tremendous changes in our lives. Technology changed how we interact and communicate, work, shop, learn, and virtually every aspect of life. Over the past six decades, it seems like the world has shrunk. Ironically, the global population grew from under three billion to over 7.7 billion over the period.

I remember putting aluminum foil on TV antennas to improve the reception. When I was in college, the computer department was in a cold room filled with tubes. Pong and Ms. Pacman were the video games I played in college. At my first job in the commodities markets, recording transactions was a manual process. My first mobile phone weighed around thirty pounds. I can go on and on, but the bottom line is that technology has been the overriding force and influence in my life, and I am not alone.

The younger generations have embraced technology as the learning curve came as the baby boomers aged. It is still a challenge for me to fathom that the pocket-sized iPhone I carry at all times has more computing power than the entire computer room from my days at the university.

The global pandemic forced many of us who were behind the curve to catch up. It also expanded the addressable market for products and services we may never have considered using were it not for the social distancing and lockdowns of 2020. Technology’s pace continues to accelerate at lightning speed. Companies that address human’s needs and desires with technological solutions will thrive over the coming years. A company that powers people’s lives with solutions and another that provides and enhances the entertainment value of sporting events using technology stand to continue to experience growth in 2021.

Technology will continue to thrive- New leaders in 2021 are likely as the giants face headwinds

Technology continues to impact every facet of our lives, and that trend will continue in 2021 and beyond. Meanwhile, the incredible gains in the leading technology stocks in 2020 have caused a concentration of power and dominance. The FAANG stocks include Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GGOG). The combined market cap of the five companies was around $6.2 trillion at the end of 2020. To put that in perspective, FAANG stocks have a larger market cap than Japan’s GDP. Japan is the third-leading world economy.

The financial firepower of technology giants like AAPL, AMZN, GOOG, and Microsoft (MSFT) that all have individual market caps that put them in the trillionaire category presents challenges for competition. Moreover, access to data poses to personal privacy. Regulators in the US, Europe, and other countries are likely to address the dominance clustered in a small group of leading companies. Politicians have had many of the technology leaders in their crosshairs over the past years. While these companies may find it challenging to continue growing because of more regulations and political interference, other technology companies will continue to provide the innovation that pushes their earnings and valuations to new highs. The best bets in the technology sector for the coming years are the companies that combine online activities with businesses with growth potential. Two areas are energy and gaming.

Combining energy with technology with Enphase Energy

Enphase Energy has been in business since 2006, with headquarters in Freemont, California. The company designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry in the US and worldwide. ENPH offers a semiconductor-based microinverter, which converts energy at the individual solar module level, and combines with its proprietary networking and software technologies to provide energy monitoring and control services. ENPH also provides AC battery storage systems, the Envoy communications gateway, the Enlighten cloud-based monitoring services, and other accessories. The company sells its products to distributors, large installers, strategic partners, and homeowners. ENPH combines solar energy with other technologies to improve efficiency.

Enphase Energy had a market cap- of $22.168 billion at $175.47 per share at the end of December.

Source: Yahoo Finance

The company has consistently reported profits and beat analyst estimates over the past four consecutive quarters. The consensus forecast for Q4 is for earnings of 40 cents per share.

Source: Yahoo Finance

From 2016 through 2019, the overall trend in earnings and revenues has been positive.

Source: Barchart

The long-term chart dating back to 2012 illustrates the bullish trend. The most recent high came in December 2020 at $189.41. ENPH was at $26.13 at the end of 2019. The shares were close to the all-time peak on December 31, 2020.

ENPH is a company that combines energy and technology, which has been a winning combination in 2020.

Gambling and high-tech with DraftKings

DraftKings is a digital sports entertainment and gaming company in the US. The company provides users with daily sports, sports betting, and iGaming products. DKNG is also involved in designing and developing sports betting and casino gaming platform software for online and retail sportsbook and casino gaming products. DKNG is a leader in the lucrative fantasy sports market, which is growing by leaps and bounds.

Many US states are legalizing online gambling as they look for more tax revenue. The addressable market for sports betting is growing. DKNG had a market cap of just over $19 billion at the end of 2020.

Source: Yahoo Finance

The earnings trend has been negative, with its loss increasing over the past three consecutive quarters. The current estimate for Q4 EPS is for a loss of 46 cents.

Source: Yahoo Finance

From 2016 through 2019, revenues have been steadily growing, but so have losses as the company invests in its business. A survey of twenty-three analysts on Yahoo Finance has an average target of $59.87 for DKNG shares, with forecasts ranging from $39 to $100.

Source: Barchart

DKNG shares closed 2019 at $10.70 and were trading at $46.56 on December 31, 2020. The stock over quadrupled in value despite the losses as the market looks forward to profitability in the coming years. DKNG is an example of a company that combines a gaming business with technology.

Look outside the box for companies with appealing or essential products with a technology edge

Technological innovation will continue to accelerate change in people’s lives over the coming years. The pace has been incredible, and it is likely to continue. ENPH and DKNG are two companies that combine technology with traditional businesses. The technology angle is likely to continue to add a premium for companies that embrace innovation in 2021. The FAANG stocks and tech leaders that experienced explosive rallies in 2020 could face regulatory and legal challenges in the coming year. However, innovation will continue to produce higher share prices for companies that can combine technology with their businesses. Look outside the box for those stocks that position as providers of essential goods or services that embrace technology.

Want More Great Investing Ideas?

9 “MUST OWN” Growth Stocks for 2021

The #1 CRITICAL Investment Lesson from 2020

7 Best ETFs for the NEXT Bull Market

DKNG shares fell $0.64 (-1.43%) in premarket trading Tuesday. Year-to-date, DKNG has declined -3.65%, versus a -1.36% rise in the benchmark S&P 500 index during the same period.

About the Author: Andrew Hecht

Andy spent nearly 35 years on Wall Street and is a sought-after commodity and futures trader, an options expert and analyst. In addition to working with StockNews, he is a top ranked author on Seeking Alpha. Learn more about Andy’s background, along with links to his most recent articles. More...

More Resources for the Stocks in this Article