Of all publicly-traded companies, tech stocks make up one of the most dynamic investor picks, there have been made some predictions for tech stocks for 2021. Companies in other sectors such as consumer discretionary typically face challenges in the form of capital big outlays (due to scaling up manufacturing or physical storefronts) and changing consumer tastes, driving them into headwinds. But that’s not the case with tech stocks – they can be your best bet if you have just over a hundred enthusiastic employees and a win-win business idea.
When they are compared to stocks in other sectors, tech stocks get criticized for the simple presumption that investors will buy shares regardless of circumstances, these stocks don’t keep in focus long-term profitability and they don’t have enough follow through. This pushes investors to back up their growth plans by picking the best technology stocks showcasing the most promising numbers yet are still not driven by a fad; offering them a promising result.
The year 2020 was undoubtedly unforgettable due to the COVID-19 pandemic that redefined life for most of us. It transformed dynamics for tech companies as well. Being home around the clock, people started accessing cloud-based services, working remotely and shopping online more frequently. The firms that made the most of this change and pleased investors with big profits were the ones that were already prepared for this unexpected change.
Fast forward to the beginning of 2021 we have investors wondering about the expected landscape of the tech sector. For them, we have our predictions for tech stocks in 2021.
Ecommerce companies such as Etsy, Shopify and Amazon benefitted immensely due to the pandemic. The closure of brick-and-mortar stores caused Amazon’s online orders to increase; Independent online stores were launched by small merchants with the help of Shopify; large retailers’ struggle with disrupting logistics and supply chains went in contrast with artisan marketplace by Etsy. It is one of the most important predictions for tech stocks in 2021.
At the end of the pandemic, these companies will face dramatically different year-on-year (YoY) figures. However, as mentioned by the IBM U.S. Retail Index, the shift from brick and mortar to online stores is expected to stay that way for the next 5 years, implying that the eCommerce acceleration will stay robust through 2021.
The shift from cash to digital payments has also been accelerated thanks to eCommerce growth. Last quarter, PayPal (NASDAQ: PYPL) reported a 36% YoY increase in total payment volume in constant currency terms, denoting the payments company’s strongest historic growth. Square Inc. also reported an increase from 24 million monthly active users (MAUs) at the end of 2019 to 30 million MAUs in June.
Both the companies, therefore, successfully generated heavy returns for shareholders last year, heavily outperforming banking stocks which are expected to be crushed underneath dramatically low interest rates this year. This will also have an influence on banks and financial technology stocks in Pakistan.
Companies like Netflix (NASDAQ: NFLX), AT&T and Disney had been enjoying the surge in streaming shows thanks to the global pandemic-related lockdowns. AT&T and Disney also released some of their biggest titles in theaters as well as on streaming platforms. Investors should beware though as Netflix is enjoying a profitable status unlike any other in the streaming market; AT&T and Disney are likely to report higher losses than last year as they chase the almost 200 million subscribers Netflix currently boasts. It is one of the predictions for tech stocks.
While Twitter and Facebook are still going pretty strong in the social media sector, smaller social media firms like Pinterest (NYSE: PINS) and Snap Inc. (NYSE: SNAP) have built themselves resilient niche markets. Both companies reported faster revenue growth than Twitter and Facebook in 2019, having their stocks rallying as a result in 2020. This trend might continue as the predictions for tech stocks been made regarding it.
Over the last two years, Intel has faced various challenges like continuously losing the PC market to smaller competitor AMD, production problems with its next-generation processors and a CPU shortage. While this has led Intel already to lose one-fifth of its stock value, this decline will most probably continue this year. The CEO is depending excessively on buybacks and cost-cutting strategy to drive earnings rather than solving the inherent production and R&D issues that would’ve made it less vulnerable to AMD.
Most smartphone manufacturers, network equipment makers and telecom companies have suggested that 5G network expansion may be a major theme in 2021 since they theoretically offer 100 times speedier networks than 4G technology. However, the not-so-frequently cited fact is that they also consume three times the power 4G base stations require, making them a very costly alternative operations-wise. Most customers already crawling their way out of the lockdowns are going to be unwilling to make the switch to more expensive 5G price plans.
It has also been revealed by a recent Opensignal study that 5G networks are not even close to being 100 times faster than 4G networks. Many companies are expected to face tailwinds due to 5G upgrades this year. Moreover, tech stocks in Pakistan will also rise due to this technology. But, the gains may not live up to their hype. But still this is one of the predictions for tech stocks.
This is expected to continue even after the Biden administration comes in power. Trump imposed ruthless sanctions on Chinese firms such as Huawei, cutting them off American technology, but that conflict started way before Trump took office. Previously, Intel had been blocked under the Obama regime from selling chips to Chinese supercomputer manufacturers.
The sale of Aixtron, a German chipmaker, to a Chinese company was also halted in 2016. The Street had stated that these decisions by Obama could increase tensions between America and China.
It is therefore expected that this ongoing tech war is most likely to resume under the Biden administration as well, specifically since it faces bilateral pressure to remain rough with China. This is expected to further distance Chinese and American tech firms from each other in 2021.