The market has enjoyed an unprecedented year, with the S&P 500, Dow, and Nasdaq all reaching record highs in the final weeks of 2020.
Among those indices, the best-performing industry was information technology — as tech companies have led the recovery from March’s lows and stormed to new highs over the ensuing nine months.
With the tech sector roaring this year, investors may want to find out which tech stocks make worthwhile investments during the month of December to get an early jump on investing in 2021. So where should investors begin? Here are five of the best tech stocks to buy this month:
— Amazon.com (ticker: AMZN).
— PayPal Holdings (PYPL).
— Shopify (SHOP).
— Roku (ROKU).
— Sony Corp. (SNE).
‘Tis the Season for Amazon
For retailers looking to capitalize on the end-of-year shopping frenzy, the holiday season is the most wonderful time of the year. In 2020, online retailers stand to benefit considerably more than their brick-and-mortar rivals, who find themselves squeezed between expanding lockdown orders and a consumer population that’s hesitant to leave home for too long. That puts Amazon.com ( AMZN), the biggest online retailer of them all, in an especially good position.
To be clear, Amazon has already had a blowout year — the company reported a 37% year-over-year increase in net sales during the third quarter, while diluted earnings per share (EPS) rose from $4.23 all the way to $12.37. And the company got the holiday season rolling especially early this year with a belated Prime Day sale on Oct. 13 and 14; while Amazon didn’t release any of its own sales figures from the event, the company did report that third-party sellers enjoyed a 60% increase in sales this year.
That said, even online retailers like Amazon can’t entirely escape the impact of the pandemic on the holiday shopping season. According to the National Retail Federation, about 186 million customers made a purchase online or in stores between Thanksgiving and Cyber Monday, down from 190 million in 2019. That hasn’t seemed to slow Amazon down at all — in a recent blog post, Amazon noted that “2020 has been the largest holiday shopping season so far in our company’s history.” With an estimated $0.42 of every $1 spent this holiday season going to Amazon, according to Truist, investors can rest assured that December will be a very good month for the company.
There’s More to Online Shopping Than Amazon
Of course, a company doesn’t have to sell everything under the sun over the internet just to have a successful December. In fact, acting as a middleman between buyer and seller can be a wildly profitable business — just ask PayPal Holdings ( PYPL) and Shopify ( SHOP). Both companies provide essential services for businesses selling goods over the internet, though in very different ways.
PayPal enables online payment processing, making it easy for companies to accept payments over the internet — while PayPal takes a little off the top for its services. Those services have been in high demand this year as more people buy online than in stores, and Paypal’s third quarter results reflect that; in fact, the company enjoyed the “strongest growth in total payment volume and revenue in PayPal’s history.”
PayPal’s net new active accounts grew 55% year over year, as the company added 15.2 million new accounts during the quarter, bringing its total to 361 million accounts. These accounts are seeing more action than ever, with 4 billion transactions during the third quarter, a 30% increase over last year, while total payment volume grew 38%. All of this meant PayPal enjoyed an excellent quarter, with net revenue up 25% and GAAP EPS rising an impressive 121%.
Meanwhile, Shopify helps companies establish their own online shop with a cloud-based web platform. The company’s reach has grown larger and larger over the years, and as of 2019, Shopify was responsible for 5.89% of U.S. e-commerce retail sales, trailing only Amazon. Of course, Amazon was responsible for 36.99% of e-commerce sales. That said, don’t think of it as Shopify lagging far behind — think of it like the company has plenty of room to grow.
And grow it has. In the third quarter, Shopify’s revenue grew an eye-popping 96% year over year, thanks in part to a record number of merchants becoming paying Shopify subscribers during the quarter. The merchants who use Shopify’s platform are selling more, too, with gross merchandise value skyrocketing 109%, which in turn boosted merchant solutions revenue by 132%.
Both companies have enjoyed an excellent 2020, with shares of PayPal up 97% and shares of Shopify up 158% year to date. Both companies are poised for further growth during the holiday shopping season, and both make for excellent December investments that you can hold for the long term.
The Gift of Great Investments
With December comes the holidays, and while investors can profit from owning shares of the companies that facilitate buying gifts, what about considering the companies that sell some of the most popular gifts this season? Roku ( ROKU), for instance, has become many customers’ go-to source for their television needs as cord cutting reaches new heights — with millions of viewers preferring to pay for on-demand services rather than a full cable bundle. Roku gives viewers the options they want, allowing them to watch a variety of streaming services while making it easy to add and drop the services they want.
The result has been a surge in popularity for the company’s streaming sticks, with Roku adding 2.9 million active accounts in the third quarter. More people at home means more television being watched, and Roku saw total streaming hours rise to 14.8 billion this quarter, a 54% increase year over year. Perhaps most importantly, Roku is making more money from those viewers than ever before, as the company’s average revenue per user grew to $27, up 20% year over year. More viewers, more time in front of the TV and more money per viewer is a potent combination that Roku shareholders love.
With lockdown orders rising and winter approaching, many people will be stuck at home watching TV — and many will pick Roku as their over-the-top provider of choice. But there are also those who would like their at-home entertainment to be a little more active, and for them, there’s always Sony Corp. ( SNE). The Japanese consumer electronics behemoth has plenty of stocking stuffers to offer this year, but the biggest gift under the Christmas tree will be its newly released PlayStation 5.
The first PlayStation 5 consoles were sold Nov. 12, and so far, sales have been impressive — while official numbers have yet to be published, according to Sony, the PlayStation 5 has outsold the PlayStation 4 in the first few weeks since its release, making it the biggest console launch in history.
Investors should keep in mind that while the PlayStation 4 was a hit, selling well over 113 million units over the course of its lifetime before the PlayStation 5 hit the scene, the new console will be a loss leader for Sony in the short term. But in the long run, Sony’s software sales will rise as more PlayStations are sold — and the stronger the company’s ecosystem of games and services, the stickier the platform will be, keeping customers engaged for years to come. That should translate nicely to Sony’s bottom line in the months ahead, and investors who get in now before the big Christmas buying boom may be happy they did so.