Four young tech stocks – Twilio Inc. (TWLO), Etsy Inc. (ETSY), Square Inc. (SQ) and Roku Inc. (ROKU) – have dramatically outperformed the big tech stocks this year, up as much as 36% versus the S&P 500’s near 3% gain. According to analysts and investors, the young techs could rise higher in 2019, per CNBC.
· Twilio Inc.; 8.5%
· Etsy Inc.; 7.3%
· Square Inc.; 17%
· Roku Inc.; 36%
Fintech Leader Square
Erin Gibbs of S&P Global prefers payments processing company Square, led and founded by Twitter Inc.’s (TWTR) Jack Dorsey. Gibbs points to the Silicon Valley company’s valuation and its history of beating earnings, indicating that the stock is attractive from a fundamental standpoint.
“Square’s valuation is so down, it’s trading at about 33 percent below the Wall Street target price so it’s by far, at least from a fundamental basis, got the most upside,” said Gibbs, per CNBC. She highlighted the company’s more than two years of exceeding analysts’ expectations, as well as its longterm growth estimate of 55%, one of the highest in tech.
Todd Gordon, founder of TradingAnalysis.com, says Square’s technical chart indicates the stock is set for a breakout. He notes that Square’s chart has moved in a downtrend channel, and that “if you can get more of a pop through here, then Square could do a little catch up on the upside.”
Streaming Play Roku
Roku’s stock surged 25% earlier this week on news of surprisingly large user growth, bringing its YTD gain 36% to $41 as of early Thursday trading. The company, which sells hardware that allows customers to access Internet streamed video or audio services through TVs, hit the public market in September 2017 at an IPO price of $14.
The company reported a 40% jump in active accounts in the fourth quarter, at 27 million, while streaming hours soared 68% over the year-ago quarter, at 7.3 billion. These numbers are becoming more important than device sales at Roku as the company seeks to monetize its audience via software and services, per Barron’s. KeyBanc Capital Markets’ analyst Evan Wingren is among the bulls who views Roku stock as a “quality, long-term opportunity.”
To be sure, these young tech stocks could get pulled down by a major market downdraft. And these newer companies could be disproportionately penalized by any negative surprise in earnings. Given the turmoil in today’s market, investors may need to regard these stocks as investments that may only payoff over the longterm.