Sure, technology stocks have let it down late, but let’s be honest: in the long run, the world will become more digital, smarter, and automated. Therefore, it may be a good idea for long-term investors to take advantage of the recent sell-out of technology and look at the companies building the essential technology platforms to advance the future.
Although their shares are usually expensive, Amazon.com (NASDAQ: AMZN), Tesla (NASDAQ: TSLA), Illumina (NASDAQ: ILMN) are all good from their 52-week highs. At the moment discount, each of these stocks should be placed on your watch list at the very least, as their technologies should become the rock platforms of the 2020s and beyond.
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1. Amazon
FAANG member Amazon has actually not built one, but several platforms that will be central to our near and long-term economic future. It is striking that Amazon pioneered the idea of cloud computing so that businesses could safely connect to the computing and storage capacity as needed, instead of having to build it themselves. Today, Amazon Web Services is by far the largest cloud platform, generating revenue of $ 45.4 billion last year, while growing by 30% with 30% operating margins.
And of course, Amazon was the pioneer in realizing the promise of e-commerce at the beginning of the internet. Through years and decades of sustained improvements and investments, Amazon can now deliver just about any item under the sun, and many in just one day for Prime subscribers. With Amazon recently investing in its own aviation platform, including a new stake in air freight partners Group for air transport services (NASDAQ: ATSG) and an investment in Rivian to manufacture last-minute electric delivery vehicles, Amazon is looking to continue to improve its best e-commerce delivery platform in the coming year.
Amazon’s platforms also extend to media and entertainment. Not only does Amazon have one of the leading streaming services in Prime Video, but its Fire Stick is becoming an essential connected TV advertising platform. The beauty of Amazon’s Fire stick is that it can marry consumer data from its e-commerce platform to target ads on its connected TV platform. Last quarter, Amazon again led the global market in sales of paired TVs, 36% higher than year-on-year and with a market share of 12.1%. It should also drive Amazon’s emerging and high-margin digital advertising business for years.
If you have leading cloud, e-commerce and digital advertising platforms, Amazon should be a strong producer in the years to come, even after the pandemic.
Image source: Tesla.
2. Tesla
There is a lot of controversy over Tesla’s battlefield stock. Bulls claim that it will become the most valuable technology company in the world, while cattle claim that it is just another car business led by a snake oil seller who is addicted to social media. The answer probably lies somewhere in between, but I would definitely tend more towards the former than the latter.
Tesla currently leads the electric vehicle market, with approximately 69% of the EV market share in the US and 18% of the global market, more than three times its closest competitor. Say what you like about CEO Elon Musk’s behavior and stock valuation, but no one can deny that Tesla has established a world-class mass-market EV brand faster than many old-fashioned carmakers might have thought. . And the disruption must continue into the future; Management predicts an incredible 50% growth rate over the next few years as the company penetrates China and Europe further.
Most people understand Tesla’s vehicles, but how is Tesla going to become a ‘platform’? The key is the complete self-driving software, which the company hopes will provide a leading autonomous taxi network in the future, when regulations allow. Unlike other companies like Waymo, which uses LiDAR sensors to gain self-driving, Tesla arms its current vehicles with eight video cameras, all of which record 360-degree video recordings and radiate visual data back to Tesla, where the data is loaded. the company’s neural network. This neural network is constantly improving Tesla’s FSD platform, and according to Musk, the company’s complete self-management software will be able to meet or exceed the driver’s safety by the end of this year. “This is a big deal,” Musk said during the recent conference with analysts.
Armed with its own self-driving chip, Tesla believes it can win the battle for autonomy, enabling current Tesla owners to potentially “rent” their cars to others if they do not use their vehicle. Recent statements indicate that Musk believes Tesla will receive software annuity streams from such a service, which justifies Tesla’s current appreciation. Musk said he is also willing to license Tesla’s self-driving software to other carmakers.
The stock is undoubtedly expensive if you consider the business merely as a car manufacturer. However, if you believe in the complete self-driving story, Tesla could become an important platform for clean energy if you put together Tesla’s product portfolio between electric cars and trucks, battery production, autonomous software, as well as solar panels and large-scale energy storage. over the long term. Of course, how much you want to pay for the scenario depends on each investor.
Image Source: Getty Images.
3. Illumina
Another form of technology is biotechnology, and one important development in biotechnology is the use of genetic testing. Genetic testing was previously very expensive and is used only by research organizations, governments and universities, but the leading genetic testing platform Illumina (NASDAQ: ILMN) has done an excellent job of reducing the cost of genetic testing over time.
With 90% of all genetic sequence data performed on Illumina’s machines, Illumina is a dominant and important technological platform that paves the way for the future of medicine. Just since 2007, when Illumina introduced its first no-order system, the company has reduced a factor of 10,000. Still, Illumina is not standing still as he hopes to reduce the cost from $ 600 per genome to $ 100 in the near future. If Illumina can get to that level, it will open up an era of truly personalized medicine.
Due to declining costs, genomic sequencing has expanded to purely research environments to clinical environments, changing the way physicians treat and screen different diseases from oncology to prenatal testing. In fact, 55 types of cancer treatments now require a genetic test. And Illumina only doubles the cancer research with the $ 8 billion acquisition of GRAIL, a ‘downstream’ company that uses Illumina’s platform to build tools for the research into multicancer.
And do not forget the potential headwind of COVID. COVID vaccines were, after all, manufactured from data obtained from Illumina’s machines. Currently, Illumina helps governments track COVID variants as they emerge around the world.
In the future, you can bet that there will be more emphasis on genetic surveillance for infectious diseases and future outbreaks. It should add this critical biotechnology platform this decade and beyond just one more headwind.
This article represents the opinion of the author, who may not be in agreement with the ‘official’ recommendation position of a Motley Fool premium advisory service. We are furry! Questioning an investment thesis – even one of our own – helps us all to think critically about investments and to make decisions that help us become smarter, happier and richer.