Following on from our Top Five Sectors to watch, we are going to delve into the technology sector a bit more and try and identify our top five tech stocks to watch in 2024.
Five tech stocks to watch in 2024
1. Apple NASDAQ:AAPL
We start with the biggest of the big-beasts, Apple NASDAQ:AAPL the aspirational stock of a generation. Apple is a well-established company with a strong track record of profitability, innovation, and brand reputation. The company is also well-positioned to benefit from several long-term trends, including the growth of the smartphone market, the increasing adoption of artificial intelligence and augmented reality, and the shift to cloud computing.
Apple has a strong financial position with a healthy balance sheet and a history of generating strong cash flow. The company’s net profit margin has averaged over 20% in recent years, and it has a debt-to-equity ratio of just 0.5x.
The company is known for its innovation, and the company is constantly pushing the boundaries of technology. The company has a long history of developing groundbreaking products, such as the iPhone, iPad, and darling of all tech snobs, the Mac. The company is also investing heavily in new technologies, such as artificial intelligence, augmented reality, and virtual reality.
Apple has one of the most respected brands in the world, with a loyal customer base. The company’s products are known for their high quality and sleek design. This gives Apple a competitive advantage in the market and allows it to charge premium prices for its products.
The smartphone manufacturer is well-positioned to benefit from several long-term trends, including the growth of the smartphone market, the increasing adoption of artificial intelligence and augmented reality, and the shift to cloud computing. The company is also expanding into new markets, such as wearables and healthcare.
Overall, Apple is a strong (if somewhat expensive) buy for investors who are looking for a stable and growing company with a strong track record of innovation.
2. Microsoft NASDAQ:MSFT
We remain with the tech mammoths, but unlike the large proboscideans that roamed the Earth during the Pliocene and Pleistocene eras, Microsoft NASDAQ:MSFT isn’t going anywhere soon.
Just like Apple, Microsoft is a well-established company and boasts a unassailable market position in the operating system, productivity software, and cloud computing markets. The company has a diversified business model, which includes not only its core software products but also cloud computing, gaming, and hardware businesses.
Microsoft’s product portfolio is one of the most diverse in the technology industry. The company’s core software products, such as Windows and Office, are used by billions of people around the world. The company is also a leader in cloud computing with its Azure platform.
The tech giant has a diversified business model, which helps to reduce its risk and makes it more resilient to economic downturns. The company’s core software business is stable and predictable, while its cloud computing and gaming businesses are growing rapidly.
Microsoft is investing heavily in growth areas such as cloud computing, gaming, and artificial intelligence. This is helping to drive the company’s long-term growth and is (another expensive, but) strong buy for investors who are looking for a stable and growing company with a diversified business model.
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3. Cloudflare NYSE:NET
Going down the food chain a bit, our next tech stock to watch is Cloudflare NYSE:NET which, although no mammoth, with a market cap of USD26bn is still in the megafauna category, possibly more of a Paraceratherium.
Cloudflare is a content delivery network (CDN) company that helps websites to load faster and more reliably. The company’s network is used by millions of websites, including major tech companies like Netflix NASDAQ:NFLX, Airbnb NASDAQ:ABNB and The Armchair Trader. Cloudflare has a strong market position and is well-positioned to benefit from the growing demand for CDN services.
Cloudflare has one of the largest and most distributed networks in the world. This gives the company a competitive advantage and ensures that its services are available to businesses of all sizes, regardless of their location.
The company is expanding into new areas, such as cybersecurity and artificial intelligence. This diversification is helping to reduce the company’s reliance on the CDN market and is making it more attractive to investors. Following its IPO in 2019, Cloudflare is growing rapidly and is expected to continue to grow in the future. This is due to the increasing demand for its services from businesses of all sizes, as well as the growing adoption of cloud-based applications.
All-in-all, our third pick is a strong buy for investors who are looking for a high-growth company with a strong network infrastructure and a diversified business model.
4. Upstart NASDAQ:UPST
A small company – for this list – at just over USD3bn market cap, Upstart is a lending company that uses artificial intelligence to assess the creditworthiness of borrowers. The company’s technology has helped it to cut down on loan losses and to offer loans to people who would otherwise not be able to get them. Upstart is well-positioned to benefit from the growing demand for alternative lending solutions.
Although Upstart shares have soared this year, they still look cheap from a valuation perspective. However, rising interest rates have battered Upstart’s financials and this fintech seems very exposed to macroeconomic movements and as less consumers take out loans, as borrowing becomes more expensive, Upstart’s business model is impacted.
That said, Upstart’s use of artificial intelligence is a significant competitive advantage. The company’s technology is able to make more accurate and nuanced assessments of borrowers’ creditworthiness than traditional credit scoring models. This allows Upstart to offer loans to a wider range of borrowers, including those who have been historically underserved by traditional lenders such as participants in the ‘gig’ economy. With the trend of consumers preferring to do all their banking online, the Upstart platform is user-friendly and convenient and attractive to a new generation of borrowers.
The fintech offers a variety of loan products, including personal loans, auto loans, and small business loans. This diversification helps to reduce the company’s reliance on any single market and makes it more resilient to economic downturns.
Through the Coronavirus pandemic Upstart made hay, but since then it’s been tougher going. In 2022, revenue dropped 1%. And through the first nine months of 2023, revenue collapsed by 46%. Rapidly declining sales are bad enough, but Upstart is also burning through cash. The cumulative net loss was USD198m in the last three quarters.
Previously Upstart had strong financials, with a growing revenue and profit base. The company was generating buckets of positive free cash flow and that gave the company the resources to invest in its growth and to expand into new markets.
It’s going to be some clawback, but if interest rates start going the other way and good times return, Upstart might be a phoenix (or archaeopteryx to continue a theme) rising from the flames. This is certainly a tech stock to watch for 2024.
5. CrowdStrike NASDAQ:CRWD
Again, not a tech giant, but at USD30bn market cap, no Asoriculus, CrowdStrike is a cybersecurity company that helps businesses to protect themselves from cyber-attacks. The company’s endpoint security platform is used by businesses of all sizes to protect their computers, networks, and data from unauthorized access.
A glyptodont in a market of mastodons, the demand for cybersecurity solutions is at an all-time high as businesses face a growing threat landscape. CrowdStrike’s security platform is well-positioned to capture this demand, as it offers a comprehensive solution that protects against a wide range of cyber threats.
The company has some useful IP, CrowdStrike’s Falcon platform is a cloud-based endpoint security solution that provides a centralized view of a company’s entire security posture. This centralized approach makes it easier for businesses to identify and respond to threats, and it gives CrowdStrike a competitive advantage over traditional on-premises security solutions.
The cybersecurity company has demonstrated strong financial performance in recent years, with revenue and earnings growing at a rapid pace. The firm is also generating positive cash flow, which gives it the resources to invest in its growth and expand its market share.
CrowdStrike’s customer base is growing rapidly, as businesses increasingly recognize the value of its security solutions. The company has a large number of Fortune 500 customers, and it is expanding its reach into other industries.
Wall Street analysts are generally bullish on CrowdStrike’s future, with many of them rating the stock a ‘Buy’ or ‘strong buy.’ This positive analyst sentiment reflects the company’s strong growth prospects and its position in a growing market.
Overall, CrowdStrike is a well-positioned company with a strong market position, a promising future, and a solid financial foundation. The company’s high growth potential and competitive advantages make it a compelling investment opportunity for investors seeking exposure to the cybersecurity sector.
One of the cheaper tech stocks to watch, CrowdStrike could lead the pack in terms of growth and capital returns.
