Here’s why long-term investors should look to add large-cap growth stocks such as Netflix, Twilio, and Nvidia to their portfolios right now
Nov. 15, 2021
The technology space continues to attract investors due to the ability of these companies to disrupt multiple verticals and scale rapidly at a low cost. Most tech companies have an asset-light model allowing them to benefit from high operating leverage.
Here, we look at three large-cap tech stocks that should be part of your growth portfolio today.
1. Nvidia
One of the top-performing technology stocks in the past decade, Nvidia (NASDAQ: NVDA) has returned close 9,000% to investors in dividend-adjusted gains. The company is part of several rapidly expanding addressable markets, allowing it to grow revenue at a stellar pace in the future.
Nvidia is already a market leader in the gaming segment, and demand for its RTX 30 series graphic card has been robust. Gaming sales account for close to 50% of total revenue and were up 85% year over year in fiscal Q2.
Nvidia is also gaining traction in segments such as artificial intelligence and cryptocurrencies. In addition, the company is developing technologies that will support multiple areas including healthcare and autonomous vehicles. Nvidia will soon supply chips to China’s largest electric vehicle manufacturer, NIO, which should be a long-term revenue driver for the firm.
NVIDIA increased total sales by 68% while earnings rose by 89% in Q2 of 2022. Analysts expect sales and earnings to rise by 54.6% and 65.6%, respectively, in 2022.
2. Netflix
A steaming heavyweight, Netflix (NASDAQ: NFLX) has returned 5,500% to investors in the last 10 years. In the third quarter of 2021, Netflix added 4.4 million subscribers to take its subscriber count to 213.6 million. Comparatively, Wall Street forecast Netflix to add 3.5 million subscribers in the September quarter.
This solid growth in subscriber count allowed Netflix to increase sales by 16% year over year to $7.48 billion in Q3, which was in line with management guidance. Its adjusted earnings of $3.18 per share were higher compared to consensus estimates of $2.56 per share.
Netflix expects this stellar growth to continue in Q4 as it has forecast subscribers to rise by 8.5 million.
Netflix spends heavily on content creation enabling the company to add paid users in several international markets. While the streaming space remains crowded, Netflix’s leadership position should allow the company to benefit from a wide economic moat and steady revenue growth.
3. Twilio
The final tech stock on my list is cloud-communications company Twilio (NYSE: TWLO). A company valued at a market cap of $54 billion, Twilio stock has gained close to 1,000% since its IPO in June 2016, easily crushing the broader markets. However, it’s also down 31% from all-time highs, allowing investors to buy the dip.
In the third quarter of 2021, Twilio’s sales rose by 65% year over year to $740.2 million as the number of active customer accounts rose to 250,000 from 208,000 in the year-ago period. Twilio forecast revenue growth between 39% and 40% in Q4, compared to Wall Street forecasts of 36%.
Twilio has acquired 10 companies in the last six years, including the big-ticket buyout of Segment for $3.2 billion last year. These acquisitions have been highly accretive to its top-line, allowing Twilio to increase sales from $399 million in 2017 to $1.76 billion in 2020.
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