With uncertainty and continued COVID restrictions to round up this strange year, why not finish on a positive and bet big on 3 stocks for a digital world
Oct. 3, 2020
Only 3 months left till the end of 2020 and it looks like it will finish much as it started, with uncertainty, social distancing, and our least favourite friend COVID-19. But with many companies not only weathering the pandemic but also thriving in the new heightened digital world, these 3 stocks can bring a positive note to a portfolio that might not have seen the best of times recently.
1. Wex
Wex (NYSE: WEX) is a fast-growing, niche tech stock providing information management and payment processing services, useful for many firms who wish to track spending within the company. Due to the unique nature of its services, it is likely to remain in demand.
Wex has three revenue segments: Fleet, Health, and Travel, all of which were hit by COVID restrictions. However, despite a 21% drop in revenue for Q2 year-over-year (YoY), this payment management company has still managed to come out of Q2 with a profit and with $1.2 billion in cash whilst maintaining the same level of debt as this time last year.
Wex handled $82 billion in transaction volume for businesses in 2019, and with an annual estimate of $42 trillion spent on day-to-day business expenses across the globe, Wex has a large market in which to expand. CEO Melissa Smith expects Wex to be pulling in revenue of $3 billion by 2023. If the company continues on its growth trajectory of 16% compound annual growth rate (CAGR) it should hit its target comfortably.
Overall this is a company which has shown it can handle a pandemic that managed to affect each of its separate revenue segments. As the world returns to normal, this company will continue to grow in a huge and as-of-yet untapped market.
2. Salesforce
Customer relationship management through cloud computing software is Salesforce’s (NYSE: CRM) M.O. This is a stock that has soared over 100% since its March lows, as evidenced in its most recent earnings, where revenue was $5.15 billion, which is a 28% increase YoY.
Although some might feel like the meteoric rise of Salesforce this year can be directly attributed to COVID-19, it is almost certain that digital transformation projects, as well as working online with cloud computing, will continue to play a major role in business life. COVID-19 has expedited the digital workplace revolution as remote working is now being considered on a permanent basis for many companies.
Salesforce is known for its acquisitions, with 2016 being its craziest year as it effectively bought one company per calendar month. Fast forward to 2020 and in the midst of a pandemic this cloud tech stock invested $250 million into Snowflake when it went public in September.
Salesforce is one of the most successful technology vendors in the world and although its stock might be a bit overvalued, I don’t see any point in the next few years where this company will falter in its ambition to be one of the largest and most essential SaaS firms in the world.
3. Fastly
This stock has been making big moves recently, offering content delivery, security, and edge computer technology as part of its cloud computing services. Fastly (NYSE: FSLY) has really impressed investors with the speed of its growth — there is a joke in there somewhere — and the potential that this company has in a market which is estimated to grow to $35 billion by 2022.
In its most recent earnings report, Fastly posted a 62% revenue increase YoY of $75 million for the quarter. In addition, Fastly had the highest increase in customer count since its IPO last year. Of those customers it can count big-brand names amongst the flock; Twitter, Pinterest, Shopify, and TikTok all utilize the secure content delivery service that Fastly provides.
Recently, there has been a little volatility in Fastly’s stock as it relies heavily on TikTok, with 12% of revenue coming from the social media app. With all that has been going on with this saga, Trump, and China, many investors have been spooked. However, with a company that is growing as fast as this one, relying on one or two businesses for a large portion of its revenue should soon be a thing of the past. Any pull back with this stock should be considered a buying opportunity.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.