Technology stocks have bounced back sharply from the beating that they took to start the year, but that doesn't mean there aren't any good values out there. In fact, we Fools believe that there are still plenty of investment opportunities from the tech space worth buying right now, including many companies that offer up an attractive combination of value and strong long-term growth prospects.
Knowing that, we asked our team of Motley Fool contributors to highlight a tech stock that they think is a compelling buy right now. Read below to see which stocks they chose and the reasons behind their selections.
Tech stocks in general may have rebounded from their February lows, but shares of LinkedIn (NYSE:LNKD.DL) are still very much in the dog house. Traders took LinkedIn's stock down more than 40% in a single day earlier this year, after the company's 2016 guidance failed to impress analysts. Shares are still down more than 40% year to date, which I think spells opportunity for investors who can keep their eye on the long term.
My conviction for LinkedIn stems from its ambitious mission, which is "to connect the world's professionals to make them more productive and successful." LinkedIn is aiming to create a platform for connecting all 3 billion people in the global workforce together, and if it can deliver on that goal, then I could easily see shares multibagging from here.
With the stock trading near its 52-week low, you might think that it's failing to deliver on its mission, but I think that there is reason to believe that the opposite is true. Last quarter the company grew its member base by 19%, to 433 million. At the same time, the company's engagement metrics are also trending higher, indicating that more users are returning to the company's site on a regular basis.
Growing its membership base and engagement is important since it incentivizes more and more businesses to turn to LinkedIn for their recruiting needs. In turn, that creates even more of an incentive for new members to join the company's platform. Those two forces together are creating a huge network effect that potential competitors will find nearly impossible to beat.
LinkedIn is also investing heavily in a number of interesting areas that should provide continued growth. Last year it acquired Lynda.com, an online learning company that uses technology to teach business skills, for $1.5 billion. It's also pushing hard to become a platform for helping freelancers find jobs, which is another huge market that is growing fast.
With so much going for it, I think that LinkedIn is extremely well positioned to thrive over the long term, and with the stock currently trading for about 37 times full-year earnings estimates, I think that right now is a great time to join me as a shareholder.
Activision Blizzard (NASDAQ:ATVI) is my pick for a compelling June purchase. The developer recently brought the mobile hit Candy Crush together with the gaming console giant Call of Duty to produce a uniquely deep content portfolio. Activision's reach now stretches to 544 million players across titles as varied as Blizzard's Hearthstone, Activision's Destiny, and King's Pet Rescue.
The user base for each development studio hit a record last quarter, and players are spending tons of time engaging with these brands. By management's count, gamers dedicated 42 billion hours to interacting with Activision Blizzard's games over the last year, or roughly the same amount of time people spent watching TV on Netflix.
Activision's stock is up more than 50% in the last year as a growing installed base of next-gen consoles helps lift demand for its AAA (or high-budget) releases while making it easier for players to buy expansion packs and full game downloads. That's good news for the business, both in terms of profits (no middleman retailer to take a cut) and revenue. With frequent digital releases and upgrades, Activision is extending the life of tent-pole franchise releases well beyond just a single year.
That puts the developer in a great position to keep growing not only through property launches like the recent Overwatch, but also through new engagement avenues such as e-sports broadcasting. As for the upcoming release calendar, the next Call of Duty installment, which comes out in November, likely won't set a record for the franchise, and the same is true for the World of Warcraft brand. But growth in other properties has Activision on pace to produce record operating results this year.
Chinese authorities recently started to crack down on the type of medical advertisements served up on Baidu's search page, following the death of a Chinese student after seeking treatment he found on Baidu. Such advertisements make up as much as 30% of all ads on Baidu's network. That, combined with slowing profitability because of the company's online-to-offline (O2O) investments, has the stock trading 20% below its 52-week highs.
I don't think either of these is a serious long-term concern. Yes, the company might experience short-term pain if it has to rework its advertising mix. But over the long run, there's no other company that can offer the same advertising placement to the Chinese growing middle class as Baidu.
And when it comes to O2O, I think the market is severely underestimating the long-term potential of such a service. All this really involves is getting people to purchase things -- movie tickets, gift cards, you name it -- from third-party companies using Baidu's payment system. Alphabet would die to turn back the clock to 2000 and get a chance to build such a network.
In the end, buying shares of Baidu gets you China's most established technology company -- with revenue growing at a 33% clip over the past year -- for cheaper than it's been in a long time. Once investors start to catch on to O2O's potential, it might be too late.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors.
Brian Feroldi owns shares of Activision Blizzard, Alphabet (A shares), Alphabet (C shares), Baidu, LinkedIn, and Netflix. Like this article? Follow him on Twitter where he goes by the handle @Longtermmind-set or connect with him on LinkedIn to see more articles like this.
Brian Stoffel owns shares of Alphabet (A shares), Alphabet (C shares), Baidu, LinkedIn, and Netflix. Demitrios Kalogeropoulos owns shares of Activision Blizzard, LinkedIn, and Netflix. The Motley Fool owns shares of and recommends Activision Blizzard, Alphabet (A shares), Alphabet (C shares), Baidu, LinkedIn, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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