If you're interested in buying technology stocks that are disrupting markets in ways that could produce envy-inspiring growth, then you might want to think about buying Lumentum Holdings (LITE 0.54%), Impinj Inc. (PI -1.22%), HubSpot, Inc. (HUBS -0.80%), The Trade Desk (TTD -0.52%), and Activision Blizzard (ATVI). These companies are transforming how we interact with our devices, manage inventory, generate sales leads, purchase advertising, and play video games, respectively.
The future of personal electronics
3D sensing gives consumers greater control over their entertainment systems, creates additional security by using facial recognition, allows consumers to control their devices from a distance without physically touching them, and enables personal images and surroundings to be included in gaming, video, and pictures in new ways.
Lumentum Holdings is at the forefront of 3D sensing technology. Based on comments about big orders for its 3D sensing chips and the capabilities of Apple's top-of-the-line iPhone X, Lumentum has apparently overcome the size and power constraints that have kept 3D sensing out of hand-held devices in the past.
Since Apple's iPhone X includes 3D sensing and Apple's features are often adopted industrywide, it wouldn't be shocking if Lumentum's 3D sensing revenue grows from a rounding error last year into a nine-figure moneymaker next year. If so, then buying its shares now before all of 3D sensing's potential capabilities are realized could be savvy.
Inventory is only the beginning
Radio frequency ID (RFID) tags already help companies order, ship, track, and manage products and goods, but soon they may allow companies to interact with customers in entirely new ways.
Impinj's tags, readers, and software, for instance, could allow retailers to use smart displays and mirrors that recommend products to customers based on what they're already holding in their hands. Sophisticated RFID technology and software that allows retailers to identify many items simultaneously could create a cashier-less shopping experience someday, too.
Impinj isn't the only player in RFID, but it supplies about 60% of the market's RFID tags, and it's rumored to be working with Amazon.com on projects that could help it make the most out of its Whole Foods acquisition. Other companies, including Macy's, plan on tagging all of their items to leverage the capability, and other sectors, including healthcare and airlines, are using RFID as well.
It's anyone's guess if RFID will live up to its billing, and there are certainly kinks that need to be worked out, but I believe the opportunity is big enough to make this company's stock a buy. For example, Impinj forecasts it will sell 7 billion RFID tags this year. That's up double digits from last year, yet it's only a fraction of the total addressable market. Apparel alone could consume up to 80 billion RFID tags annually.
Giving cold calls the cold shoulder
HubSpot helps clients generate inbound leads that are better qualified and more likely to buy.
In the past, companies have spent big money building out large sales teams that can pound the pavement in search of new business. Instead, HubSpot helps clients create inbound traffic from people already interested in the products and services its clients are selling. Its solution allows clients to better manage their online presence and leads and, importantly, close more business.
HubSpot's inbound marketing approach is winning companies over. On Sept. 26, HubSpot's management bumped up its third-quarter financial outlook because demand for its solutions is exceeding its internal forecasts. It now expects sales of at least $95.9 million in Q3, up from its prior guidance for $92.8 million in sales, and a net loss of as little as $0.02 per share, an improvement from the $0.08-per-share loss it previously forecast.
The higher-than-expected sales and better-than-anticipated loss continue a trend of improving financial performance. In the second quarter, HubSpot's client list increased to 34,326, up 40% from one year ago. As a result, sales were up 37% year over year, and the company posted a non-GAAP quarterly profit of $0.07 per share, reversing its year-ago loss of $0.07 per share.
There may be choppiness in profitability for this innovator, but pre-qualified leads from inbound marketing programs are clearly resonating with corporate sales leaders.
It's all about insight
Advertising is one of corporate America's biggest expenses, so it's probably not shocking to learn that companies want to make sure their advertising is paying off.
The Trade Desk uses data mining to help advertisers precisely target prospects with advertising that's most likely to result in sales. Its number-crunching insight allows advertisers to pick the best marketing channel and get the best return on investment from its ad spending. Given that The Trade Desk boasts a client retention rate of 95%, it appears customers are happy.
Last quarter, The Trade Desk's revenue soared 54% year over year to $72.8 million. Even better, its profit surged 147% to $18.8 million in the quarter. Trade Desk thinks that expanding in mobile, video, and connected-TV can help drive sales even higher, and with revenue already expected to jump 49% this year to $303 million, this is a very enticing stock to buy, particularly since consumer's consumption of digital content continues to increase.
The newest team in town
Activision Blizzard's going through a major transformation that's connecting gamers in increasingly profit-friendly ways. No longer is it making the bulk of its money by selling software in brick-and-mortar retail stores. Instead, it's selling high-margin games and add-on content that downloads directly to a player's gaming system. Last quarter, in-game purchases accounted for $1 billion of its $1.6 billion in sales.
Real-time streaming and video of gameplay content are driving record player engagement, while improving technology is producing a gaming experience that's better than ever. As Activision Blizzard leverages engagement in new ways, such as league play, more doors to revenue growth should open. Activision Blizzard's already created a league for Call of Duty, and recently, it announced the first seven "city" teams for its Overwatch League. Eventually, these leagues could produce additional revenue from media contracts and advertising deals.
Activision Blizzard's lineup includes eight billion-dollar gaming franchises, and with 407 million monthly active users globally, there's a lot of opportunities to drive revenue higher. Sales were $1.63 billion in Q2, and that was $200 million above forecast. As we go into year-end, financials could do even better, given the launch of Destiny 2 in September and the upcoming launch of Call of Duty: WWII in November.