One of the most obvious side effects of the COVID-19 pandemic has been the acceleration of trends that support consumers while they're making the most of their time at home. E-commerce, gaming, and streaming music and video have all emerged as the clear winners of the stay-at-home economy.
Investors have avoided some of the biggest winners, though, concluding that they couldn't possibly go any higher, only to find that these ongoing trends and the companies that enable them will likely continue to benefit for the foreseeable future. It only takes 30 days to change a habit, and with the lockdowns now crossing six months, many of the recently adopted behaviors will continue into the months and years ahead.
Here are three top-notch technology stocks that are still buys -- even after their stunning successes so far in 2020.
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Amazon: So many ways to prosper
When Amazon.com (AMZN -1.65%) initially reported its first-quarter results to close out April, investors were taken aback by CEO Jeff Bezos' pronouncement that the company would spend its entire $4 billion in expected second-quarter operating profit on COVID-related expenses -- essentially concluding that there would be no profits for the quarter.
While that was certainly a logical conclusion to draw, Amazon has always played by a different set of rules. As I argued in early May, Bezos was "playing the long game," a strategy that had served the company well.
Amazon surprised many investors late last month when it reported second-quarter net sales that soared 40% year over year, accelerating from 26% gains in Q1. Even more importantly, the company generated more than $5.2 billion in net income -- even after spending "over $4 billion in incremental COVID-19-related costs."
It isn't just e-commerce that's propelling Amazon higher. The company is the leader in cloud computing, which continues to get a boost from the adoption of remote work. Amazon Prime Video and Prime Music are entertaining families on lockdown, while its Twitch video game streaming platform is the industry leader.
With so many ways to win, Amazon is as close to a no-brainer stock as you can get when it comes to stay-at-home tech stocks.
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NVIDIA: The choice of serious gamers and cloud operators
Another industry that's gotten a boost from the stay-at-home economy is that of gaming. While the video game publishers are certainly one way to play the trend, owning shares of NVIDIA (NVDA 3.71%) is a broader way to benefit.
When it comes to gaming, no other graphic processing unit (GPU) holds a candle to NVIDIA, which is still the top choice of serious -- and even more casual -- gamers everywhere.
Gaming still accounts for the majority of NVIDIA's revenue (about 43% in the first quarter), but its GPUs are also the top choice in the world's foremost data centers, cloud computing, and artificial intelligence operations. The data center segment (which contains all three) grew 80% year over year and now generates 37% of NVIDIA's sales, up from 29% in the prior-year quarter.
It isn't just gaming that's received a boost from the pandemic, as cloud computing has been at the center of the trend toward remote work, another aspect of the stay-at-home economy. In fact, the shift to the cloud that's occurring will be permanent, as the holdouts come to understand the true benefits of cloud computing, according to research company Gartner.
NVIDIA has an edge, as its GPUs currently serve each of the major cloud providers, including Amazon Web Services, Alphabet's Google Cloud, and Microsoft's Azure, just to name a few. With the potential to continue to benefit from remote work and reaccelerating lockdowns, NVIDIA should be near the top of every tech investor's buy list.
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Netflix: The first name in streaming video
Netflix (NFLX 1.74%) may have started shipping movies-by-mail, but the "net" in its name was always intended to point to a future of internet delivery. The company has become synonymous with the streaming video it pioneered and has worlds left to conquer.
Over the years, there have been many prognostications that there would eventually be a Netflix killer, but the company that started the streaming revolution is still king of the hill. When people found themselves shuttered away at home, they turned to Netflix in droves to while away the hours.
Even after a record 15.8 million subscribers in the first quarter, Netflix continued to gain converts, adding a Q2 record of 10.1 million more, totaling 25.86 million so far in 2020. To give that number context, Netflix added just 27.83 million new subscribers for all of 2019. These stellar customer gains drove revenue to $6.1 billion in the second quarter, up 25% year over year, while net income surged 165%. In an unexpected turn of events, the company even turned cash flow positive.
The biggest growth engine for Netflix is its largely untapped international market, which has been growing by leaps and bounds during the pandemic. While subscriber growth in North America increased just 10% year over year, growth in Latin America jumped 29%, Europe, the Middle East, and Africa (EMEA) grew 39%, and Asia Pacific soared 74%.
This illustrates the worldwide opportunity that remains, particularly as the pandemic drags on and the stay-at-home economy thrives.
