Roughly two-thirds of 2020 is now in the books. Whether it's seemed like a year that's flying by, a year that might never end, or some odd combination of the two, everyone can agree that it's been a remarkably volatile period for the stock market. Despite unprecedented uncertainty created by the coronavirus earlier in the year, major indexes, including the S&P 500, have rebounded and recently set new highs. Technology stocks have played a huge role in the recovery, and they will likely continue powering the market's performance through the next decade and beyond.
To help guide investors as they move through the remainder of the year, we put together a panel of three Motley Fool contributors and asked each member to profile a tech stock that they think is primed to crush the market. Read on to see why they identified Impinj (PI -2.44%), CrowdStrike (CRWD -0.54%), and StoneCo (STNE 5.07%) as stocks that you won't want to miss out on.
This small-cap chip stock could soar
Keith Noonan (Impinj): Impinj is a semiconductor company that specializes in radio frequency identification (RFID) tags, sensor technology, and software, and it's playing a leading role in bridging everyday objects into the world of networked data. The RFID specialist's tags are small and durable, and they can transmit information without the need for a power source. These characteristics have led retailers like Macy's and Zara to adopt the company's technology for applications including taking inventory, collecting data on which products are hits with consumers, and preventing theft and counterfeiting.
Unfortunately, coronavirus-driven closures and shifts in consumer habits in the retail space have disrupted Impinj's biggest end-market segment, and the company's sales fell roughly 31% year over year in the second quarter. On the other hand, now actually looks like a great time to buy Impinj stock. Shares are down 10% year to date and trade off roughly 60% from their lifetime high, and the company looks cheaply valued with a market capitalization of roughly $540 million.
The retail market should bounce back as coronavirus-related pressures recede, and having access to the kind of data that Impinj's tech can provide will only become more important for retailers. Impinj also has massive growth potential in other market segments. As just one example, the company's technology is already being used to take inventory in some hospitals. It's not a stretch to think that Impinj's products could see much greater adoption in the medical and pharmaceutical fields. They might even be used to track the distribution of coronavirus vaccines in some cases.
Charting Impinj's near-term sales and earnings performance remains difficult, but the importance of having a data-driven business in the 21st century has never been more obvious. The stock could skyrocket if more businesses and organizations turn to the company's RFID technology to bring previously unconnected things into the world of connectivity and data analysis.
The cloud guardian
Joe Tenebruso (CrowdStrike): Investing success can often be found at the intersection of powerful growth trends. Cloud computing and cybersecurity are two such trends -- and where they meet, you'll find CrowdStrike.
As a cloud-native cybersecurity specialist, CrowdStrike helps to prevent costly data breaches. Its Falcon platform uses artificial intelligence to detect threats. Each new customer helps the system get smarter, thereby strengthening the level of protection for everyone on the network. These powerful network effects should help to fuel CrowdStrike's expansion.
Moreover, CrowdStrike's focus on cloud-delivered endpoint protection makes it particularly well positioned for growth. Endpoints include the laptops, tablets, and smartphones used by a company's employees, so CrowdStrike stands to see increased demand from the work-from-home trend. Endpoints also include other connected devices, so the surging growth of the internet of things should also fuel demand for CrowdStrike's services.
CrowdStrike's financial results show just how explosive this growth can be. Its revenue soared 85% year over year to $178 million in its fiscal 2021 first quarter, which ended on April 30. The gains were driven by an influx of new customer additions, which more than doubled compared to the prior-year period.
"An increasing number of organizations recognize the power of CrowdStrike's cloud-native Falcon platform to effectively stop breaches as well as simplify their security and I.T. operations stack with a single, lightweight agent," CEO George Kurtz said in the company's earnings release. "Cybersecurity is mission-critical and in the quarter our customers continued to prioritize their cybersecurity investments."
As the world moves increasingly to the cloud -- and cyber attacks grow in scale and sophistication -- many more organizations are likely to turn to CrowdStrike for protection. Investors who buy shares today should be well-rewarded as the cloud sentinel fulfills its tremendous growth potential.
Don't overlook this Latin American fintech name
Will Healy (StoneCo): In the fintech space, stocks like PayPal (PYPL -2.96%) and Square (SQ -1.63%) tend to draw much of the attention. However, investors might want to follow Warren Buffett's lead and take a position in StoneCo. StoneCo offers fintech services in Brazil, allowing merchants and partners to conduct online transactions through mobile, online, and in-store channels.
McKinsey's Brazil Digital Report states that cash remains the most popular payment method in the country. Still, the use of electronic payments has also continued to grow in the world's eighth-largest economy. Moreover, the unique payment culture likely gives StoneCo a competitive advantage over Square or PayPal, as it has more experience serving customers who otherwise lack access to electronic payment methods.
Furthermore, even though COVID-19 hit Brazil hard, StoneCo performed even amid a pandemic. Total payment volume (TPV) increased by almost 28% year over year despite the contagion. That growth reached nearly 42% in July.
This translated into a revenue increase of 13.8% to just over 667 million reais ($119 million) Nonetheless, due to rising expenses, earnings fell 21% to 0.54 reais ($0.10) per share.
Still, reduced profits have not slowed the stock. Like most fintech stocks, StoneCo plunged in February and March during the bear market. However, StoneCo followed these stocks higher after the March low. The stock fully recovered and has now risen by nearly 20% year to date.
The forward price-to-earnings (P/E) ratio of around 85 appears high. Nonetheless, the stock could continue moving higher. Moreover, with a projected profit increase of nearly 76% in fiscal 2021, it could further support that multiple.
As it extends its reach within and perhaps beyond Brazil, StoneCo should see gains not only in September but also in the months and years to come.