Last year, the pandemic lit a fire under many tech stocks which benefited from stay-at-home trends. Many e-commerce, cloud, gaming, online education, and remote work companies all flourished with unusually strong growth as other sectors were battered by pandemic-related headwinds.
But this year, rising bond yields, concerns about inflation, fears of slower growth after the pandemic, and a focus on reopening plays all turned the tables on under those high-growth darlings. As a result, many investors rotated from tech stocks toward other sectors which would benefit from reopening trends.
However, there are still plenty of tech stocks which will generate stronger growth after the pandemic ends. Let's examine three of those "reopening tech stocks" -- and why they could head much higher this year.
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1. Bumble
Bumble (BMBL -0.57%), which lets women make the first move on its eponymous dating app, went public this February at $43 per share. The stock opened at $76, soared to the low $80s shortly afterwards, but tumbled below its IPO price in May amid the broader tech sell-off.
Bumble trades in the mid $50s today, with the market seemingly undecided if it's a good post-pandemic growth stock. However, I believe it will flourish as the pandemic ends and people start dating again.
Bumble's revenue rose 19% last year, even as its two core apps (Bumble and Badoo) gained fewer paying users throughout the pandemic, and its adjusted EBITDA rose 50%.
But in the first quarter of 2021, Bumble's revenue rose 43% year over year, its adjusted EBITDA more than doubled, and its number of paying users grew 30% to 2.8 million -- including 1.35 million Bumble users and 1.45 million Badoo users. Bumble generates most of its revenue from its namesake app instead of Badoo, an older app which is more popular in Europe and Latin America.
For the full year, Bumble expects its revenue to increase 34% to 35% and for its adjusted EBITDA to grow 24% to 27%. That forecast, which exceeded Wall Street's expectations, indicates it's a solid reopening play -- and the stock still trades at just 14 times this year's sales. Match, its larger and slower-growing competitor which owns Tinder, trades at 15 times this year's sales.
2. Expedia
Expedia (EXPE -0.40%), one of the world's top online travel agencies, also owns Hotels.com, Travelocity, Orbitz, Trivago, Hotwire, Vrbo, Egencia, HomeAway, Traveldoo, Classic Vacations, VacationRentals.com, CarRentals.com, Wotif, CheapTickets, and ebookers.
Image source: Getty Images.
That massive network generated stable growth prior to the pandemic, but its gross bookings plummeted 66% last year as global travel ground to a halt. Its total revenue plunged 57%, it posted a net loss, and its stock sank to its lowest levels in nearly seven years last April.
Yet Expedia's stock has more than tripled since hitting that multi-year low, and it's risen nearly 90% over the past 12 months. It's easy to see why Expedia recovered -- investors expect pent-up demand for travel to quickly boost its revenues and profits again.
Expedia's revenue fell another 44% year over year in the first quarter of 2021 as its gross bookings dropped 14% and it posted another net loss. However, analysts expect its revenue to rise 59% for the full year as it squeezes out an adjusted profit. Its stock still isn't expensive at 26 times forward earnings and three times this year's sales -- so it could be an essential stock to own as more people start to travel again.
3. Alphabet
Lastly, Alphabet (GOOG 9.96%) (GOOGL 10.22%), the parent company of Google, should generate stronger growth this year as its advertising business sells more ads in a post-pandemic world. Alphabet generated 80% of its revenue from Google's ad business last year. This business suffered a slowdown in the first half of the year, and forced Google to rely more heavily on its unprofitable cloud business.
Alphabet's total revenues rose 13% last year. Its ad revenue rose just 9%, with stronger growth in the second half of the year, as its cloud revenues soared 46%. Its net income grew 17%.
Alphabet's revenue rose 34% year over year in the first quarter of 2021, with 32% growth in its ad revenues and 46% growth in its cloud revenues, and its net income surged 162%.
That acceleration indicates a post-pandemic recovery is already underway, and analysts expect its revenue and earnings to grow 30% and 49%, respectively, this year. Its stock trades at just 27 times forward earnings -- which makes it a reasonably valued play on post-pandemic reopening trends.
