There are over 17,500 cryptocurrencies on the market right now and they're growing by about 100 a day. The vast majority of them are not mineable and hold little value or utility, and more than a few were probably created as a lark. Dogecoin's founder says its coin was meant to be a joke, but maybe the BeavisAndButthead altcoin is supposed to be taken more seriously. Don't quote me on that, though.
I'll admit to still having difficulty wrapping my head around the entire crypto phenomenon, and while there's undoubtedly a strong future for the likes of major cryptos like Bitcoin, Ethereum, and Cardano, I still find better prospects and value in tried and true stocks, particularly in the tech sector.
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Technology stocks have been a key component of the market's drive higher. After the financial markets collapsed, it was consumer demand for electronics and related products and services that caused the tech sector to far outperform every other segment.
It's true the dynamics are changing as inflation runs rampant and the Fed wants to hike interest rates, perhaps as many as three times this year, but there are still solid growth tech stocks to be found. In my view, the following three companies have more potential than any cryptocurrency.
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Palantir Technologies
Data analytics specialist Palantir Technologies (PLTR 0.56%) got its start serving the nation's spy agencies, including the CIA and NSA, as well as the FBI and military, to read global data signals and help make sense of the millions of pieces of data streaming in. Those agencies are still on board, but today the big data company is also expanding its reach into the private sector.
Some 40% of its revenue comes from commercial enterprises and represents the fastest-growing portion of its business. In the fourth quarter, commercial revenue grew 47% year over year while government revenue was up 26%. Each has its own platform representing its specific needs.
The Gotham platform was first developed for the government in 2008, but Palantir eventually realized businesses had just as much need for number crunching as the government did, and it developed the separate Foundry platform. Together they use artificial intelligence and machine learning to digest the estimated 44 zettabytes of data that already exists plus 2.5 quintillion bytes of data produced daily. For the record, one zettabyte is 1,000 quintillion bytes.
Palantir's stock went public in 2020, and soon after got swept up in the meme stock trading frenzy with shares trading as high as $39 a share, quadrupling its $10 IPO price just a few months prior. Since then, though, the stock has fallen sharply, losing 73% of its value as analysts worry about continuing losses and the strain of competition in the data analytics space.
However, Palantir continues to add new customers and losses narrowed considerably in the fourth quarter to just $59 million, a 3,500 basis point improvement. With revenue continuing its strong pace of growth, this former spy shop has a big future.
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AT&T
After finally revealing its plan to spin off its WarnerMedia business, AT&T (T -1.37%) looks poised for another secular run higher. Without the weight and distraction of an entertainment division holding it back, Ma Bell can once again concentrate on its telecom operations as the 5G network rollout begins in earnest.
Swedish telecom Ericsson estimates that the entire consumer 5G network market could be worth $31 trillion by 2030 with 12% of that, or $3.7 trillion worth, being reserved for communications service providers like AT&T. Much of the new spending will come from consumers spending on enhanced video, AR and VR, and digital gaming over 5G networks.
Because of its aggressive spending on new spectrum licenses in federal auctions, AT&T has acquired almost as much sub-6 GigaHertz spectrum as Verizon owns. This is an important niche because that's where 5G will begin and because it provides the connectivity necessary for the Internet of Things.
AT&T stock is down 20% because of the WarnerMedia spinoff, which will slice the lucrative dividend the telecom pays in half. Yet that only seems like a lot until you realize AT&T's payout will still be yielding a hefty 5% annually.
It might lose its status as a Dividend Aristocrat as a result of the cut, but the transaction delivers several benefits for investors. They will now own both the telecom and a potential fast-growing media company, will still earn a healthy dividend payment, and at the same time, AT&T will become a much more focused business. I'd take that package over any cryptocurrency.
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Meta Platforms
I'm much more sanguine about Meta Platforms' (META -10.56%) future than many of my colleagues are. I'm less convinced that going all-in on the metaverse is a slam-dunk winning play. Convincing large swaths of the population that living in an alternate reality is better than real life is going to be a tougher sell than the nice straight-line growth analysts are predicting.
Still, it's tough to ignore Meta because of its sheer size. Although it recently suffered its first decline in user counts in 18 years, the company still has 1.9 billion daily active users. While there may be a shift in preferences to platforms like TikTok among young people (and quite a few older ones, too), Facebook, Instagram, and WhatsApp all retain a massive user base.
Meta is also investing heavily in building out the metaverse. It will soon begin breaking out results from its Reality Labs division. Its Oculus VR app was the No. 1 mobile download around Christmas. Moreover, the metaverse is admittedly a hot and trendy topic right now and Meta should be able to encourage a large coterie of its users to it. Cross-selling is a powerful marketing tool, after all. The tight-lipped company doesn't release sales numbers often but it had sold about 4 million of its Quest 2 virtual reality headsets by July last year. The unit volume must be higher now.
At some points, it becomes fashionable to hate a stock. Meta Platforms is almost a permanent fixture on that list. The stock has dropped sharply this month after its earnings report and is down by almost half from its recent highs. Sometimes too much is just too much, and I feel more confident of a Meta rebound than I do in almost any cryptocurrency today.
