We asked some of our best contributors who cover technology stocks to talk about a top stock pick for October. Read on to find out what they had to say and see whether these stocks might fit in your portfolio.
Andrés Cardenal: While names such as Facebook and Twitter usually attract more attention in the technology sector, investors should not underestimate LinkedIn (LNKD.DL) and its tremendous potential for growth in the years ahead.
The company makes approximately 60% of revenues from its talent solutions segment, while premium subscriptions and marketing solutions each generate 20% of sales. Importantly, the three business segments are firing on all cylinders; sales increased more than 40% annually in the three divisions during the second quarter of 2014.
LinkedIn has 313.4 million active members and 28,080 corporate solutions clients as of the last quarter. This means the company has already gone through the inflection point and consolidated its leadership position in the industry. Users and companies attract each other to the platform. The bigger LinkedIn gets, the more valuable the service becomes for the different parties involved. This creates a self-sustaining virtuous cycle of growth and increasing customer value over the long term.
The market opportunity in talent solutions is truly amazing for LinkedIn. Management believes the company could generate nearly $10 billion in revenues with its current user base and considering only current products and prices, that's roughly 10 times the revenues LinkedIn produced in that division over the last 12 months. On a longer term basis, the total size of the market could be a jaw-dropping $85 billion based on management estimations.
Those are some of the reasons I think LinkedIn is a top stock now.
Nathan Hamilton: Providing a valuable service for consumers is one of the most powerful forces for service companies. For wireless carriers, value boils down to pricing and network quality. T-Mobile (TMUS 0.47%) is delivering on both.
T-Mobile moved aggressively on pricing in 2013 to attract subscribers with promotions. Accordingly, it's selling, general and administrative expenses have increased 42% since the first quarter of 2013. The results are paying off as T-Mobile netted more than 1 million subscribers in each of the past five quarters. Average revenue per postpaid subscriber also declined to $49.32 in the most recent quarter from $54.07 in the first quarter of 2013. Most investors shun declining revenue per subscriber, but long-term investors should focus on T-Mobile's attracting subscribers and gaining share from the entrenched behemoths.
Network-wise, RootMetrics recently reported T-mobile no longer has the worst network among the major carriers: T-Mobile improved to third place. In the past 12 months, T-Mobile spent over $3 billion on blocks of low-frequency spectrum -- the most desirable bands for coverage. The company also plans to participate in highly sought after spectrum through upcoming auctions in November and into 2015.
Taking pricing trends and improving network quality into account, T-Mobile is providing a valuable service and subscribers are flocking to the company. This is what makes the stock a buy in October.
Anders Bylund: Last October, Google (GOOG 0.37%) (GOOGL 0.35%) CEO Larry Page shared a thrillingly simple message with Google's investors: "We are closing in on our goal of a beautiful, simple, and intuitive experience regardless of your device."
The next day, Google shares jumped more than 13% higher and haven't looked back since.
OK, so Page's message was paired with a good earnings report. Google exceeded analyst targets on both the top and bottom lines that quarter. But what Page said cuts to the heart of why Google is such a great long-term investment. It's not all about monetizing every click, or beating some arbitrary competitor in a single market.
Instead, Google attacks a broad range of markets, sometimes far outside its comfort zone. And in each case, the company aims to improve on whatever was there before -- again and again. "Because great is just never good enough," as Page said later in the same earnings call.
Google is a blue chip stock for the long haul. The company dominates online search and advertising today, and will explore new markets for many decades to come.
To be honest, this October isn't a unique opportunity to buy Google shares. But the earlier you get in on a fantastic investment for the really long haul, the better. So why not start a Google position today? You'll thank me 30 years from now.
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But don't take my word for it; look at the numbers. Revenue growth improved five percentage points from Q1 to Q2. Active users jumped 24% year-over-year. And revenue per 1,000 timeline views -- a key measure of Twitter's ability to monetize engagement -- doubled to $1.60.
Optionality also factors into the Twitter stock story. Hardly a year after introducing direct access to TV programs and enhanced services for helping broadcasters connect with audiences, the microblogger is now working with studios on highly targeted ads for movie buffs. Adding a "buy" button takes Twitter from distributor of Grumpy Cat photos and assorted interesting things to mobile commerce mogul in the making. The difference hasn't yet shown up in the stock price, but it will.
