3 top tech stocks to buy if the market collapses

The stock market experienced one of its biggest declines less than five months ago. Many stocks have since rallied and are posting impressive gains, but there is no guarantee that this recent rally will continue. The unemployment rate in the United States is still above 10%, state and local governments are struggling financially, large companies continue to lay off workers, and economies around the world are suffering from the effects of the coronavirus pandemic.

Suffice it to say, all of this economic uncertainty could easily push the market down. If and when this happens, investors should have a shortlist of stocks ready for recovery at a potential discount. Three Motley Fool contributors have highlighted a few companies that should make the cut. Read on to find out why Shopify (NYSE: SHOP), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT) should be on your list of tech stocks to buy if the market crashes.

Build a ramp to bring business online

Brian withers (Shopify): The long-term trend of e-commerce has boosted the coronavirus as many consumers have turned to shopping online instead of going to the local store. This shift in consumer behavior has prompted many businesses to accelerate their plans to strengthen or expand their online presence, and Shopify is uniquely suited to meet this need. Its platform has been completely designed to make it easy for entrepreneurs and businesses to build and manage their online platforms.

Shopify has seen tremendous growth. Over the past three years, its sales have grown at a compound annual growth rate of 59%. As the platform grew, that growth inevitably slowed, from 73% in 2017 to 47% in 2019, but the coronavirus has changed that trajectory. In the second quarter, the platform saw an incredible increase in merchant sales of 119%, which boosted revenue by 97%.

Data source: Shopify results posts. YOY = year after year.

Shopify divides its revenue into two segments: subscription solutions and merchant solutions. Its subscription revenue comes from the monthly fees merchants pay to use the platform, ranging from its Shopify Lite subscription at $ 9 per month to its premium Shopify Plus service for businesses and large sellers starting at $ 2,000 per month. month. This segment’s revenue grew “only” by 21% compared to last year in the last quarter, mainly thanks to new merchants joining the platform. Its merchant solutions segment is made up of transaction-based fees, where it takes a small portion of payments, shipping services, or sales with its point-of-sale credit card reader. This is the segment where the company recorded the biggest gains for the quarter.

In the second quarter, its merchant solutions revenue increased 148%, driven by huge growth in gross merchandise volume (dollar amount of merchandise sold on the platform). During the call for results, management indicated that this was the “third consecutive quarter of [merchant solutions] an acceleration and a rate of growth that we have not seen since our IPO. This impressive result has enabled the company to scale its operating costs and post a rare positive operating result.

It looks like Shopify is doing all right. It benefits from years of investments in innovation, attracting new traders, helping its existing customers of a million and over sell more in a tough economic environment and with $ 4 billion in cash and marketable securities ( and without debt). But the only thing that can prevent investors from investing in this high quality trader is its high valuation. Its price-to-sales (SP) ratio is a nosebleed-inducing 57, even higher than some expensive work-from-home software companies like Soft (P / S ratio of 24), Okta (P / S ratio of 39), and DocuSign (P / S ratio of 37).

If the market pulls back and Shopify stock follows, long-term investors would be smart to buy shares of this exceptional trader who is fueling the future of ecommerce.

Apple: a rebound in manuals

Danny Vena (Apple): Using the most recent market crash as a model can be instructive when planning the next one. While nearly all stocks were affected to some extent in the rout that occurred between February and March, it is what happened in the months that followed should help inform investor decisions. . Additionally, a company with impressive prospects should be at the top of an investor’s buy list when a stock market crash occurs. Finally, a dividend yield will rise following a crash and can give investors peace of mind while waiting for the market to rebound. One stock that ticks all of these boxes is Apple.

Like many other companies, Apple took it seriously when the stock market crash occurred earlier this year, losing over 30% of its value in just 24 trading days. What happened in the wake of those dark days, however, is instructive. Apple gained more than 52% in 2020, and since reaching its last low in late March, the stock has doubled. This puts Apple in scarce territory, with a market cap of over $ 1.9 trillion, making it the most valuable publicly traded company in the United States.

There are a number of reasons why Apple stock has come back strong, and its steep rise shouldn’t end there. The company has a number of catalysts that will continue to drive its growth in the future. The focus on services in recent years is paying off. Segment revenues are up 81% since late 2017, with an execution rate of over $ 52 billion per year, and now represent 19% of Apple’s revenues over the past 12 months.

The company’s shift to portable devices is also paying off. Since Apple added the wearable, home and accessories segment two years ago, revenue has grown almost 73%. The business – which includes products like AirPods, Apple Watch, and Beats products – quickly grew to over 10% of the company’s total revenue.

Plus, with the degree of uncertainty, iPhone sales are currently stalled, but that won’t always be the case. It’s also important to remember that with around 950 million iPhones in use around the world and the advent of 5G upon us, many believe there is a massive upgrade cycle just around the corner. rue, which bodes well for the next version of the iPhone 12.

With these factors as a backdrop, many believe that Apple’s market cap will approach $ 2.5 trillion, which is a 34% increase from the current price.

Let’s not forget the Apple dividend. Since the company resumed payment in 2012, it has increased the dividend by over 116%. Apple uses less than 25% of its profits to fund the payment, making it one of the most secure.

Given all of this evidence, Apple is a manual stock that you can buy with confidence the next time the market plunges.

Remember this pillar of technology

Chris snow (Microsoft): With many tech stocks flying high right now, it can be easy for investors to look to younger, more showy companies to invest in and miss the stability of tech giants like Microsoft. Make no mistake, there is nothing wrong with investing in tech growth stocks right now, but owning Microsoft stocks if the market crashes is a smart bet. Here’s why.

First, even during the pandemic, Microsoft has made impressive financial gains. Total revenue grew 13% year over year to $ 38 billion in the last quarter. In addition, sales of the “more personal computing” segment of the company jumped 14% and its productivity and industry grew by 6%.

Microsoft has built a stable technology company for itself through its popular software offerings like Office and Windows, but it is the company’s cloud computing company, Azure, that is driving Microsoft’s latest growth.

Azure sales jumped 47% in the fourth quarter and continues to be one of the most popular cloud computing infrastructure companies. Azure currently holds 18% of the cloud computing market, which is behind Amazonis 33%, but far ahead Alphabet Google affiliate market share of 8%. What’s great about Azure is not only that it ranks second in cloud computing, but the market is still growing. The global cloud computing infrastructure market will grow from $ 73 billion in 2019 to $ 167 billion by 2024.

It’s also worth pointing out that Microsoft has weathered many previous stock market crashes and economic downturns and emerged stronger than ever. Even after the company’s stock price fell in March, Microsoft’s stock has rebounded and is up 33% since the start of this year. Investors looking for a tech security that has the financial means to weather economic uncertainty and get a head start would be wise to grab some of Microsoft’s stock.