While we are all ensconced in our homes, technology has become increasingly vital to working, socialising and generally staying in touch. Online shopping has rocketed, TV shows and films have never been streamed more, and video conferences are now the norm not the exception.
Unsurprisingly, this all has been reflected in the stock market as tech solutions have provided some of the rare upside and pandemic resistance that portfolios sorely need. Here are three such companies that have not only weathered the storm of 2020 but are coming out the other side stronger as we head into 2021.
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Snapchat
Image-sharing platform Snapchat has proved it has that quality all social media names chase: staying power. Launched in 2011, the app has continued to prove popular with users nearly a decade later and this was emphasised by some very strong results in the third quarter from its owner, Snap, listed on the New York Stock Exchange.
Despite the chaos of the pandemic, Snap’s revenue was $679m in the third quarter of 2020, which represented a 52% increase from the same period in 2019. This helped the company generate adjusted EBITDA of $56m (compared to a loss of $42m in 2019) and overall cashflow remained strong. As it stands, Snap now has cash and marketable securities of $2.7bn on its books, which has helped boost confidence. This has driven its share price upwards from $16 on January 2 to $43 by late October.
Snap has managed to ensure user loyalty, growing Snapchat’s daily average users by 18% to approximately 249 million. This has allowed the platform to take advantage where others have faltered (Facebook is still suffering from boycott backlash, for example) and become an increasingly important player in the social media advertising world. This market position, on top of deep cash liquidity, means Snap is attracting more attention from tech investors.
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Alibaba
Perhaps one of the most surprising things about a company the size of Alibaba – sometimes described as the ‘Amazon of China’ – is that it is still growing. This multisectoral giant (operating in ecommerce, digital payments and cloud computing services) managed to grow its revenue in the quarter ending June 30 by 34% from the year before. This meant it received RMB153.7bn (or US$21.7bn) during that quarter, while its monthly average users reached a peak of 874 million. This has helped the share price climb upwards from HK$219 (US$20.25) on January 2 to HK$309 by late October.
Like Amazon, Alibaba has been able to use its size, brand dominance and logistical reach to not only withstand Covid-19 lockdowns but to grow from them as well. Alibaba has strategically reinvested to target users in new areas of China, thus diversifying its customer base, and entered into cloud computing partnerships with companies eager to accelerate their own digital transformations and react to the pandemic. Alibaba is also solidifying its place within financial services: it has a 33% stake in Chinese fintech company Ant Group, which is targeting an IPO, potentially providing another boost to Alibaba’s already broad revenue stream.
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Nvidia
As a chipmaker operating in the gaming world, Nvidia has already been able to benefit from this year’s surge in demand for console games. This has been reflected in the company’s financials and figures for Nvidia’s quarter to August 2020 revealed record revenue of $3.87bn, up 50% from the year before. Investors have reacted positively in 2020 with the share price climbing from $239 on January 2 to $542 by late October.
However, Nvidia is not content and is transitioning into the world of artificial intelligence (AI) chips, used in autonomous vehicles, data centres and warehouse robots, with its acquisition of Arm Holdings, the largest tech business in the UK. Cambridge-based Arm creates semiconductor chips that are used in a whole host of consumer products such as the iPhone, Nintendo DS, and Garmin Satnav. The odds are you may have used a product with Arm chips in it without even knowing.
Although the acquisition has yet to be completed, this shows Nvidia is serious about having exposure to the right technologies in the coming years. At the same time, Nvidia has won several plaudits for its work to become a high-quality ESG company through its commitment to having a diverse talent pipeline and sourcing raw materials ethically, an increasingly important factor for today’s investors.
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