Four stocks that offer value
Meta Platforms (Nasdaq: FB) owns the social network Facebook as well as a range of related apps, most notably the messaging service WhatsApp and the picture-sharing website Instagram. The company is now using some of the money generated by Facebook, which is an “incredible cash cow” says James Penny of TAM, to invest in the metaverse (a vision of a network of virtual worlds facilitated by virtual reality (VR) and augmented reality (AR)). While this investment “could end up falling on its face”, there are early signs that it “could be this generation’s Facebook”. Facebook trades at only 13.6 times forecast 2023 earnings.
Streaming service Netflix (Nasdaq: NFLX) has fallen a long way from its peak valuation due to concerns that the number of subscribers has peaked. However, there is still some value left in, reckons Neil Campling of Mirabaud, especially if it finds ways to cut down on password sharing, which has been blamed for allowing people to have a free ride on other people’s subscriptions. He also thinks Netflix could make money from developing computer games based on some of its hit series. Netflix trades at only 14.8 times forecast 2023 earnings.
Microsoft (Nasdaq: MSFT) should do well, thinks Anthony Ginsberg of GinsGlobal. He is particularly impressed by the way that it has become a “sizeable player in cloud computing”. At the same time, the company is also making moves into online gaming: it recently revealed that more than ten million people have streamed games over Xbox cloud gaming. The stock is more expensive than other blue-chip tech stocks at 23.6 times forecast 2023 earnings, but is showing strong growth. Sales have nearly doubled since 2016, and are set to keep growing at roughly 10% a year.
Cybersecurity firm Palo Alto Networks (Nasdaq: PANW) will continue to benefit from the surge in demand created by the move to cloud computing, says Jerry Thomas of Sarasin. It is particularly noted for its advanced firewalls as well as its automated security operations, and also provides security consulting services to companies. The shares are not cheap, even though they are down by around 30% from their peak, and still trade at 49 times forecast 2023 earnings. However, sales more than doubled between 2017 and 2021, and are expected to keep growing at around 25% a year.
If you want to invest in a broad portfolio of tech shares then HAN-GINS Tech Megatrend Equal Weight UCITS ETF (LSE: ITEP) might fit the bill. This has a portfolio of 114 companies in various fast-growing sectors, including cloud computing and big data, cybersecurity, social media, blockchain and digital entertainment. The companies in the portfolio are on an average price/earnings ratio of 22 and the ETF’s total expense ratio (TER) of 0.59% is reasonable. If you want to focus on a specific theme, the HAN-GINS Cloud Technology Equal Weight UCITS ETF (LSE: SKYP) holds a group of 76 companies involved in the shift to cloud computing. It also has a TER of 0.59%. Equal weight means that a fund holds the same amount in each stock, rather than holding more in larger companies, like most indices.