Coronavirus induced volatility in 2020 seems to be fading away gradually as we march into 2021 with positive developments on vaccine approvals and roll outs.
The pandemic turned the concept of normal on its head by compelling people worldwide to reimagine, improvise and adapt their lifestyle according to the need. This, in turn, led to accelerated digitalization that transformed workspace, education, healthcare, shopping, payments, delivery and automation, and thus ushered in the “new normal.”
Although return-to-work and return-to-school trends will gain prominence in the days ahead, till the vaccine gets democratized; some of the top trends that gainied prominence in 2020, including online learning, video conferencing and telehealthcare, are likely to linger through 2021.
Moreover, in a post vaccine scenario, importance of advanced technology is likely to gain steam with new use cases across AR/VR, IoT, autonomous driving, smart devices and robotics verticals, backed by accelerated deployment of 5G.
Let us discuss the top five stocks set to prosper in 2021 on five defining trends this year.
One Year Price Performance
Trend 1: Continuance of Video Conferencing
Momentum in remote working, web-based learning and telehealthcare will continue to pave the way for more business growth in video conferencing offerings.
Innovation in work communications involving video conferencing, file synchronization, file sharing, e-signature portals, unified communications, encryption and security bodes well for companies offering enterprise communication offerings.
Digital communication has opened up new avenues for business expansion. From individuals to sole proprietorship firms to large enterprises, all have been beneficiaries of this video conferencing boom.
It has helped people connect with their loved ones, customers, employees, students, doctors amid social distancing norms, and has in a way kept the ecosystem oiled and running by preventing any potential loss of business.
The importance and prospects of enterprise communication in the days ahead can ascertained from the fact that
salesforce
CRM
is acquiring
Slack
WORK
for a whooping $27.7 billion.
Moreover, the coronavirus crisis has wreaked havoc on the world economy in 2020, and in a bid to bounce back, people will continue to save on their travel time and resources, and instead utilize it to create more returns.
Thereby, work from home, e-learning and digital healthcare boom are here to stay. This, in turn, will act as tailwind for video conferencing and enterprise communication stocks in 2021.
Best Gainer
:
Zoom Video Communications
ZM
has had a blockbuster run on the bourses in 2020, and needs no introduction. The company continues to benefit from the coronavirus crisis-induced lockdowns, shelter at home guidelines and social-distancing trend.
Taking into account the fact that it could take at least a year or two for the global population to get vaccinated considering manufacturing and distribution challenges, demand for the company’s cloud-native video-first platform is expected to remain solid in 2021 courtesy of the work-from-home and online-learning wave.
Easy to deploy, use, manage and scalability makes Zoom Video’s software popular among its customers. Expanding clientele coupled with growing international presence is expected to drive top-line growth momentum in the near term. Moreover, its efforts to eliminate the security and privacy loopholes, and new hardware and Zoom From Home solution’s launch are expected to help the company boost business through 2021. (Read More:
Will Zoom Run Out of Steam After COVID-19 Vaccine Arrives?
)
Moreover, the video-conferencing giant is looking to expand its portfolio of offerings beyond workplace video chat into email and calendar services, per
a report from The Information
.
Markedly, while the Zacks Consensus Estimate for this Zacks Rank #3 (Hold) company’s fiscal 2021 earnings has moved up 14.9% to $2.85 per share, the same for fiscal 2022 earnings jumped 17.5% to $2.82 per share in the past 60 days.
Trend 2: Telehealthcare Wave
Momentum in telemedicine services is likely to continue to gaining strength from the booming digital health space as customers keep availing online medical consultation services from the comfort of their homes in the post-pandemic period.
This potential is keeping the market sentiment buoyant as we enter 2021.
Notable Achiever
:
Teladoc Health
TDOC
offers virtual care solutions at every step of the care pathway for patients and physicians. This technology uses remote monitoring, videoconferencing and much more to extend the reach of nurses and physicians for dispensing better care. The telehealth service is a classic disruptive innovation that is rapidly changing the face of healthcare, shifting the place of delivery to home from visiting clinics.
The company is witnessing a rise in telehealth visits, outpacing its membership rise, which highlights rapid adoption of telehealth services. The COVID-19 pandemic has driven demand for its telehealth services. Also, the inclusion of telehealth services in Medicare advantage is likely to act as a long-term growth driver for the company. (Read More:
Teladoc Up 130% YTD: Will the Rally Continue in 2021?
)
This Zacks Rank #3 company’s prospects for 2021 appear encouraging. Notably, its estimated sales growth rate for 2021 stands at 80.6%.
Trend 3: Contactless Payment and Delivery Remains Vital
Coronavirus crisis-induced exponential increase in existing and new shoppers, across grocery, food delivery, health and other supplies, led to e-commerce boom. This triggered the global digital payment adoption wave, which was primarily sluggish and varied by country until 2019.
In fact, the pandemic has elevated contactless payment options and delivery to a level of utmost importance. The coronavirus outbreak has compelled people to choose this mode over others on safety concerns. Consumers not only want the ability to shop at their convenience but also want to minimize personal contact with point-of-sale devices.
Contactless cards are rising in popularity as a result. Markedly, millennials are most comfortable using contactless payments.
Top Performer
:
PayPal
PYPL
is benefiting from robust growth in total payments volume courtesy of increasing net new active accounts. Further, strengthening customer engagement on the company’s platform is a major positive.
This leader in digital payment processes assists merchants in accepting crypto payments via partnerships with three major bitcoin payment processors — BitPay, GoCoin and Coinbase. Further, the company recently launched a platform that enables customers to buy, hold and sell cryptocurrency directly from their PayPal account.
Notably, this Zacks Rank #3 company announced its intentions to enable cryptocurrency as a funding source across its 26 million merchants worldwide. Its crypto trading platform is expected to be introduced globally in early 2021.
Furthermore, Venmo’s improving monetization efforts and rising adoption rate across various platforms are aiding the total active accounts. Additionally, growing momentum of core peer to peer and PayPal Checkout experiences is a tailwind. Also, benefits from Honey buyout are positives. We believe accelerating transaction revenues of PayPal are likely to continue driving the top line.
Notably, Paypal’s 2021 earnings estimates have moved north by 5 cents over the past 60 days to $3.80 per share. Its estimated sales growth rate for 2021 stands at 17.5%.
Trend 4: EV Revolution on AI & ML Backed Automation
The automobile industry’s future is set to be defined by democratization of Electric Vehicles (EV). Increasing commercial viability of EVs — both in terms of affordability and charging infrastructure — are paving the way for an environment-friendly EV market. Moreover, advancement in investments, focus on AI and ML expertise and automation technologies, stricter emissions and fuel-economy targets, are tailwinds.
Investors are intrigued by automakers, which are looking for solutions to lower global carbon emissions and provide a cleaner energy future.
Our Pick
: EV-king
Tesla
TSLA
has a first-mover advantage in the e-mobility space with high range vehicles, superior technology, and software edge. With Model 3 sedan being its flagship vehicle, Tesla has established itself as a leader in the EV segment. Ramp up of Model Y production is further boosting its top-line growth.
Robust production levels from the Shanghai Gigafactory bode well for its future growth. Tesla aims to deliver 500,000 vehicles in 2020, indicating an uptick of 36% year over year despite production interruptions amid coronavirus woes.
Along with increasing automotive revenues, energy generation and storage revenues are also boosting Tesla’s prospects. Amazing line-up of upcoming products and aggressive expansion efforts bode well for the company. Thus, Tesla, currently sporting a Zacks Rank #1 (Strong Buy), is viewed as an attractive bet. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
The Zacks Consensus Estimate for its 2021 earnings indicates earnings estimates have moved north by 2 cents over the past seven days to $2.26 per share. (Read More:
Top 5 Stocks to Play the EV Revolution
)
Trend 5: Focus on Green Energy
Coronavirus crisis has taught us the importance of sustainable living and how nature can bend humans to its will. While we stayed at home and reflected on the scenario, nature prospered worldwide lower pollution levels. This clearly showed us the value of green energy.
Carbon neutral focus and environment friendly business strategies are expected to come mainstream in 2021. Usage of new technology and the lookout for options to harness the clean energy sources available in nature to produce electricity is driving the global clean energy mission forward. Major technological development and ongoing research & development activities are supporting this energy revolution.
Best Bet
:
First Solar
FSLR
is a major producer of solar modules and systems. The the company, which currently carries a Zacks Rank #2 (Buy), is replacing its legacy manufacturing fleet over the next several years with the new Series 6 module to expand its Series 6 manufacturing capacity to 6 GWs by 2020-end and 8 GWs by 2021-end. This new series of modules is expected to further curb the costs of setting up utility scale solar projects.
Notably, per a Taiwanese market research company PV Infolink, the global solar photovoltaic panel demand is
expected to grow approximately 15%
and is poised to reach a total capacity of 143.7 GW in 2021. Given the buoyancy in demand for solar modules and First Solar’s efforts to ramp up manufacturing capacity, it is likely to benefit in the long run.
The Zacks Consensus Estimate for 2021 earnings has moved north by 4.8% to $3.92 per share in the past 60 days.
To Conclude
While we identified the top picks set to gain from top 5 defining trends in 2021, we would also suggest investors to keep a tab on all-rounder stocks, including Amazon (AMZN), Microsoft (MSFT) and Alphabet (GOOGL). The three stocks are powerhouses of AI and ML expertise, which aids them to strengthen their cloud computing business.
Amazon’s presence in retail, healthcare, robotics, makes it an unignorable stock. Microsoft’s Teams forte, as well as Dynamics 365 and HoloLens offerings with major healthcare partnerships makes it worth adding to watchlist. Alphabet’s Google is poised to gain from G-suite momentum on growing demand for online learning and workspace communication. Furthermore, Alphabet has been a frontrunner when it comes to autonomous driving, courtesy of its well-performing Waymo unit. Notably, Alphabet currently carries a Zacks Rank #2, while Amazon and Microsoft carry a Zacks Rank of 3.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021? These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.
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