US tech giants’ Stocks to stay on a roll in 2021 after a stellar 2020

Source: SFIO CRACHO, Shutterstock

Summary

• The developments surrounding COVID-19 have triggered an increased shift towards technology products and services.
• The past year has been an outstanding time for tech companies with staggering growth in stock prices.
• Tesla, Amazon, Netflix have been among the many companies that have posted robust gains and are still going strong.

Among the many surprising developments that 2020 gave us, one of them has been the remarkable gains in tech stocks. Tech businesses have registered never-before gains and touched new highs during these highly-uncertain times. More surprisingly, these stocks are still on the rise and are the go-to stocks for investors.

Some say it is the rapid digitisation of economies that is fuelling the unprecedented growth across tech stocks. Above all, the demand for tech products as well as services continues with increased investor interest.

Market Showing Mixed Signs

The tech-heavy index, Nasdaq Composite, has been riding high, taking the optimism from more relief promised under the new Biden administration in the US. Significant gains were reported in Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) stocks prior to their earnings reports. This was anticipated due to the positive results from Netflix (NASDAQ:NFLX), which galvanised the momentum in tech space.

However, the market on 22 January 2021 showed mixed performance with Nasdaq Composite Index ending slightly up by 0.09 per cent; however, S&P 500 and Dow Industrials were down by 0.30 per cent and 0.57 per cent, respectively.

On the same day, Amazon.com, Inc. (NASDAQ:AMZN), declined by 0.45% and settled at US$3292.23. Netflix also lost 2.53%, while Tesla gained marginally by 0.2% to $846.64.

The market activity is still considerably influenced by the developments surrounding COVID-19 pandemic. COVID-19 cases are still on the rise, and there are worries surfacing in the market that stricter lockdowns might just be around the corner.

2020: A Remarkable Year  for Tech Corporates

Undoubtedly, 2020 has been a phenomenal year for tech giants, including Facebook, Apple, Google, Tesla, and many more, who outperformed the NASDAQ in the last week of the previous year. 

Among the many large-cap highly volatile stocks is Tesla, Inc., which witnessed the staggering growth of approximately 700% in 2020 only. Such a rally made investors hope for some cracking news in the quarterly performance report of the stock.

This up-trend in tech stocks is indicating a pleasant outlook in the current year on the back of the continuing pandemic, which forced people to reach out to these tech services to get support for their daily household or chores while staying at home.

In the last week of 2020, retail giant Amazon grew by 2%, marking advances in tech space through its high-technology dependent stores providing cutting-edge solutions to customers. Likewise, Netflix moved up roughly 4% during the same time. In totality, the share price of Netflix gained around 60% over the year 2020.

Over the year 2020, Tesla gained by ~ 695%, becoming one of the most valuable companies across the globe, while Netflix gained by around 64%. Amazon shares surged by approximately 73% during the year 2020, delivering impressive returns to its shareholders.

Netflix has further gained on the back of an impressive earnings update for the period ended December 2020 while there remains significant optimism of growth for other up-trending stocks. Even though Tesla gained dramatically over the whole of 2020, there are speculations in the market, favouring further growth in Tesla’s share price.

Future Trends Indicate Positive Developments

A bend towards renewable sources of energy

There has been a growing conscience towards renewable sources of energy, and people are favouring environment-friendly ways of travelling and almost everything possible.

Moreover, countries are strategising towards the electrification of transportation to keep up with low-emission norms. This indicates that Tesla is poised to gain significantly from these developments. Tesla has recently entered the Indian market and registered in the state of Bengaluru, towards the south of India.

Several countries are looking forward to roping in the EV car manufacturer Tesla to enter their market and support in the electrification of transportation.

Tesla’s shares gained so much that Jeff Bezos, the richest man in the world, was dethroned by Elon Musk to grab the top spot in the billionaire’s index. This had happened after the shares of Amazon slipped 2.62% in the first week of the new year 2021, and Tesla’s shares gained significantly in the five trading days of the first week of 2021.

The event remained the highlight of the global market as Tesla stood with the market capitalisation exceeding the total market capitalisation of all leading automakers.

Growth In Demand For Online Services And Tools

Furthermore, there has been a drastic escalation in the demand for cloud services, data centres, online streaming services, and fintech services, especially in the wake of COVID-19 pandemic. Stay-at-home restrictions have compelled people to opt for online entertainment services and businesses to work through online mode, using remote working applications.

Netflix crossed 200-million paid memberships milestone in the last quarter of 2020 and added a record paid membership, totalling 37 million in the complete year. Moreover, Netflix believes that it is quite close to becoming free cash flow positive and expects free cash flow for the full year 2021 to be around a break-even stage.

Likewise, the transformational wave of technology has triggered users to shop online and the activity has significantly escalated in the past months. If media reports are to be believed, online retail giant Amazon is anticipated to grow its earnings per share for the December quarter 2020.

Bottomline

Vaccination drives have already begun across countries, but we are simultaneously witnessing fresh strains of COVID-19. Currently, there are mixed predictions about the duration of the pandemic and the efficacy of the vaccine. Therefore, the shift towards these digital solutions might continue in coming times.

Although people are eager to return to normal life, it might not be easy to abandon the technological dependency, which presently facilitates daily lives. With no confirmed solution to COVID-19 pandemic, it shall be interesting to see how further developments influence these tech stocks.