Over the past quarter of a century, technology has played a big role in helping make John and Jane Q. Investor a lot of money. In particular, the advent of the internet has allowed for the instantaneous dissemination of information at the click of a button. This ease of access to earnings results, press releases, income statements, and balance sheets has helped level what was once a very uneven playing field.
But It’s not just the access to information that’s been helping investors thrive. We’re also seeing communities of investors come together to share information and ideas. It’s the foundation that The Motley Fool is built upon, and it can also be seen on select social media platforms.
A good example is financial Twitter (NYSE:TWTR), which is also commonly referred to as FinTwit. Twitter’s tens of millions of interested investors are regularly sharing stock ideas and information via tweets to hopefully get collectively richer. While there’s no official ranking of what companies FinTwit is talking about the most, it sure seems that the financial Twitter won’t shut up about the following five stocks.
There’s perhaps no Twitter battle more famous than that between the Tesla Motors (NASDAQ:TSLA) bulls and bears — the bears love to add a “Q” to the end of the Tesla ticker symbol, implying bankruptcy.
Tesla and its CEO Elon Musk certainly deserve credit for doing what no other automaker had done in over five decades: Successfully build an auto company from the ground-up to mass production. In spite of the coronavirus disease 2019 (COVID-19) pandemic, Tesla is on track to deliver over 500,000 electric vehicles (EVs) in 2020.
What remains to be seen, though, is whether Tesla can maintain its first-mover advantages, and if the company can turn its early success into tangible operating earnings growth. Thus far, Tesla has leaned on selling emission credits to generate microscopic per-share profits. It’s yet to demonstrate that it can generate a generally accepted accounting principles (GAAP) profit solely from selling its EVs.
While I don’t consider myself a “$TSLAQ” tweeter, I am concerned about Tesla’s long-term prospects. Other auto stocks are investing heavily in EV, battery, and autonomous driving technology. It seems unlikely that Tesla will be able to retain its current advantages in this capital-intensive industry over the long run.
No shock here, but financial Twitter really love tech stocks, with edge cloud computing company Fastly (NYSE:FSLY) arguably topping the list.
With the COVID-19 pandemic pushing consumers online and businesses into remote work environments, it’s become more important than ever that content reaches the end user quickly and securely. That’s where Fastly and its usage-based content delivery solutions come into play.
The bear side of the argument for Fastly is that usage from its top customer in the first half of the year (12% of first-half sales), TikTok, sank dramatically during the third quarter. This coincides with the Trump administration threatening a stateside ban on downloads of TikTok. Fastly is also a pricey at 33 times Wall Street’s forecast sales for 2020.
On the other side of the coin, Fastly is quickly becoming the preferred edge cloud solutions provider. Putting TikTok aside, Fastly added 96 new customers during the third quarter, and is seeing higher average quarterly spend from its existing enterprise clients. Getting these existing to spend more is Fastly’s ticket to improved operating margins and recurring profitability.
Despite its valuation premium, count me aboard the bull thesis on Fastly.
Another stock financial Twitter can’t seem to get enough of is telemedicine giant Teladoc Health (NYSE:TDOC).
Teladoc is one of a handful of high-growth companies that’ve benefited from the COVID-19 pandemic. With doctors doing their best to keep at-risk patients out of their offices, demand for virtual visits has gone through the roof. In each of the past two quarters, it’s reported a more-than-tripling in year-over-year total visits. Then again, revenue had grown by 74% on a compound annual basis between 2013 and 2019, so it’s not as if this company was a slouch prior to the pandemic.
What really has the investment community excited is the recently completed acquisition of applied health signals company Livongo Health. Livongo’s solutions target people with chronic illnesses, providing them with tips and nudges so they can lead healthier lives. Since 2017, Livongo had regularly doubled or nearly doubled its diabetes member count, and has plans to aggressively market its solutions to patients with hypertension and weight management issues.
This combined company is a cross-selling dream come true. Patients will have the convenience to contact their physician or specialist from their home, with Livongo potentially providing real-time data and updates to those doctors.
For me, Teladoc represents one of my strongest-conviction buys this decade.
Financial Twitter is also obsessed with Singapore-based hypergrowth company Sea Limited (NYSE:SE), which is exceptionally pricey, but has three intriguing operating segments.
For the time being, Sea’s most financially sound segment is its gaming arena. The number of quarterly active users in its digital entertainment division jumped 78.3% from the prior-year period to 572.4 million, with 11.4% of these active users also paying customers. That’s up from 9.1% in the year-ago quarter.
But gaming isn’t why Twitter is obsessed with Sea. Rather, it’s the company’s e-commerce ambitions in Southeastern Asia via its Shopee platform. Between the pandemic pushing consumers online and this region, in general, giving rise to a burgeoning middle class, Shopee has been a popular mobile download and regular destination for consumers. Gross orders surged almost 131% in the latest quarter, with gross merchandise value rising about 103% to $9.3 billion. This segment may be losing money now, but it’s Sea’s ticket to big-time profits in the future.
The third segment of interest is digital financial services. Considering how underbanked parts of Southeastern Asia currently are, mobile wallet usage should be a fast-paced growth driver for the company.
Finally, cashless and digital payments facilitator Square (NYSE:SQ) is a company that FinTwit won’t shut up about.
Most consumers are probably familiar with Square’s longest-running operating segment: the seller ecosystem. Predominantly focused on small merchants, Square provides point-of-sale devices and analytic tools to help businesses grow. What’s interesting here is that Square is seeing larger merchants adopt its payment-facilitating solutions. Since this is a merchant fee-driven ecosystem, bigger businesses should mean more revenue generation for Square.
However, what has financial Twitter abuzz is the company’s peer-to-peer payment platform Cash App. The monthly active user count for Cash App more than quadrupled to 30 million, as of June 30, 2020, from 7 million at the end of 2017. The beauty of Cash App is that it allows Square to collect revenue from a number of channels, including merchant fees, transfer fees, investments, and bitcoin exchange — the latter of which has been a major revenue driver in 2020.
We’re witnessing rapid adoption of digital and cashless transaction technology, which gives Square a bright outlook.