Top 3 Technology Stocks to Watch in 2017
May 4, 2017 6:38 am ET
The market for enterprise apps is expected to reach $50.8 billion in annual revenue by 2018, according to IDC Worldwide, as demand grows for customer relationship management and enterprise resource management applications. At the same time, Transparency Market Research projects that smartphone applications will increase at a 16.2% compound annual growth rate to reach $54.89 billion in size 2020.
In this article, we will take a look at three publicly-traded companies that provide investors with exposure to these fast-growing markets.
Right-Sizing Online Retail
MySize Inc. (NASDAQ: MYSZ) has developed innovative technology designed to solve a key problem facing online retailers - returns. Consumer Growth Properties estimates that shoppers will return roughly one-third of clothing and shoes purchased online, which is twice as high as the return rate for goods purchased in a brick-and-mortar location. The Retail Equation estimated that these returns cost nearly $270 billion in sales during 2013 alone.
MySize’s MySizeID is a smartphone application that uses a person’s body measurements and statistical algorithms to help determine correct apparel sizes when online shopping. By doing so, consumers benefit by receiving clothing that fits the first time and retailers benefit from fewer returns. The world also benefits from the reduction of waste since some 30% to 40% of goods that are returned are simply discarded rather than sent back through the supply chain.
The company plans to develop the smartphone app as a white label solution for online retailers, which means they can incorporate the technology into existing apps or brand the custom app with their own logo and styles. MySize would generate revenue from either a percentage of sales or a small stipend per app use. Currently, the app is in beta testing with Trucco, a major online retailer located in Europe, before a larger scale roll-out.
China’s Twitter is Taking Off
The Chinese microblogging service Weibo is similar to Twitter Inc. (NYSE: TWTR) in many ways - except for its growth rates. Twitter may be posting lackluster 1% sales growth and a string of net losses over the years, but Weibo Inc. (NASDAQ: WB) has posted 43% growth in revenue, a 33% growth in monthly active users, and even a $43 million net income. Analysts expect these figures to continue growing in 2017, albeit at a slightly slower pace.
Most of Weibo’s revenue comes from small and mid sized businesses that post advertisements, but its live video streaming platform has also picked up steam. Live video users can purchase virtual items for broadcasters, who receive a cut of the revenue from the transactions. In essence, the platform has turned live video into a kind of infomercial that anyone can run. However, the stock comes with a somewhat steep price tag of over 100x earnings.
High Revenue with a Higher Purpose
Blackbaud Inc. (NASDAQ: BLKB) is a multi-billion dollar - but still relatively unknown - provider of cloud services to nonprofits, foundations, health care groups, charities, and other organizations. The company’s goal is to help these organizations increase their impact with software in digital marketing, grant management, and improving corporate responsibility. The stock has risen nearly 30% over the past 52 weeks and could be poised for more of the same.
While its 78x price-earnings ratio may seem lofty, the stock’s forward P/E ratio is a more reasonable 38.5x and its price-sales ratio is below the industry’s average at 5.2x. The company could face growing competition from Salesforce.com (NYSE: CRM) in the future, but thus far, it has managed to defend its leadership position in the non-profit space and its connections could provide a strong barrier to entry over the coming years.