Incredible rallies driven by short squeezes involving GameStop, AMC Entertainment Holdings, and a handful of other companies have generated huge excitement and dominated financial headlines recently. Investors lucky enough to own these stocks prior to their surges saw tremendous gains. But short interest on many prominent squeeze stocks has fallen well below what it was at peak levels, and aiming for more big gains with this strategy looks very risky at this point.
On the other hand, recent sell-offs for technology stocks have presented buying opportunities in companies backed by strong businesses and favorable market trends. Read on for a look at two promising tech companies that are primed to deliver strong performance.
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Zynga
Video game companies have been hot acquisition targets as of late. Large specialized publishers and tech giants alike are buying up development studios that can help them ramp up growth in interactive entertainment.
Zynga (NASDAQ:ZNGA) has been in the news as a potential buyout target following Electronic Arts' purchase of Glu Mobile and several other big acquisitions. This dynamic could help limit downside risk on the stock, and Zynga has a good shot at delivering strong returns even if the broader market is rocked by volatility in the near term.
Zynga is a mobile-focused publisher that has benefited from strong tailwinds in the video game market. The company has been on an acquisition spree of its own, and its string of successful buys has spurred rapid expansion for the business. Its $1.8 billion acquisition of Peak Games last summer made it the biggest U.S. mobile publisher by revenue and provided an immediate sales boost.
Bookings surged 61% year over year to reach a record $699 million in the fourth quarter, with impressive gains driven by resilience for long-standing legacy franchises and contributions from franchises brought into the fold through other acquisitions, including Gram Games and Small Giant Games.
Most recently, Zynga announced that it had acquired Echtra Games and plans to release a new role-playing franchise from the developer. The company has assembled an impressive collection of development studios and properties, and the stock has multiple paths to delivering wins for shareholders.
Making investment moves based on the hope that a company will be acquired can be risky, but the bullish case for Zynga stock doesn't hinge on hopes that a larger player will come along and pay a premium. Zynga's resources put it in good position to benefit from the expansion of the global games industry, and the company looks poised to deliver strong results.
Amazon
Amazon's (NASDAQ:AMZN)'s business trajectory since its founding in 1994 has been nothing short of amazing. Consider that the company started as a simple online bookstore before evolving into a general online retail platform that shaped an entire industry. From there, the e-commerce giant orchestrated a groundbreaking push into the cloud software space, putting it at the forefront of two of the most important service categories in today's economy.
The company has demonstrated an incredible penchant for innovation and execution. That doesn't mean that all of its projects have been hits or that there won't be misfires in the future, but a willingness to take risks and invest in growth have been key factors behind Amazon's success. These characteristics also help explain why the business still has plenty of room to expand.
Despite its massive size, Amazon is still growing at an impressive clip. The company increased sales in the most recent fourth quarter 44% year over year to $125.6 billion, and earnings per share surged roughly 118% in the period.
The company's growth will likely slow down as the world bounces back from the pandemic and returns to brick-and-mortar shopping and in-office work. But Amazon has proved to be an indispensable company, and it has shored up its advantages in key growth markets over the last year's unprecedented conditions.
The company's leadership positions in e-commerce and cloud computing create a foundation that's incredibly strong, and unfolding initiatives in fields including digital advertising and artificial intelligence continue to look very promising. As impressive as Amazon's performance has been so far, it looks like the tech leader's growth story is just getting started.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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March 25, 2021 at 08:41PM
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Ignore the Short Squeezes: These Tech Stocks Are Better Buys - The Motley Fool
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