Investing in tech stocks – what may be in-store

3 min read

With a volatile 2018, it’s no wonder many investors are questioning the future for tech stocks.

After a period of momentous growth, fears of further Federal Reserve rate hikes and uncertainty surrounding the US-China trade war, saw tech stocks take an unpredictable ride in 2018.1

But arguably, these are companies that are often on the cutting edge, always looking for new and exciting products or services that could transform our modern world.

And so as expected, 2019 has started on a better note.

To find out what may be in-store for the tech giants, we’ll take a closer look at some of the largest posse of American tech stocks trading on the NYSE and NASDAQ, as well as three of China’s biggest internet companies.

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Tech stock Facebook (FB) focuses on new product expansion

The social media giant has seen some rapid growth with its net income of US$22.11 billion (AUD $31.14 billion) for 2018 having increased by 39 percent2 from 2017.

The brand has also had its fair share of controversy however. Growth appeared to slow in 2018 as a result of the Cambridge Analytica privacy scandal which made global headlines. 

What may be in-store in 2019?

According to Zuckerberg, the company will invest heavily into the business, where the key focus will be on new product expansion including Facebook Watch, Facebook Marketplace and Instagram TV while continuing to improve security.3

Tech stock Apple (AAPL) focuses on getting users to subscribe

In August 2018, Apple celebrated its status as the first publicly traded U.S company to reach $1 trillion in market cap.4 But celebrations were overshadowed by weakened iPhone sales which saw Apple end 2018 down nearly 7 percent for the year – the company’s worst year since the global financial crisis.4

What may be in-store in 2019?

In terms of the future, many expect Apple to focus on getting its hardware users to subscribe to the company’s software services, such as the App Store, Apple Music and iCloud to help smooth the revenue pattern.5

Tech stock Netflix (NFLX) could come under pressure

Netflix has built its market position on original content and quick adoption of technology upgrades, and the proof has been in the pudding of steadily growing subscriber numbers around the world. 6

What may be in-store in 2019?

Netflix could come under pressure as a result of Disney’s plan to enter the streaming market, backed by content holdings such as Marvel, Lucasfilm and Pixar.7 AT&T is also rumoured to be launching its own Time Warner-focused offering putting investors on notice that competition in the streaming services marketplace is definitely hotting up.

China’s super-tech stocks

While the tech stocks we’ve mentioned above are US-based, China has their own set of high performing tech stocks referred to as the BATs, three of China’s biggest internet companies.

The BATs are Baidu, China’s version of Google, Alibaba, the country’s answer to Amazon and Tencent, China’s equivalent to Facebook. While China’s BATs may face challenges with the US-China trade dispute, their heavy investment in innovation means many are watching as they climb their way to success on the global stage.

Australia’s tech stocks

Given the strong influence of the US market, it comes as no surprise that Australia too has leading tech stocks. Made up of Wisetech, Appen, Afterpay, Altium and Xero, these companies have each delivered innovative technologies to secure their place as our own local tech pinups.

Ways to invest in tech stocks

If you are considering investing in tech stocks there are a number of ways to do this. Managed funds that invest in tech for instance, enable you to gain access to a diverse mix of assets while investment managers buy and sell shares or other assets on your behalf.

You could also invest in tech stocks via an Exchange-Traded Fund (ETF) which are low-cost and can offer exposure to a wide range of Australian and global tech companies. There are fees associated with both these options however.

1 Bloomberg: https://www.bloomberg.com/news/articles/2018-12-11/faang-glory-days-may-be-over-as-headwinds-persist-into-next-year
2 Macrotrends: https://www.macrotrends.net/stocks/charts/FB/facebook/net-income
3 The Motley Fool: https://www.fool.com/investing/2018/10/31/as-growth-decelerates-whats-next-for-facebooks-bus.aspx
4 https://www.cnbc.com/2018/12/31/faang-stocks-2018-performance.html
5 https://www.cnbc.com/2018/05/23/apple-services-business-is-leaving-money-on-the-table.html
6 https://www.cnbc.com/2017/05/23/netflix-ceo-reed-hastings-on-how-the-company-was-born.html
7 https://www.ig.com/au/news-and-trade-ideas/shares-news/netflix-vs-disney-vs-at-t--the-battle-for-video-streaming--181119

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Disclaimer: Information current as at 25 March 2019. BT Financial Advice advisers are representatives of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian Credit Licence 233714 (Westpac). BT Financial Advice is a division of Westpac. The information in this publication is general information and factual only. It does not constitute any recommendation or financial product advice and must not be relied upon as such. Before making any financial decision you should determine whether the information is appropriate in terms of your particular circumstances and seek advice from an independent licensed financial services professional. This information may contain material provided directly by third parties and has not been independently verified and Westpac Banking Corporation is not in any way responsible for such information.