Five Tech Trends You Cannot Ignore
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Five trends are changing the landscape of tech and can make you serious money. They are:
- Wearable tech
- At-home 3-D printing
- The death of appointment viewing
- Mobile wallets
- Social networking
John Sculley, former CEO of Apple (NASDAQ: AAPL), believes wearable tech like the highly anticipated iWatch is the biggest frontier in tech, as he explained in a CNBC interview on July 1. Sculley is CEO of Misfit Wearables, which makes Shine, a wearable sensor only compatible with Apple for now. Apple's forthcoming watch is probably the closest thing to "ubiquitous computing," outside of Google Glass.
Former head of haute couture fashion house Yves St. Laurent, Paul Deneve, and Apple's design genius Sir Jony Ive are reportedly hard at work on the watch, and a hundred patents have been filed worldwide by Apple for a watch-like device.
Other companies also working on versions of wearable devices include Sony, Microsoft, Samsung, and possibly Amazon. And why wouldn't they, with Citigroup analyst Oliver Chen predicting that the iWatch could be a $6 billion business for Apple since watches are a high gross margin--60% or larger-- item.
At-home 3-D Printing
3-D printing at home is barely past the "gee whiz" stage of plastic tchotchkes. Expect additional printing materials and more software designs to expand options for consumers in the coming years.
The main challenge to the two biggest companies in the space, the "maker" movement and their adoption of the Makerbot, a desktop 3-D printer, was partially resolved when Stratasys (NASDAQ: SSYS) bought Makerbot. It also bought Objet earlier this year. While 3-D Systems already had a desktop 3-D printer, the Cube, Stratasys' addition of Makerbot and Objet has almost doubled "maker" users to a third of the pie.
The Los Angeles Times wrote, "The 3-D printing market is estimated to hit $10.8 billion by 2021, according to consulting firm Wohlers Associates, which tracks the sector. Last year, the industry pulled in $2.2 billion, compared with $1.8 billion in 2008."
While both 3-D Systems and Stratasys have strong industrial divisions, the Makerbot purchase by Stratasys was a strategic and savvy buy. The company has 500 patents and the largest variety of materials for printing, giving it a first mover advantage. Numbers don't lie, as the company has seen 30% plus growth since 2011 to total revenue of $359 million and EPS growth of 59% to $1.49 in 2012, and the company is guiding for total revenue that is $90 million higher for 2013.
The death of appointment viewing
Like Saturday morning cartoons, programs were televised at certain times and only then. If you missed it, maybe you could tape it or catch a rerun. Streaming on Netflix (NASDAQ: NFLX) enables subscribers to binge, to watch anything at any time from any computing device with internet access.
Netflix has first mover advantage to attract subscribers. The company signed up 2 million more US subscribers in Q1, handily beating the company's own guidance and pushing the stock up 22%.
Not content to "rely on the kindness of strangers," Netflix is making expensive deals with big networks and studios so that it, like Yahoo! and Amazon, can create its own original content.
Its original "House of Cards" offering generated a "very nice impact" on earnings, according to CEO Reed Hastings. He hastened to add the $100 million in production costs were similar to the lower end of deals with networks. Q1's success helped the company decide to expand its original offerings.
The mobile payment space is dominated by three names: privately held square, Intuit, and eBay's (NASDAQ: EBAY) PayPal. PayPal is the momentum name, making deals with retailers like Home Depot and Macy's. Discover Financial Services is collaborating with eBay to expand PayPal to 7 million retail outlets.
An April 2012 survey found that 80% of traditional bank customers would be willing to adopt PayPal as a mobile wallet. Some would even consider traditional bank services from PayPal, according to the survey performed by Carlisle & Gallagher Consulting Group.
eBay has several software platforms for developers to write solutions for merchants and payment options for consumers to charge items directly to their phone bill. It also has BillSAFE, allowing consumers to pay for purchases immediately upon receipt of an invoice.
CEO John Donahoe expects GSI e-commerce and PayPal to almost double global payments to $300 billion by 2015 from the $175 billion of 2012.
Facebook is being challenged on several fronts by Tumblr, Twitter, Pinterest, and Google Plus. It does not have the moat nor the first mover advantage of LinkedIn (NYSE: LNKD), the professional and career social network, nor is it the gold standard for job seekers and employers, which has helped LinkedIn double in two years.
The company has grown from 30 million subscribers in 2008 to 270 million now, and analysts foresee 65% five year EPS growth. Total revenues has grown from $81.7 million in 2010 to $972.3 million in 2012.
Setting up a LinkedIn profile is free, but paid memberships offer advantages like adding video and graphics and knowing who sees the profile.
It also offers valuable content from Influencers, leaders in business and politics, including Sir Richard Branson, President Obama, and Meg Whitman, who provide unpaid opinion pieces. The company hopes this content will boost its Marketing Solutions (i.e. advertising) segment, which is currently only driving a quarter of revenues.
The Foolish takeaway
Apple has the lowest P/E of all these companies at 9.96 with no debt and a yield of 3.10%. It is the battleground stock of the tech world, despite its undeniable position as a value name now. While people may not queue up for an iWatch, it is just the first iteration of "ubiquitous computing."
eBay comes in as the next most reasonable name with a trailing P/E of 26.14. For the price of PayPal you are getting the auction site for free.
Both LinkedIn and Netflix have high trailing P/Es at 737.60 and 551.72, respectively. However, they are first movers in their trends. Rivals will find their dominance hard to challenge.
Lastly, Stratasys' strategic buys have made it the leader in at home 3-D printing. At a forward P/E of 36.08 and a PEG of 1.44 it's positioned for further gains.
These trends should only accelerate, but bear close watching for upstart competition and new developments. This list should give you a starting point for your own due diligence.
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AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Apple, eBay, LinkedIn, Netflix, and Stratasys. The Motley Fool owns shares of Apple, eBay, LinkedIn, Netflix, and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!