Dec 19, 2020 (Heraldkeepers) -- In March 2020, the NASDAQ Composite Index may have fallen below 7,000 points for the first time since 2019, but to say it has rebounded nicely is an understatement. Buoyed by an unprecedented demand for tech products and services, it hit an all-time high of 12,582.77 points on December 8, 2020.
While some volatility is to be expected, especially with a new administration coming in, the index has been on a general upward trend since May. And with news of a vaccine for COVID-19 becoming available and life slowly returning to normal, things are looking bright for both tech stocks and their investors.
Confidence is at a very high level currently, and with more than 200 new NASDAQ listings since January 2019, businesses are taking advantage of increased public liquidity to shore up their funding. While many of the listings are Special Purpose Acquisition Companies (SPACs) – blank-check companies with the sole purpose of acquiring private companies that will then take their place in the market – traditional Initial Public Offerings (IPOs) have also enjoyed a renaissance in 2020.
If you're a graphic designer or tech worker who's looking for good companies to invest in, you couldn't have come in at a better time. There's still room for lots of growth this year and the next. Here are some of Lform Design's (a custom web development company ) founder Ian Loew's picks for major market moves and investments to watch out for in the near future.
Since its IPO on December 9, food delivery company DoorDash /zigman2/quotes/222973991/composite DASH -1.58% has gone from its opening price of $182 to a closing price of $175 as of December 11. DoorDash used an unusual IPO model – a hybrid auction where investors submit the number of shares they wish to buy and the price they're willing to pay per share – which led to investors snapping up its shares at 7% higher than its listed price. There are enough positive attributes to keep the stock delivering the goods for a long time.
First, DoorDash holds a 45% market share in the food delivery industry, far ahead of its closest competitors UberEats (22%), Grubhub (18%), and Postmates (8%). This marks a drastic turnaround from its 5% share in 2016, when Grubhub dominated the market at a seemingly-invincible 70% share. However, DoorDash's aggressive expansion has left all its competitors in the dust.
Second, it seems like the demand for food delivery isn't going anywhere. DoorDash's revenues rose more than 220% in the first nine months of 2020 as COVID-19 forced many would-be diners to stay home and order takeout instead. Even the least stock-savvy can't help but notice the impact of DoorDash's success (especially if they get a sudden urge for Chipotle while stuck in a very long Zoom meeting!).
We should temper our expectations with DoorDash, though. DoorDash's business model, where delivery is outsourced to contracted drivers (who are also eligible for healthcare and insurance), means that the revenue is split three ways: DoorDash, restaurants, and drivers. This means we won't see the immediate returns that Grubhub enjoyed during its first few days of public trading in 2014.
However, DoorDash is looking at different options that could help reduce the dependence on contracted drivers, such as drone delivery. With the current demand for food delivery set to hold steady at least until the third quarter of next year, and following its performance as one of the big IPOs of 2020, DoorDash looks very promising indeed.
While the hospitality and tourism industry has taken a serious hit due to travel restrictions worldwide, Airbnb /zigman2/quotes/222990650/composite ABNB -2.87% decided to push through with its planned IPO on December 10, using the same auction method DoorDash used just the day before for its own IPO.
The home-sharing company's revenues were down 19% year-to-year as of this month, which, given larger declines among its competitors (Hilton reported a 60% decline, while Marriot disclosed that its third-quarter revenue went down 66%), could be considered a modest success. In fact, Airbnb recorded a net profit of $219 million in the third quarter of 2020. Pretty impressive in the wake of massive travel bans worldwide!
Much of that relative success could be attributed to its leadership's quick reaction to the pandemic. In May, the company announced major cost-cutting measures and reduced its workforce by around 25%. These measures also came with a change in marketing strategy, claiming that staying in an Airbnb partner homestay is safer than staying in a traditional hotel.
As a result of these announcements, Airbnb's share price surged from its initial $68 pre-market value to $144.71 as trading closed – the 10th best debut this year. The looming possibility of travel restrictions being eased as the COVID-19 vaccine is rolled out makes AirBNB an intriguing stock to watch in the coming months. As travel starts to become viable for more people again, keep your eyes on it!
While travel stocks have seen a definite downturn in 2020, tech stocks have seen their values increase at an unprecedented rate. We're all familiar with Zoom, the ubiquitous video conferencing software that's been a staple of today's remote meetings, but its namesake ZoomInfo /zigman2/quotes/218739090/composite ZI -3.69% – a SaaS business intelligence platform – has been one of this year's hottest tech stocks.
Bloomberg reported that ZoomInfo's IPO in June raised $935 million , and its IPO price doubled at the opening bell. By the time trading ended, ZoomInfo stocks were worth 62% more than their initial price, closing at $34. Analysts say some of that increase was the result of speculators confusing ZoomInfo with the conferencing tool Zoom Video, but so far, the stock price has yet to go below the $31 support level . It has, in fact, breached the $50 mark at least three times so far.
This volatility has made ZoomInfo one of the most interesting stocks to follow on the NASDAQ index. Some investors aren't too happy about ZoomInfo's secondary offering on December 2 at $45, but with its value up 26% since its IPO, there is very little to complain about.
When businesses start realizing the value of ZoomInfo's business intelligence solutions, investors will be very thankful they bought ZoomInfo stock in 2020.