2 tech stocks to buy after the recent sell-off

It’s been a tough few weeks for tech investors. At the beginning of March, the technophiles Nasdaq Composite entered correction territory, meaning the index fell more than 10% (but less than 20%). While the market has rallied slightly, volatility remains high and many tech stocks are still trading well below their 52 week highs.

For example, Lemonade (NYSE: LMND) and The commercial counter (NASDAQ: TTD) are down 48% and 24% respectively. But nothing fundamental has changed in either company. Instead, rising yields made bonds more attractive and fueled concerns about inflation, leading investors to withdraw money from stocks.

Despite these headwinds, there appears to be an opportunity for long-term investors to buy a few stocks of large companies at a reduced price.

Lemonade: a new kind of insurance company

Lemonade is a pioneer in the insurance technology industry. Unlike traditional insurance companies, Lemonade’s digital platform was designed to combine big data, artificial intelligence, and behavioral economics, making his business more efficient from start to finish.

Image source: Getty Images.

The bull’s case is simple: by collecting more data than its competitors, Lemonade should better quantify risk, price insurance policies, detect fraud, market and engage consumers. It’s a big problem. For example, according to the FBI, insurance fraud costs the United States $ 40 billion a year in increased premiums. This comes down to about $ 400 to $ 700 per family, and that leaves a lot of room for improvement.

Collectively, the company’s benefits are expected to either increase its revenue or reduce operating expenses such as payroll, marketing, and claims payments. Ultimately, this should make Lemonade more profitable than its competition. Then, when you factor in the size of the global $ 5,000 billion insurance market, it’s easy to see why investors are excited about this business.

The company’s digital-centric strategy has enabled it to quickly attract new customers, especially those under the age of 35. This has translated into an increase in gross profits, a trend that is expected to continue as Lemonade customers age and their insurance needs increase.

Metric

2018

2019

2020

TCCA

Customers

308,835

643 118

1,000,802

80%

Gross profit

$ 3.1 million

$ 11.7 million

$ 24.8 million

183%

Data source: Lemonade SEC. CAGR = compound annual growth rate.

Finally, investors should pay attention to Lemonade’s ability to grow its business, both in terms of new products and new geographies. The company currently offers home insurance (including condominium and tenant policies), pet insurance, and term life insurance, although management recently hinted that the company is already working on launching its next one. major product. Its activity is mainly concentrated in the United States. However, Lemonade is licensed to provide insurance in 31 European countries with operations in Germany, France and the Netherlands.

The Trade Desk: a challenger to walled gardens

Trade Desk’s AI-powered ad technology platform helps marketers buy ad space and manage digital ad campaigns across channels such as display, mobile, social and connected TV (CTV ).

Notably, the company operates the world’s largest independent demand-side platform, which means it is not affiliated with any content network. This differs considerably from walled gardens like Alphabetis Google and Facebook, both of which have content (think YouTube and Instagram).

While Google and Facebook have had incredible success in the digital advertising market – in fact, they accounted for 52% of all digital ad spend in the United States last year – their business models are suffering from conflict. inherent interests and transparency issues. This is because both companies provide the ad technology platforms that marketers need to purchase ad space, and they also sell ad space to those marketers. Trade Desk CEO Jeff Green likened it to scoring your own homework.

In comparison, the Trade Desk strategy is much more transparent and user-friendly. Since it does not have any content platform, The Trade Desk has no incentive to direct ad buyers to a particular ad inventory. And while the company is still far behind Google and Facebook in terms of market share, it is growing faster. In other words, the Trade Desk is gaining ground.

Returned

2015

2020

TCCA

Alphabet

$ 75.0 billion

$ 182.5 billion

19%

Facebook

$ 17.9 billion

$ 86.0 billion

37%

The commercial counter

$ 114 million

$ 836 million

49%

Source: Alphabet, Facebook and The Trade Desk SEC Filings.

The Trade Desk also has another advantage that works in its favor: the digital advertising market is huge and there is plenty of room for multiple winners. According to eMarketer, global digital ad spend is expected to reach $ 526 billion by 2024, up 58% from $ 333 billion in 2020. It gives that technology company lots of space to develop your business.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Lucille Thompson

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