The leaves are falling, and the weather is getting cooler. You know what that means: it’s time to think about next year.
We’re running out of months in 2024 and investors are increasingly focused on what next year will bring and which stocks to buy now.
Start your morning smarter! Wake up with Breakfast news in your inbox every market day. Register for free »
With that in mind, let’s turn our attention to three tech stocks that our Motley Fool contributors keep thinking about: Meta Platforms (NASDAQ: META), Shift4 (NYSE: FOUR)And Microsoft (NASDAQ: MSFT).
Jake Lerch (metaplatforms): My choice is Metaplatforms.
Simply put, Meta is a thriving company generating ample revenue, profit and free cash flow. That’s why shares are up 64% year to date and more than 380% since the start of 2023.
In the company’s most recent earnings report (for the three months ending September 30, 2024), Meta reported revenue of $40.5 billion, which was up 19% year on year.
For starters, that’s a staggering amount of revenue (for context: Starbucks generates less than $40 billion in revenue in the course of a whole year). Moreover, Meta is growing that turnover at a breakneck pace of almost 20%.
Even better for shareholders: Meta converts a large part of that income into profit. The company reported net income of $15.7 billion, up 35% from a year ago.
Finally, free cash flow was $15.5 billion, which helped bolster the company’s cash reserves, which rose to $70.9 billion. That’s important because there is so much cash in the bank gives Meta the opportunity to increase shareholder returns through future dividend increases, share buybacks, strategic acquisitions or capital investments.
Promisedthere are concerns for Meta. Regulatory actions in both the US and US EU could hinder growth or profit. Moreover, the company’s headlong attack on the metaverse and artificial intelligence is costly.
Nevertheless, the reason to own Meta stock is its huge user base. The company has over 3.3 billion daily average users (DAUs), representing approximately 41% of the world’s population.
Because so many people use one of Meta’s apps every daythe company’s digital advertising business is Ordinary too lucrative to ignore. For that reasonI expect Meta to have another excellent year in 2025.
Will Healy (Shift4 Payments, Inc.): Despite a long existence, Shift4 is far from becoming a household name, even among the fintech stocks it competes with. CEO Jared Isaacman founded this company in 1999 to provide a faster payment processing alternative.
Over time, Shift4 differentiated itself from fintech companies such as PayPal And Block by focusing on restaurants and hospitality-related locations, such as resorts, casinos and sports venues. Its more high-profile clients include the Nobu Hotel, Yosemite National Park and sporting venues such as Lucas Oil Stadium, home of the Indianapolis Colts.
It also expanded beyond the US to Canada, Japan and most countries in Europe and is pursuing strategic partnerships in other countries. This approach has grown the company to the point where it serves over 200,000 customers and processes more than $260 billion in payments annually. Not surprisingly, the financial numbers reflect the success.
In the first six months of 2024, revenues of $1.5 billion rose 30% from year-ago levels. Shift4 also controlled cost growth, allowing net profit attributable to Shift4 to grow to $60 million for the first half of the year, an annual increase of 50%.
Furthermore, the stock price is up 103% over the past year, putting it close to all-time highs during the 2021 bull market.
Projections indicate that the company’s growth is not slowing down. The price-to-earnings ratio now stands at 55, and expected growth is so high that the price-to-earnings ratio has fallen to just 18.
Such gains have helped Shift4 quietly recover from the 2022 bear market. However, with Shift4 stock nearing record highs, 2025 could be the year investors finally start paying attention to the stock. Therefore, it can pay to open a position before others take notice of it.
Justin Pope (Microsoft): This is not a flashy choice. Still, it’s hard to deny Microsoft a place among the best tech stocks to buy by 2025. Microsoft’s blistering cloud growth in the first quarter of fiscal 2025 was an eye-opener. Azure is Microsoft’s cloud business and where you’ll see the most impact from artificial intelligence (AI). The cloud business was already booming, but AI is adding fuel to the fire because the cloud is how companies deploy and run their AI applications.
In other words, AI drives business to cloud companies like Microsoft. The great thing is that Microsoft is just one of three companies that dominate the global cloud market.
Azure revenue rose 34% year over year in the first quarter of fiscal 2025, giving Microsoft total revenue of $65.6 billion (16% growth) and earnings of $3.30 per share (10% growth) could generate. Both top and bottom line figures exceeded Wall Street expectations. Azure’s growth accelerated from a 30% growth rate last quarter. Microsoft’s cloud exposure and integrations with ChatGPT developer OpenAI make the stock perhaps the safest way to certainly be exposed to the growth tailwinds of AI.
Microsoft isn’t cheap — the $3.2 trillion company trades at 31 times forward earnings estimates — but I think it’s reasonably priced. Analysts estimate that Microsoft will grow earnings 15% annually over the next few years, bringing the stock’s current PEG ratio to around 2.2. That’s about the upper limit of what I’d typically pay for a high-quality company’s earnings growth, but Microsoft is a top company.
Given the long-term growth potential of AI and Microsoft’s likely involvement in it, investors should feel good about paying a fair price for arguably the best tech stocks one can buy on the market today.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
-
Amazon: If you had invested $1,000 when we doubled in 2010, you would have $22,292!*
-
Apple: If you had invested $1,000 when we doubled in 2008, you would have $42,169!*
-
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $407,758!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns October 28, 2024
Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in PayPal. Justin Pope has no position in any of the stocks mentioned. Will Healy has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Block, Meta Platforms, Microsoft, PayPal, Shift4 Payments, and Starbucks. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft, long January 2027 $42.50 calls on PayPal, short December 2024 $70 calls on PayPal, and short January 2026 calls from $405 on Microsoft. The Motley Fool has a disclosure policy.
Opinion: The three best tech stocks to own in 2025 was originally published by The Motley Fool
