2020 has been a year of slumps and soars in tech stocks, but 2021 could be volatile as well. Therefore, analysts give their forecasts for stocks, also revealing a vision of the general trends in the market.
Forecasts for the US stock market in 2021 from Wall Street analysts differ: some warn that many technology stocks are overvalued and will soon be corrected, others are waiting for the economic recovery amid the introduction of vaccines against COVID-19 and even more growth in the coming year. TheStreet analyst Eric Jones has compiled his list of predictions for the new year 2021.
1. Speculative growth in stocks will decline or fall
The speculative rise in shares of companies with green energy products, technologies for ordinary consumers and some corporate software companies may end in January. When analysts and financial professionals return to work after the holidays, and companies share their forecasts for 2021 during the reporting season.
So, for example, the 420% growth rate for Zoom’s shares this year will inevitably decline or will fall in 2021 as offices and schools reopen and competition among video conferencing services intensifies.
At the same time, TheStreet analyst notes that shares of companies with a variety of enterprise software products, such as Microsoft (MSFT), are most likely to maintain growth rates. Microsoft shares are up 42% since the beginning of the year.
2. Investments in remote workers and corporate networks
With the return of employees to offices in 2021, investments in corporate equipment and network modernization could resume, which should benefit industry leader Cisco Systems (CSCO).
Cybersecurity companies (such as Zcaler (ZS), Crowdstrike (CRWD), Okta (OKTA)) will also see revenue surge as firms invest in their products to ensure remote workers secure access to corporate networks and data.
3. Mac sales growth
Since employees of many companies will preserve the format of work remotely, the “laptop refresh cycle” looks far from complete. Apple’s Mac sales (AAPL) growth seen in the last two quarters may continue as models with their own processors, better performance and better battery life appear. Positive reviews for new Macs can lead to more consumers switching from Windows.
High-performance Macs based on Apple SoC processors may arrive in the spring and fall of 2021, according to media reports.
4. Deferred demand for offline offers
As COVID-19 vaccines become widely available, much of the pent-up demand that exists right now for activities such as recreation, bars and restaurants, live concerts and sporting events could emerge in 2021.
Many non-tech companies are at stake here, but many analysts and investors already see potential for Uber (UBER), Lyft (LYFT), Eventbrite (EB) and Groupon (GRPN).
5. Accelerating the adoption of cloud computing
The three leaders in the public cloud market: Amazon (AMZN) Web Services (AWS), Microsoft Azure, and Google (GOOGL) Cloud Platform (GCP) continued to demonstrate strong growth in 2020. However, the rate of revenue growth was impacted by lower spending by some customers in the industries affected by the pandemic.
With the expected gradual recovery of the affected industries and an even greater global transition of the private and public sector to data storage in cloud servers, the pace of revenue growth for these companies should accelerate next year.
6. Chance for smaller players of streaming services
In the global “streaming video” market, in addition to the leaders Netflix (NFLX), Amazon and Disney (DIS), the following have a chance to expand and increase their market share: WarnerMedia from AT&T (T) with its HBO Max service, CBS (CBS.A) with All Access, and Comcast’s Peacock NBCUniversal (CMCSA) service.
Decisions such as AT&T’s recent release to make all of its releases available in 2021, both through HBO Max and through cinemas, could be a good way to monetize your own content and further move away from selling broadcast licenses to other companies.
The increasing monetization of video streaming services through digital advertising should also bring profit growth to companies in this industry.
7. The wave of mergers and acquisitions
The surging cash balance of large tech companies and low interest rates in the US are fueling a wave of mergers and acquisitions.
In 2020, we’ve already seen a handful of large-cap tech companies with huge gains use their shares to fund part or all of large acquisitions. Example of a stock and cash transaction: Nvidia-Arm, AMD-Xilinx, and Salesforce-Slack. Expect more such deals to be announced in the first half of 2021.
8. T-Mobile is more likely to grow than Verizon
T-Mobile US (TMUS) may “beat” Verizon (VZ) to roll out 5G home broadband services in the US, given that the approach T-Mobile is taking (using traditional mobile spectrum up to 6 GHz) actually yields lower speeds but much wider coverage.
Verizon, in turn, provides its services using mmWave high frequency millimeter-wave, which can transmit very high speeds, but over short distances. So, two years after its first launch, Verizon’s mmWave service, according to media reports, still covers less than 1% of all Americans.
Assuming T-Mobile’s 5G will launch by the end of 2021, TheStreet analyst Eric Jones predicts the service will see more adoption next year.