5 Best Tech Stocks to Buy in August 2021

Tech stocks have outperformed the markets by a wide margin over the 2 decades. Some of the tech stocks, especially growth names, have come off their 52-week highs. What’re the five best tech stock to buy in August 2021.

The pace of digitization has accelerated over the last year amid the COVID-19 pandemic. A lot of consumers who pivoted towards the digital economy might not fully revert back even after the pandemic is over.

1. Amazon (NYSE: AMZN)

Amazon stock is now down over 10% from its 52-week highs and is in a correction zone. The stock had tumbled after its second-quarter earnings fell short of estimates. The company’s guidance was also tepid and the stock sold off badly after the earnings release. That said, Amazon is among the biggest beneficiaries of digital transformation and looks like a good tech stock to buy in August.

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Amazon looks like a good tech stock to buy

Looking at the charts, Amazon looks mixed. While the tech giant trades above the 100-day and 200-day SMA (simple moving average), it has fallen below the 30-day and 50-day SMA. The stock’s 12,26 MACD (moving average convergence divergence) also gives a sell signal. However, its 14-day RSI (relative strength index) of 36.7 indicates that it is getting near the oversold territory.

Amazon stock trades at an NTM (next-12 months) PE of around 59x which is below its historical averages. While the growth rates that the company saw in 2020 might not be sustainable, it should still continue to grow at a high pace. Both cloud and e-commerce are long-term secular growth stories that will help Amazon grow its business.

Meanwhile, Wall Street analysts are bullish on Amazon stock and its median target price of $4,150 implies an upside of 23.3% over current prices. Its lowest target price is $3,775 which is a premium of over 12% while the highest target price of $5,00 is a premium of 48% over current prices.

Amazon stock forecast

Of the 50 analysts polled by CNN Business, 48 rate AMZN stock as a buy while two rate it as a hold. None of the analysts has a sell or equivalent rating on the stock. Several analysts reiterated their bullish bet on Amazon after the second-quarter earnings but some of them lowered their target price.

“AMZN’s slower than expected retail revenue growth and lower profitability (from surging investment) send estimates lower today. Over the long-term we see these investments leading to deeper core retail and AWS moats (why we remain bullish), said Morgan Stanley in its note. Evercore, Bank of America, Barclays, and Mizuho lowered their target price on Amazon stock after the earnings release.

“Slower growth & increased investments make the shares more challenging NT, but we expect revenue growth to normalize more around 20% next year & AMZN’s investments in fulfillment & logistics bode well for future growth, including for AMZL & MCF (multi-channel fulfillment),” said JPMorgan as it lowered the target price from $4,600 to $4,100.

Overall, AMZN looks like a good tech stock to buy for the long term and the recent weakness looks like a buying opportunity.

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2. Netflix (NYSE: NFLX)

Netflix is the worst-performing FAANG stock in 2021 and is down 2.3% in the year even as other tech stocks have soared to record highs. Concerns over slowing growth and increasing competition in the streaming industry have been weighing heavy on the tech stock. Also, Netflix’s foray into video gaming received a mixed response from markets. While some see it as a wise move, others are not impressed with the move.

Netflix looks like a good tech stock to buy

Netflix is facing resistance at the 50-day and 200-day SMA. If the stock can cross above the two trendlines, it would signal an uptrend. The stock trades at an NTM PE multiple of 47.5x which looks reasonable.

Meanwhile, the fall in Netflix stock looks like an opportunity to buy this quality tech stock. Commenting on the tepid subscriber growth numbers for Netflix over the last couple of quarters, Oakmark Funds’ Bill Nygren said “we think that’s the wrong way to look at it.”

“Subscribers watch more Netflix now than they ever have, so the engagement is the best its ever been and if you look at the two-year growth stack, the growth in subscribers has been way beyond what people expected two years ago, so we think this is a very healthy company that an extreme focus on near-term numbers is keeping hidden in plain sight,” said Nygren.

Wall Street analysts see the stock running higher and consensus estimates call for a 22% upside over the next 12 months. Its street-high target price of $971 implies a 90% upside.

The market for streaming is getting overcrowded now with several legacy media companies targeting the industry in a big way. However, Netflix has a good moat and should be able to protect its turf. Also, the market for streaming is growing and the industry continues to wean away consumers from traditional media and movie going.

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3. SoFi (NYSE: SOFI)

The definition of tech stocks has widened and fintech, EdTech, and health tech companies are also seen as tech stocks. Within the fintech industry, SOFI looks like a good bet. The company went public earlier this year through a reverse merger with Social Capital Hedosophia Holdings IV (IPOE). The SPAC (special purpose acquisition company) was sponsored by Chamath Palihapitiya.

While the stock soared after the merger as it was targeted by Reddit traders in a short squeeze, it has since plummeted and trades near the $15 price level. Meanwhile, the dip in SOFI stock looks like an opportunity to buy this tech stock.

SOFI is also expected to get a bank charter that will help buoy sentiments and add to the company’s earnings. The company posted better than expected first-quarter earnings and the growth rates of members have been rising for the last several quarters. The company expects to post revenues of $980 million and an adjusted EBITDA of $27 million in 2021. It trades at an NTM price-to-sales multiple of around 12.2x which looks reasonable.

SOFI looks a good play on the fintech industry

Jim Cramer, the host of the Mad Money show on CNBC is bullish on SOFI stock. “Frankly, I don’t understand why this stock is where it is. I think [CEO] Anthony Noto is doing a terrific job. I think at $15; you buy the stock. I think you just go buy it,” said Cramer recently.

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4. Nvidia (NYSE: NVDA)

Nvidia stock is up 51% so far in 2021 and is among the top gainers in the S&P 500. It was among the biggest gainers in the index last year also and looks like a tech stock worth buying for the long term. Nvidia is a play on digital transformation. From rising gadget sales to gaming demand, the demand for Nvidia products is expected to be in top gear. The company is also a play on the automotive industry’s chip demand. The company has also launched the next-generation chip called Atlan which will also be used in autonomous vehicles.

Nvidia looks like a good tech stock

Nvidia looks like a good tech stock to buy in August. Recently, the company went for a stock split after the sharp rise over the last few years.

Of the 41 analysts covering the stock, 34 have a buy rating while five rate them as a hold. The remaining two analysts have a sell or equivalent rating on NVDA stock. The stock has a median target price of $193.75 which is a discount of 2.3% over current prices. The stock trades 44% above its street low target price of $110 while the street high target price of $250 implies an upside of almost 26% over current prices.

Earlier this week, Bank of America reiterated its bullish bet on Nvidia. “Reiterate Buy, but expect mix-related volatility. NVDA remains a top pick ahead of Q2 call post-close Aug-18 and we look for upside to consensus Q2 and Q3 sales outlook,” it said in its note.

If you are looking at a proxy play on the digital transformation, Nvidia would fit the bill and looks like a tech stock worth having in the portfolio.

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5. Apple (NYSE: AAPL)

Apple is the largest company globally with a market cap of over $2.4 trillion. The stock recently hit an all-time high. Despite having surged almost three-fold since the Q3 2018 lows, Apple is one of the good tech stocks to buy. The company is a play on the ongoing iPhone supercycle. Also, the rising share of services revenues in the company’s sales mix would support its valuations. Apple continues to look at new industries is said to be considering getting into the buy-now-pay-later market. In the long term, the company is also planning to get into the electric vehicle industry.

Apple also has several underappreciated businesses including the advertising business. “Although Apple rarely comments on it, the company has a burgeoning advertising business, with an estimated ~$3B in annual revenues today, up from $300M in FY 17; operating margins are 60%+. We estimate that the business could grow to be $7B – $10B or more by FY 23 or 24, adding 150-300bps of annual revenue growth to services,” Bernstein said in a recent note while maintaining its market perform rating.

Apple looks like a good tech stock to buy

Apple is among the rare tech stocks that Warren Buffett has bought and the iPhone maker is now the biggest holding in Berkshire Hathaway’s portfolio. If you looking at a tech stock to hold for the long term, Apple would fit the bill.

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