Though the Nasdaq surged to new highs in 2019, it's not too hard to spot high-growth tech companies trading well below their 52-week highs.
And in some cases at least, valuations for these companies have dropped to a point where the risk/reward looks interesting -- even if the "risk" part of the equation can't be ignored.
To follow up on my Tuesday piece about low-risk tech stock ideas for 2020, here are some tech names that have more risk attached, but which are also delivering healthy double-digit growth and (I think) have considerable upside if things go well. As mentioned in the Tuesday piece, there's a case for waiting for a correction before making purchases, given how markets have been acting lately.
Idea #1: Pinterest (PINS)
Valuation: Pinterest has an enterprise value (EV - market cap minus net cash) equal to 5.9 times its 2020 revenue consensus, and 4.4 times its 2021 revenue consensus. It's also worth noting that Pinterest's per-user valuation is less than half that of Snap (SNAP) or Twitter (TWTR) .
The Elevator Pitch: Pinterest is still in the early stages of monetizing its 320 million-plus monthly active users (MAUs), especially outside the U.S.. Its platform is a natural fit for e-commerce advertising. MAUs are growing at a solid double-digit clip, and the company is expected to be profitable and cash-flow positive next year.
Risks: U.S. MAU growth (currently in the single digits) slows further. Pinterest encounters some speedbumps for its efforts to launch new ad products and ramp international ad sales.
Idea #2: Lyft (LYFT)
Valuation: Lyft has an EV equal to 2.1 times its 2020 revenue consensus, and 1.7 times its 2021 revenue consensus.
The Elevator Pitch: Lyft's bookings are expected to be up 47% for 2019 and 25% for 2020, as it benefits from greater ride-sharing adoption, share gains against Uber (UBER) and a more favorable pricing and promotional environment. Its active rider count and revenue per active rider are both growing strongly. The company has made meaningful progress in recent quarters towards reducing its losses, and its $3.1 billion cash balance gives it plenty of runway as it works to become cash-flow positive.
Risks: Lyft doesn't follow up on its 2019 progress by further reducing its losses/cash burn in 2020. Uber executes better and halts its U.S. share losses. New regulations take a toll.
Idea #3: Huya (HUYA)
Valuation: Huya, owner of China's top game-streaming platform, has an EV equal to just 1.6 times its 2020 revenue consensus and 1.3 times its 2021 revenue consensus.
The Elevator Pitch: Between them, Huya and rival DouYu (DOYU) dominate the Chinese game-streaming market. Revenue is expected to be up 71% for 2019 and 37% for 2020, as Huya benefits from strong Chinese game-streaming/eSports activity and its success at monetizing this activity through a cut on virtual gifts provided by viewers to streamers. MAUs were up 47% annually last quarter (much faster than DouYu's 15% growth). And though it also owns a stake in DouYu, Tencent (TCEHY) remains a major Huya investor.
Risks: An intense competitive environment weighs on Huya's top and/or bottom lines. Beijing imposes new gaming regulations that impact Huya. Reignited trade tensions lead to broader selling for Chinese tech stocks.
Idea #4: ANGI Homeservices (ANGI)
Valuation: ANGI, the parent company of HomeAdvisor and Angie's List, has an EV equal to 2.6 times its 2020 revenue consensus, and 2.2 times its 2021 revenue consensus.
The Elevator Pitch: Though running the two biggest home services marketplaces in North America, ANGI still claims just a single-digit penetration rate within an addressable market where the lion's share of activity is still offline. Close to 20% revenue growth is expected in both 2020 and 2021. The company has seen decent traction in recent quarters in driving on-demand and pre-priced transactions, and has also managed to return previously-struggling Angie's List to revenue growth.
Risks: The search marketing expense headwinds that ANGI saw for a while in 2019 flare up again. The company sees stiffer competition from Google and/or startups such as Thumbtack and Porch. Parent InterActiveCorp (IAC) spins off its 83% stake in ANGI to shareholders (an idea that it mulled for a little while in 2019), leading shares to be pressured by the additional supply.
Idea #5: Opera (OPRA)
Valuation: Opera trades for 17 times its 2020 EPS consensus, and 13 times its 2021 EPS consensus. Its EV is equal to 2.1 times its 2020 revenue consensus, and 1.9 times its 2021 revenue consensus.
The Elevator Pitch: While having a limited presence in North America, Opera's browser and news apps remain quite popular in Europe and a slew of emerging markets. Smartphone MAUs were up 18% annually in Q3 to 232 million, and PC MAUs were up 16% to 68 million. The company still has headroom to better monetize this user base via ad sales, and has also leveraged its consumer reach to launch a microlending business that has taken off in Africa and India. In addition, Opera maintains a double-digit stake in fast-growing Nigerian local services firm OPay, which recently raised $120 million.
Risks: The microlending business sees larger-than-expected loan losses. Opera's search ad revenue-sharing deal with Google (still a large, albeit declining, percentage of its revenue) expires at the end of 2020 or is renewed under less favorable terms. Opera's browsers lose share to Google Chrome and/or other rivals.
