In this article we will take a look at the 10 best app stocks to buy today. You can skip our detailed analysis of these stocks, and go directly to the 5 Best App Stocks to Buy Today.
Mobile apps form the basis of the modern tech revolution. Billions of people access the internet for entertainment, games, education, communication and money management via apps. This has given rise to the “app economy” which is surging to new highs with no end in sight.
Due to the Covid-19 pandemic, the usage of mobile apps grew a lot higher. According to a report by Finances Online, a total of 218 billion mobile apps were downloaded in 2020, showing a 6.86% growth from the previous year. A report by Deloitte shows the app economy represented a whopping $568.47 billion, roughly 30 times the value of movie ticket sales in North America. The report also said that in 2018 alone, there were 317,673 companies actively operating in the mobile apps space in the US.
The coronavirus crisis was a major boost to the app economy. People started using mobile apps for performing daily chores, including food delivery, online shopping, paying online, etc. According to a report published by Deloitte, food delivery through mobile apps grew to 56% in 2020. Similarly, mobile payments jumped from 28% to 42% during the year.
The global mobile app market is also growing steadily. A report published in this regard states that the global app market is growing at a CAGR of 21%, and is expected to reach $653.9 billion by 2025. In Q1 2021, consumers around the world spent over $32 billion on in-app mobile purchases. Apple Inc. (NASDAQ: AAPL) and Alphabet Inc. (NASDAQ: GOOG) remained the two largely used app downloading platforms, making them the best app stocks to buy today. Apple Inc. (NASDAQ: AAPL) iOS saw a 40% growth in consumer purchases at $21 billion and Alphabet Inc. (NASDAQ: GOOG) accounted for $11 billion of the purchases through Google Play.
In 2020, many app-making companies saw their revenues grow, compared to the previous year. The revenue generated from the mobile games apps stood at $81 billion in 2020. Companies like Activision Blizzard, Inc. (NASDAQ: ATVI) and Zynga Inc. (NASDAQ: ZNGA) saw a hike in the number of users in 2020. As of Q1 2021, Activision Blizzard, Inc. (NASDAQ: ATVI) has over 435 million MAUs.
Along with games, the e-commerce sector sales also surged in 2020, especially in the U.S., which is the second-largest e-commerce market in the world, after China. The use of apps remained crucial in this regard. The e-commerce giants Amazon.com, Inc. (NASDAQ: AMZN) and eBay Inc. (NASDAQ: EBAY) have shifted their business model from website to mobile apps for consumers’ convenience. According to a report published by JPMorgan & Chase, the mobile commerce market in the U.S. is worth $282.8 billion and accounts for 38% of the general e-commerce market share. Facebook, Inc. (NASDAQ: FB) is also focusing on its Shops segment through WhatsApp, which would help consumers to have a hassle-free shopping experience. Similarly, a Russia-based technology company, Yandex N.V. (NASDAQ: YNDX) plans to invest $400 to $500 million to expand on its e-commerce presence. The e-commerce arm of Yandex N.V. (NASDAQ: YNDX) accounted for 15% of its total revenue in Q1 2021.
Major social media apps are also deriving a lot of revenue due to their wide use globally. Instagram, owned by Facebook, Inc. (NASDAQ: FB) has over 1 billion monthly active users in 2021. Similarly, MAUs of WhatsApp, another messaging app owned by Facebook, Inc. (NASDAQ: FB), reached 2 billion in 2021.
The mobile industry changed the world forever, and brought about some key changes that are affecting the entire globe. The entire hedge fund industry is also feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
The growing use of apps has contributed to the app-making companies’ stock performance as well. With this context, let’s analyze the 10 best app stocks to buy today. We took into account hedge fund sentiment, analysts’ ratings, fundamentals and future growth catalysts while choosing these stocks.
Best App Stocks to Buy Today
10. Zynga Inc. (NASDAQ: ZNGA)
Market Cap: $11.2 billion Popular Apps: CSR 2, FarmVille, Zynga Poker
Founded in 2007, Zynga Inc. (NASDAQ: ZNGA) is a California-based social game company with the main focus on online games and advertising. The company has developed some famous games, including FarmVille, Words with Friends, Zynga Poker, and CSR 2.
Zynga Inc. (NASDAQ: ZNGA) derives its revenue from its online games and advertising. In Q1 2021, 97% of the revenue was generated through mobile games. The company reported a revenue of over $680 million, while mobile revenue amounted to $661 million. In Q1, $123 million were generated through advertisement, accounting for 18% of the whole revenue. Mobile bookings made over $720 million, up from $425 million during the same period last year. Moreover, monthly active users also surged by 139% year-over-year in Q1, standing at 164 million.
Due to the solid Q1 earnings, BofA upgraded Zynga Inc. (NASDAQ: ZNGA) to ‘Buy’ and raised the price target to $13.5 from $12.
Like Electronic Arts Inc. (NASDAQ: EA), Facebook, Inc. (NASDAQ: FB), Yandex N.V. (NASDAQ: YNDX), and Activision Blizzard, Inc. (NASDAQ: ATVI), Zynga Inc. (NASDAQ: ZNGA) is one of the best app stocks to buy today.
9. Yandex N.V. (NASDAQ: YNDX)
Market Cap: $24.4 billion Popular Apps: Yandex Go, Yandex.Mail, Yandex Browser
Yandex N.V. (NASDAQ: YNDX) is a Russia-based internet company with services in e-commerce, search, mobile apps, and advertisements. The company was founded in 2000 and has over 10,000 employees. Yandex Search is the leading search engine in Russia, accounting for 60% of the Russian search engine market as of 2021. Along with this, Yandex N.V. (NASDAQ: YNDX) owns a wide range of apps and also has e-commerce sectors, Yandex.Market and Yandex.Lavka.
In Q1 2021, Yandex N.V. (NASDAQ: YNDX) generated RUB 73.1 billion in revenues, growing 39% year-over-year. The e-commerce sector accounted for 15% of the total revenue, with the earnings of Yandex.Market and Yandex.Lavka standing at RUB 10.8 billion. Yandex Go, a ride-hailing and taxi service, generated RUB 20.7 billion, up from RUB 13.2 billion during the same period last year. Moreover, the online advertisement revenue also grew by 20% at RUB 35.9 billion.
Earlier in March 2021, Morgan Stanley raised the price target of YNDX stock to $75, ranking it as ‘Overweight’.
“Yandex is the leading internet search platform in Russia and was the top detractor from both absolute and relative performance this quarter. This underperformance came about despite solid results in 2020 which showed Yandex’s total e-commerce gross merchandise value grew three-fold in 2020 to over ₽56 billion RUB. Specifically, in the fourth quarter of 2020, Yandex saw year-on-year growth of 127%.
In our view, Yandex is one of the highest quality businesses in our investment universe. It has built a defensible competitive moat around its core search business, reinvesting its cash flows in new growth areas to remain relevant in a fast-changing global internet landscape.
With solid execution, Yandex has the potential to transform into an ecosystem which the company’s Chief Technology Officer describes as the “Silicon Valley of Russia.” Yandex remains a topfive holding in the Portfolio.”
8. Electronic Arts Inc. (NASDAQ: EA)
Market Cap: $39.7 billion Popular Apps: FIFA 21, The Simpsons, EA Play
Electronic Arts Inc. (NASDAQ: EA) is a California-based video game company. It is one of the largest game companies by market cap in America. Electronic Arts Inc. (NASDAQ: EA) owns some of the most famous games, including The Simpsons, SimCity BuildIt, NBA Live Mobile Basketball, FIFA 21, etc. The company also owns a gaming subscription service known as EA Play. It ranks eighth on our list of the best app stocks to buy today.
EA Play reported over 13 million subscribers in 2020. Apex Legends remained the most played game with more than 100 million players. FIFA 21 and The Sims 4 users reached 25 million and 36 million, respectively.
Earlier in April, Electronic Arts Inc. (NASDAQ: EA) acquired Glu Mobile Inc. in a $2.1 billion deal. The deal would grow EA’s mobile portfolio. Moreover, the company is also acquiring a mobile gaming company, Playdemic, for $1.4 billion.
Like Apple Inc. (NASDAQ: AAPL), Facebook, Inc. (NASDAQ: FB), and Baidu, Inc. (NASDAQ: BIDU), Electronic Arts Inc. (NASDAQ: EA) is one of the best app stocks to buy today.
“Video game publisher Electronic Arts (EA) has recently experienced muted performance relative to peers. The company is expanding its moat as COVID-19 pulled forward gamer engagement in 2020 and early 2021. While we expect current growth rates will slow, the long-term value of the company’s user community has increased. EA’s net cash balance sheet and industry leadership fit well with our philosophy and process, and while the recently acquired Codemasters and GLUU Mobile will draw down cash, the balance sheet remains strong and the deals further EA’s mobile growth strategy. We believe our stake in EA represents how we can think opportunistically to build an eclectic, idiosyncratic portfolio to deliver value over the long term.”
7. Match Group, Inc. (NASDAQ: MTCH)
Market Cap: $43 billion Popular Apps: Tinder, Match.com, Hinge, OkCupid
Match Group, Inc. (NASDAQ: MTCH) is an American technology company, mainly dealing in dating apps operating in over 50 countries. The company is the founder of some of the major dating apps, including Meetic, Tinder, Match.com, OkCupid, Hinge, etc.
Launched in 2012, Tinder remains the top dating app of Match Group, Inc. (NASDAQ: MTCH), with over 450 million downloads in 2021. The average number of subscribers stood at 6.9 million in Q1 2021, up from 6 million during the same period last year. The annual revenue of Tinder is also growing at a CAGR of 68% and stood at $1.4 billion in 2020. Similarly, in 2020, Hinge’s saw revenue growth by 200% year-over-year. It also became the third most downloaded dating app in the U.S., with subscriptions rising by 82%.
“In addition to the new issue market, we have been tactically adding growth exposure. Our largest new position was Match Group, the global leader in the online dating space that was spun off by Interactive Corp. in 2020. Singles have put their life plans on hold during the pandemic but continue to want to meet people. Match Group, Inc. (NASDAQ: MTCH) was negative impacted by COVID, especially in markets like India, but the business is very profitable with high margins and is driving growth through international expansion, increasing users and better monetization and engagement.”
6. Baidu, Inc. (NASDAQ: BIDU)
Market Cap: $65 billion Popular Apps: Haokan, Baidu Post, Baidu App
Baidu, Inc. (NASDAQ: BIDU) is a multinational technology company based in China, providing services in search engines and artificial intelligence. As of 2021, Baidu, Inc. (NASDAQ: BIDU) accounts for 72.3% of the search engine share in China, leaving behind Google China.
The company has over one dozen mobile apps, including Haokan, Baidu Post, and the most important, Baidu App. Along with this, Baidu, Inc. (NASDAQ: BIDU) also has a platform for online content creators, Baijiahao, commonly known as BJH. In Q1 2021, the Baidu App has over 558 million active users, and daily users logging in to the website reached 75% in March. The content creators’ accounts reached 4.2 million, growing by 40% year-over-year.
The total subscribers for iQIYA, Baidu, Inc. (NASDAQ: BIDU) video streaming website reached over 105 million in Q1 2021. iQIYA generated $1.2 billion of the total revenue, showing 4% growth year-over-year. Moreover, the BIDU stock is also on the rise, with share price growing by 52.5% in the past year, making it one of the best app stocks to buy today. Earlier in April, Morgan Stanley raised the price target on BIDU stock to $330, ranking it an ‘Overweight’.
Like Facebook, Inc. (NASDAQ: FB), Match Group, inc. (NASDAQ: MTCH), and Yandex N.V. (NASDAQ: YNDX), Baidu, Inc. (NASDAQ: BIDU) is one of the best app stocks to buy today.
An Investment Management Firm, Horos Asset Management, recently published its Q1 2021 investor letter and mentioned Baidu, Inc. (NASDAQ: BIDU). Here is what the firm has to say:
“We have also fully exited our stake in Baidu, following their outstanding performance during the period and their lower relative upside potential compared to other investment alternatives, which we will discuss below.
The Chinese technology platform company Baidu has also been held in the portfolios managed by Alejandro, Miguel and myself for several years. During this period, we have seen very high volatility in its share price, which we have taken advantage of to make significant rebalancing moves in our position (in fact, we even sold our entire position once, when we thought the stock’s upside potential was exhausted). After several years of instability, market sentiment turned very positive, putting an end to the historical advertising problems in the healthcare sector, the divestments in O2O (Online-to-Offline) businesses that continued to weigh on the company’s margins, the IPO of part of the iQiyi streaming business (which hid Baidu’s underlying cash generation capacity) and the tough competition from other industry giants such as Tencent and Alibaba, as well as the entry of new players with disruptive business models (ByteDance). At the same time, the company’s recent commitment to electric vehicles contributed even more to this change of narrative. Baidu’s share price rose almost fourfold from the March 2020 lows to all-time highs and reached a valuation where the margin of safety, in our view, was too narrow.”
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Disclosure. None. 10 Best App Stocks to Buy Today is originally published on Insider Monkey.