While a return to normal is still a distant reality, investors are relying on the biggest pandemic trends when looking at hot stocks to buy for 2021. The Covid-19 pandemic made seismic changes to the way we live our lives. Of course, some trends will eventually fade away. But others are here to stay for the long-haul. For investors, this serves as a great blueprint for picking stocks that show long-term potential.
Although unpredictability was the underlying theme of 2020, a few key trends will shape the new normal. To sum it up, this includes e-commerce, music and video streaming, remote work, cybersecurity and at-home fitness. Shifts in consumer behavior reflected many of these trends in 2020 and there is a good chance they will continue to do so long after the pandemic.
So, based on the trends of the past year, here’s a look at the top stocks to buy in 2021.
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Hot Stocks to Buy for 2021: PayPal (PYPL)
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The pandemic brought an end to face-to-face interaction, which meant that paying for goods or services in-person — either with a cash or card — became a thing of the past. This inadvertently led to the rise of digital payment apps and contact-free payments. One of the pioneers in this field? PayPal. The company, founded by Peter Thiel, is a household name in the e-payments sector.
While PayPal’s brand name app was once its most famous offering, today the company is best known for its subsidiary, Venmo. The app enables person-to-person digital payment transfers and is compatible with all major devices.
More recently, PayPal also announced its cryptocurrency offering, which will allow users to buy, hold and sell the currency on their e-wallet. This will likely incentivize more people to join its payment platform. In terms of the numbers, analyst Dan Dolev of Mizuho Securities says the company’s crypto venture will increase net revenue by 10% in 2023. That’s $2 billion — great news for PYPL stock.
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Keeping with the theme of online payments, the pandemic also changed the way we shop for goods and services. Consequently, this forced many businesses to adapt to the digital world. E-commerce — once an option — soon became the primary means to consume or sell products. But what company helped businesses make this sudden transition? Shopify.
Shopify is a platform that allows merchants to host their stores online and connect with consumers. This service was crucial for small businesses that had little-to no-online presence prior to the outbreak. In many cases, SHOP became vital to those businesses’ survival.
As such, the company’s growth has been spectacular recently (to say the least). Since going public, its shares have grown by a whopping 4000% and 177.6% in 2020. Much of this momentum can be attributed to the high levels of traffic on its platform, which also significantly increased the number of merchants hosting their businesses on Shopify. At this very moment, the company boasts over 1 million merchants on its platform.
So, if you had any reason to doubt the potential of SHOP stock before, the numbers speak for themselves. This is clearly one of the top hot stocks to buy in 2021.
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As far as trends go, I wouldn’t really consider Amazon one — it has become more like a part of our daily lives. However, the company’s incredible performance this year earns the e-commerce platform a place on this list.
At the onset of the pandemic, Amazon experienced an unprecedented level of demand, forcing it to hire an additional 400,000-plus workers just to keep up. While this hot streak has cooled down a bit since then, customers show no signs of changing their spending habits post-pandemic. That makes AMZN a long-term play worth holding onto.
But there’s a second opportunity for Amazon to deliver some incredible returns in the coming years: its cloud platform, Amazon Web Services (AWS). As employees continue to work from home, the cloud computing sector will see some big gains in the coming year (and already has). AWS, which currently holds a 33% market share in the sector, is poised for a solid run.
Experts estimate the cloud market will balloon to $331 billion by 2022. Although some investors have shied away from AMZN stock due to its high price, its unique position in multiple sectors and opportunity for growth make it hard to ignore. When it comes to hot stocks, this one is a no-brainer.
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Theme parks and movies are synonymous with the name Disney, but the pandemic practically brought an end to both lines of business. With parks and movie theatres closed for months on end, the company adapted and found its diamond in the rough in the form of Disney+. An emerging business segment prior to the pandemic, the stay-at-home economy catapulted the streaming platform’s growth to new highs. After a dip at the start of 2020, DIS stock has now more than doubled from its 2020 lows and even ended last year with a 25.3% gain.
Looking ahead, the future of Disney rests in its streaming platform. By the end of 2020, the company amassed a subscriber base of 86.8 million and counting. This growth can be attributed to its large library of films, which DIS hopes to add to in the coming year. For instance, the company just introduced a new Marvel series and is set to include shows based in its the Star Wars universe.
Basically, the pandemic pushed Disney+ into stardom, allowing the company to stay in the limelight. If you are willing to bet on the power of streaming, Disney is one of the best hot stocks to invest in.
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The rise of the remote work environment, while convenient for many, has also paved the way for increased cyber threats. This year, cybersecurity companies like Crowdstrike played a key role in helping employees manage cyber issues. One of the company’s hallmark features is its ability to identify and stop threats before they occur. This is done using its Falcon platform, which uses existing information on the client network to stop a cyberattack.
In terms of numbers, Crowdstrike is what I consider to be a high-growth stock. The company’s revenue levels have increased by 85% year-over-year (YOY). Moreover, subscribers to its services grew exponentially.
Given that the cybersecurity company is a leader in the space, it’s well-positioned to expand and capitalize on upcoming market opportunities. The only downside to this investment is the price of CRWD stock, which is currently trading at 59.8 times sales at the time of this writing. But, because remote work is a trend that’s here to stay, Crowdstrike is definitely one of the hot stocks with long-term potential.
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The great streaming rally of 2020 wasn’t just limited to the movie business — it included music as well. Notably, streaming giant Spotify had a phenomenal run in 2020, earning it a place on this list of hot stocks to buy. For one, the name started the year with a share price of around $150 and closed at over $314. Spotify also saw growth in a number of areas. For instance, monthly active users (MAUs) were up by 29% as of September in a YOY comparison.
However, one of the biggest stories to come out of Spotify in 2020 was its big bet on podcasts. While the outcome of these acquisitions is yet to be seen, the company is hoping for some big gains in the coming years.
Looking ahead, SPOT also has some major plans for expansion. Adding to its global customer base — which includes Russia and a number of European countries — the streaming service is looking to launch in South Korea next. This is a huge market in Asia and could add substantially to the app’s user base. A larger number of subscribers will also allow the company to sell more ad inventory and keep revenue flowing.
So, all the arrows point toward greater growth for SPOT stock in 2021 and beyond.
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Last on my list of hot stocks to buy is Peloton. That’s because — while some changes brought about by the pandemic appear to be fleeting — the at-home workout trend seems to be here to stay.
Peloton’s interactive bikes (which start at around $1,900) were once considered too expensive as far as in-home workout equipment goes. However, after gym closures at the start of the pandemic, PTON’s bikes soon became an appealing option for many. With a $39 monthly subscription that provides access to an array of classes, its bikes make for one of the best gym experiences you can get from the comfort of your home.
While one could argue that PTON stock’s rally will end once gyms open up, it’s worth noting that consumer trends are often driven by the convenience factor. To that end, Peloton is convenient. Plus, it’s ability to provide users with world-class trainers at home remains unmatched. Hence, there is a good chance we’re going to be seeing a lot more from Peloton post-pandemic.
With its revenue at $363 million in 2020, over 3.1 million subscribers and ambitions for 100 million, Peloton is a great bet on the future of remote fitness.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.
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