2 Tech Stocks To "Buy The Dip" For 2021

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(Source: Facebook Corporate Presentation)

Facebook just came off a strong quarter in Q3 with record revenue of $21.47 billion, and diluted EPS hit a new high of $2.71 as well. Despite critics suggesting that FB’s best days are over as people continue to migrate away from its platforms, this couldn’t be further from the truth, with monthly active users up to 2.74 billion, up 12% year-over-year.

Meanwhile, the company’s average revenue per user [ARPU] came in just shy of all-time highs of $8.52, with an ARPU of $7.89 in Q3. This translated to 9% growth year-over-year, with the biggest gains coming from APAC where Q3 ARPU hit a new high.

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(Source: YCharts.com, Author’s Chart)

As shown above, these improving metrics have set FB up for another year of record annual EPS, with FY2020 annual EPS estimates sitting at $9.25 currently. While this 44% growth rate in annual EPS ($9.25 vs. $6.43) should be discounted as FY2019 was a down year for earnings, it’s encouraging to see annual EPS immediately returning to new highs. Meanwhile, annual EPS is expected to hit $12.58 in FY2022, continuing its trend of double-digit earnings growth that Facebook has enjoyed for nearly a decade now.

Some investors might argue that FB is expensive at $280.00 per share with earnings of just $6.43 last year, but these are stale numbers, and the market is looking forward to the FY2022 numbers now that we’re about to enter 2021. Based on the FY2022 annual EPS estimates, FB is actually trading at a very reasonable 22x earnings given that it’s a liquid market leader with consistent annual EPS growth. Therefore, if we were to see the stock pullback below $265.00, where it would trade at roughly 21x FY2022 earnings, I would view this as a low-risk buying opportunity.

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(Source: DocuSign Earnings Slides)

Moving over to DocuSign, the company also came off a huge quarter, with billings up 61% year-over-year to $406 million, and revenue soaring by 45% to $342 million. This translated to the strongest quarter for the company’s sales growth in over two years, and the company is getting set to report its fiscal Q3 2021 earnings this week.

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Disclosure: I am long FB

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does ...

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