3 best tech stocks to buy in October

Unless this is your first visit to The Motley Fool, you’ve probably seen articles that discuss the importance of long-term investing. This is because a buy and hold strategy mitigates the impact of short-term market volatility and leaves enough time for your investment thesis to come to fruition.

But there is another important part of the equation: the average cost in dollars. Generally speaking, it makes sense to build up positions slowly and invest money regularly. This helps to further minimize the impact of short-term market volatility on your total returns.

With that in mind, we asked three Motley Fool contributors to pick their best tech stocks to buy in October. Read on to see why Apple (NASDAQ: AAPL), Facebook (NASDAQ: FB), and PayPal funds (NASDAQ: PYPL) made the list.

Image source: Apple.

The gold standard of consumer electronics

Trevor Jennevine (Apple): Apple has established itself as one of the world’s leading brands. It is the second largest smartphone maker, with a 15% market share in the second quarter, up from 12% in the previous quarter. And it enjoys a leading position in tablets and smartwatches. But Apple is more than shiny hardware.

Last year, the company introduced its bespoke M1 chip, bringing longer battery life and better performance to its MacBooks and iPads. Since then, the company has released the M1 Pro and M1 Max, both of which offer even more computing power. Sure, Apple has been designing its iPhone chips for some time, but its foray into laptop processors could be a growth driver for two reasons.

First, who doesn’t want more computing power? Apple’s silicon creates a better experience for users, which could help the company sell more devices and expand its ecosystem. Second, these internal chips actually cut Apple’s spending by $ 75 per unit, according to JP Morgan analyst Samik Chatterjee. In turn, this should lead to an increase in the hardware gross margin over time (or allow a selling price to be lower than the same gross margin).

Building on this idea, Apple has expanded its service offering in recent years, and the line now includes subscription products like Apple TV +, Apple News +, and Apple Fitness +, along with other services like Apple Pay and the App Store. This business segment posted a gross margin of nearly 70% in the last quarter, well above its gross margin of 36% on hardware products. In other words, as services become a bigger part of its business, Apple is expected to become more profitable.

Finally, shareholders recently received some good news. In April 2021, Apple made changes to the privacy of its iPhones, making it more difficult for advertisers to collect data and target users. The company touted the move as a way to protect consumers, but it has also tripled Apple’s market share in the past six months. Specifically, Apple’s Search Ads business – which features sponsored placements above App Store search results – is now responsible for 58% of iPhone app downloads, up from 17% last year. .

Here’s the gist: Despite its $ 2.5 trillion market capitalization, Apple is the gold standard in many areas of the consumer electronics industry and the company still has growth levers to pull. With the holiday season on the horizon, this tech move looks like a smart buy right now.

A chance to capitalize on the fear factor

Jeremy Bowman (Facebook): It’s been a tough month for Facebook. The social media giant was first hit by a blackout that took Facebook, Instagram and WhatsApp from the Internet for several hours, and then by the testimony of whistleblower Frances Haugen, who accused the company of acting in the interest in profits rather than people.

As a result, the stock is down more than 10% from its September high. While Facebook may face some consequences of Haugen’s testimony, potentially in the form of increased surveillance and regulation, this will likely apply to the entire social media industry as well, meaning that the he company will not lose ground compared to its competitors. Additionally, Facebook is heading towards its third quarter earnings report, and the company looks set to deliver another round of solid results. It overtook the Stop Hate for Profit boycott last July, which is expected to boost its growth rate, and its advertising business is benefiting from the economic reopening as restaurants and physical retailers eager to restart their businesses. .

Facebook has steadily crushed analyst estimates over the past few quarters, and it looks set to do the same this time around, as analyst consensus calls for an increase in earnings per share of just 17% to $ 3.17. Management had warned that Apple’s new ad tracking policies were impacting its ad performance, but given the other favorable winds blowing in the company’s favor, that appears to be a low estimate.

Meanwhile, the stock looks cheap with a price-to-earnings ratio of less than 25 considering its large growth in digital advertising, Facebook’s move towards ecommerce, and the potential for the metaverse as the company invests. aggressively in virtual reality and augmented reality. After the recent massive sell-off, now seems like the right time to take advantage and buy this top tech title.

Young adults communicating with smart phones.

Image source: Getty Images.

A good friend in the fintech sphere

Eric Volkman (PayPal Holdings): In recent days, PayPal Holdings has not been a popular action. Investors fear that his apparent pursuit of Pinterest is going to translate into a monster deal – supposedly around $ 45 billion – that will be hard to swallow for the next-gen fintech company.

The resulting fall in the PayPal share price offers a great opportunity to buy shares at a discount, especially as the holiday season approaches (which will certainly generate a significant number of trades). The company is already doing incredibly well in its core business, and it is evolving into a larger financial services provider with multiple revenue streams.

PayPal is already a huge presence in digital payments. The platform it operates powers many of the business transactions we do online. It’s also a strong presence in the peer-to-peer payments arena, thanks to its hugely popular Venmo mobile app.

A lot of payments go through the PayPal system, and the waters are rising. Total payment volume grew 40% year-over-year in the largest quarter, reaching $ 311 billion. In addition, new users are making their way into the company; PayPal added more than 11 million new net asset accounts in the last quarter, bringing the total to over 400 million for the first time in its history.

This dynamic helped propel net sales 17% higher and increase net income by 8%. And the business is quite profitable, with a net profit margin of 19% in the last quarter.

In addition, PayPal is working to expand its ecosystem of financial services. For example, it is expanding its buy now, pay later service by rolling it out to international markets like Australia and Germany. And another much-requested service, cryptocurrency trading, was launched on Venmo not too long ago.

The potential deal with Pinterest is making investors shy. It is not justified. Even if this admittedly expensive acquisition materializes, Pinterest’s products and PayPal’s payment system complement each other well. And with the social media aspects of Pinterest, PayPal is gaining an edge in this universe that can increase merchandise sales and payment volume.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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