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Adobe Inc.
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Adobe has been a solid performer, with the software giant surpassing a $300 billion valuation. Much of 2021’s gains came after Adobe reported impressive fiscal second-quarter earnings in June. Revenue and non-GAAP earnings per share both rose by about 23% year over year, exceeding analyst expectations. A practically required expense for professional and amateur creatives of all types, Adobe’s offerings are largely centered around its digital media segment, which generated $2.8 billion of the $3.8 billion in revenue last quarter. The Adobe Creative Cloud is in turn the driver of digital media, where recent subscription momentum in programs like Lightroom and Photoshop helped Adobe post an impressive quarter. The company remains an attractive, high-margin software business with a growing number of loyal returning customers.
Spotify Technology SA
Spotify has been quite another story, the worst performer on the list of the best stocks to buy for 2021. The business is still healthy, but it has simply failed to meet market expectations in recent quarters. The company picked up 9 million monthly active users in the second quarter, finishing with 365 million, below the prior quarter’s guidance for 366 million to 373 million. Margins are improving, though, due in part to the company’s bets on podcasts, for which Spotify doesn’t have to shell out per-spin music licensing fees. A relatively new feature allowing artists to pay for promotion in Spotify’s nascent Discovery Mode is another potential catalyst in the quarters and years ahead, with artists in Discovery Mode garnering 40% more listeners than in their pre-Discovery Mode days. Patient investors should stick with SPOT.
BJ’s Wholesale Club Holdings Inc.
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The thesis for warehouse club retailer BJ’s being named one of the best stocks to buy for 2021 was simple: Cost-conscious consumers looked poised to seek out savings during an elongated pandemic, benefiting bulk retailers like BJ’s. Plus, among direct competitors, BJ’s was far cheaper than Costco Wholesale Corp. stock, which traded for roughly three times the price-earnings ratio of the smaller BJ’s. The second-best performer on this list to date, BJ’s still trades at a steep discount to Costco, with BJ stock trading for 18 times earnings versus Costco’s P/E of 41. BJ’s is slowly expanding, with plans to open six new warehouses this fiscal year.
The Walt Disney Co.
Disney shares have put up a lackluster performance in 2021, but the Burbank, California-based entertainment giant is still one of the more solid blue-chip stocks on this buy list. Its trailing financials have taken a big hit as the pandemic forced Disney’s iconic parks to close or operate at limited capacity and its cruise line business to suspend operations entirely. Things have been starting to look better on those fronts, with cruises gradually starting to set sail again in August. The Delta variant is an obvious risk to its Parks, Experiences, and Products division in the near term. At the same time, the relatively fresh Disney+ streaming service has been growing rapidly, more than tripling subscribers year over year in the second quarter, to 103.6 million. If COVID-19 variants force Disney to once again close down parts of its business, investors can at least rest assured that Disney’s streaming interests in Disney+ and Hulu will act as a hedge.
Alibaba Group Holding Ltd.
Alibaba’s prospects have been deeply hurt this year by something outside its locus of control: the Chinese government. The e-commerce giant is one of a handful of large tech companies Chinese regulators are taking antitrust action against, along with Tencent and JD.com (JD). The initial public offering of its fintech affiliate, Ant Group, was scrapped late last year – still no word on when that might be on the table again – and then, in April, China issued Alibaba a record $2.8 billion fine for alleged anticompetitive behavior. That said, it’s not all bad news: Considering its gargantuan size, BABA is still growing by leaps and bounds, with revenue rising 34% year over year last quarter. Shares trade for less than 24 times earnings, so long-term investors who believe China’s regulatory push will subside in time have a great opportunity to buy while negative sentiment has put pressure on the stock price.
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