People are spending more and more time (too much?) browsing apps on their phones. As a result, these mobile app stocks are thriving.
Mobile applications, better known simply as “apps,” have become a $5 trillion industry. If you have a smartphone, chances are you spend a lot of time thumbing through various apps—probably more time than you’d like. Worldwide, people spend more than 3 trillion hours collectively on their apps. That’s a great trend for the companies that own and publish mobile apps. And it bodes quite well for mobile app stocks.
You already know the companies that make the most money from apps. Those would be Apple (AAPL), Google (GOOG) and Netflix (NFLX). But those aren’t “app stocks,” per se. They are multi-pronged, multinational, globally recognized juggernauts who make money from a variety of sources, and aren’t necessarily driven by their app-related businesses. Plus, their stocks are well known—comprising three-fifths of the so-called FAANG stocks—and, thus, their greatest growth periods are behind them.
Mobile app stocks, by my definition, are companies that not only derive a significant portion of their revenue from app sales and advertising on their apps, but that are perhaps most identified with their mobile app(s). Thanks to the recent mini-correction and ongoing stagnation in tech stocks, there aren’t as many mobile app stocks faring well today as there were eight or nine months ago. But the following two have held up quite well - which means they’re set up for much bigger runs once the market regains its footing.
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Two Mobile App Stocks to Buy
Mobile App Stock to Buy #1: Snap Inc. (SNAP)
When it came public in 2017, Snap Inc. - which owns the photo and video sharing application Snapchat, which is currently ranked No. 4 in the Apple App Store’s mobile app rankings - tanked right out of the gates, and didn’t hit bottom until late 2018. Since then, it’s gone nowhere but up, from a low 5 per share to the mid-70s as of this writing. The stock is up 205% in the last year and 50% year to date, despite the malaise in most other growth stocks. Analysts expect the company to increase sales by 67% this year and to turn profitable for the first time, at 22 cents per share. And SNAP has beaten estimates by a wide margin in four straight quarters. Even trading just off all-time highs (83 last week), and at a sky-high valuation, SNAP looks like a buy here.
Mobile App Stock to Buy #2: PayPal (PYPL)
Founded in 1998, PayPal didn’t start out as an app. But since rolling out its own app, and subsequently buying emerging peer-to-peer payment rival Venmo in 2014 (as part of an $800 million acquisition of Braintree), the company has grown. PayPal’s sales growth topped 20% last year for just the second time in the last decade, and EPS growth reached 71%, a five-year high. And the shift to mobile payments is only accelerating, and the market has plenty of room left to grow, at least in America: only 23% of U.S. mobile users have used a mobile wallet to pay in-store, according to Statista.
PYPL came public in July 2015 after being spun off from eBay (EBAY). In its first 18 months, the stock didn’t really go anywhere. But it found its footing in early 2017, and the stock hasn’t looked back since; it’s more than tripled since the March 2020 Covid market crash bottom, as the pandemic has only sped up the mobile payments trend here in the U.S. The result is a stock that has been in a general uptrend for a while, though it has retreated a bit of late - perhaps creating a buying opportunity.
PayPal has made more than a few appearances in our momentum stocks advisory, Cabot Top Ten Trader. I expect it to make quite a few more appearances in the years ahead.
If you’d like to find out the names of the 10 momentum stocks making appearances in this week’s Cabot Top Ten Trader issue, click here.
In the meantime, I’d add the two mobile app stocks mentioned above to your watch list. The beneficiaries of a booming industry, both Snap Inc. and PayPal (and other mobile app stocks I haven’t mentioned, like Square (SQ), because their charts don’t look so hot right now) are poised for big runs in the years ahead.
Do you own any mobile app stocks? How have they performed?
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*This post has been updated from an original version, published in 2019.
