2012 has been an entertaining year to say the least. We saw Apple (AAPL) nearly double, then lose almost half of that run all in a single year. We watched Research in Motion (RIMM) continue to make consumers and shareholders wait for the next BlackBerry. We've watched Google (GOOG), Samsung, Apple, and seemingly every other tech giant locked in litigation, with very little results. Then, of course, we've had the IPO we have all been waiting for.
Facebook (FB) had most individuals jumping for joy when it announced that the company was going public. In fact, there were open limit orders reported on CNBC for up to $1,000 per share. Admittedly, people were too optimistic. Facebook is, after all, still just a company. Facebook is still in its infancy as far as generating revenue goes as well. While institutional investors, as well as individual investors, were drinking the proverbial Kool-aid, Morgan Stanley was making late night phone calls on the eve of the IPO. Morgan Stanley (MS) was telling "high priority" clients that the financials on Facebook were vastly underperforming expectations. By now, we all know what happened with the IPO. Facebook stock fell from $40+ to the $18 range. Hardly a ringing endorsement.
Now, Facebook has rebounded from the IPO debacle to the $26 level. Last quarter Facebook unveiled its mobile advertising platform, with a rousing success. In just the first quarter of mobile ads, Facebook was able to generate $1 billion. Zuckerberg openly admitted that he didn't care about mobile advertising before last quarter. He went on to state that the first quarter of mobile ads was just the tip of the iceberg. The question is, will Facebook be the iceberg or the Titanic?
All signs point to Facebook growing into its lofty valuation. Even the biggest of Facebook's bearish analysts upgraded the stock to a buy today. If Facebook can continue to grow revenue through ads, and its new "Gifts" program, we could see Facebook achieve a Forward P/E of a measly 25. That would be grossly undervalued considering the growth trajectory required to achieve those numbers. However, Facebook definitely seems to be rolling out revenue generating products to drive that growth. If Facebook can continue its rapid growth, my conservative price target by the end of 2013 is $38.50.
The other tech play for 2013 centers around NFC technology. NFC technology means near-field communication. What it does is mind boggling. The technology could allow consumers to use their phones as their new wallets. The technology allows individuals to use their phone to pay for items at the store, as a library card, pool pass, gym pass, and many other functions as well. Essentially, NFC technology could make the wallet obsolete. In fact, Google has the Google Wallet, which uses NFC technology.
So Google Wallet is the play? No way. The company is expensive in comparison to its main competitor Apple based on fundamentals. The tech play to consider along with Facebook is NXP Semiconductor. Who? That's a very fair question. NXP Semiconductor (NXPI) has quite possibly the best patent portfolio in the NFC technology space. NXPI has cheaper fundamentals than competitors Qualcomm (QCOM) and Broadcom (BRCM). Cheaper fundamentals and superior growth make for phenomenal potential. NXP has an impressive client list, that may begin utilizing it more heavily. Some of its clients include Google, Microsoft, Apple, Samsung, and many others. That's right, a stock most people haven't heard of is supplying the major players in the tech industry.
Wal-Mart (WMT), Best Buy (BBY), and 7-Eleven have partnered together to form a company that will allow for NFC technology to be used within its stores. That would expedite the shopping and checking out experience at each store. Imagine if on Black Friday, you could find your dream television, put your phone by the bar code, pay for it then and there, then walk out. There would be no lines, no crying babies, none of that. Simply walk in, grab, pay with your mobile device, and walk out. Then take into account that most current Android and Apple phones have NFC technology in their phones, just locked and buried inside. Once the infrastructure for NFC is laid out, it's easy to see the market potential for this technology. I don't know about you, but I'd rather have the best patent portfolio with the best amount of growth in that space. My price target for NXP Semiconductor by the end of 2013 is $32.75.
While Apple is likely to reach new all-time highs again in 2013, it doesn't figure to have a 50% move again next year. Even if Research in Motion's newest BlackBerry does become a wild success, it has lost too much market share for it to have a quick turnaround. The key next year is growth, both for the United States and companies. Those who can grow the most efficiently should stand to reap the rewards. That is why I look to Facebook and NXP Semiconductor to lead the technology space next year.
Additional disclosure: Always consult with a licensed financial professional before considering a position for your portfolio. Investing involves a significant risk of loss. Never invest more than you can afford to lose.