The tech sector continues to be one of the hot parts of the stock market, providing both highs and lows for a number of investors. As social media and other areas continue to grow and expand, tech stocks have become a lightening rod for the success, and sometimes failure, of the companies involved. Investors are always looking for opportunities, and many wonder whether stocks of companies such as Renren Inc (NYSE:RENN), Groupon Inc (NASDAQ:GRPN), Sirius XM Radio Inc (NASDAQ:SIRI), Zynga (NASDAQ:ZNGA) and others will be among the rising or falling investments in 2012.
Renren Inc (RENN)
Getting billed as “the Facebook of China” is a guarantee for success, right? While such a lofty billing doesn’t ensure anything, it definitely got people’s attention. With the People’s Republic of China limiting or even banning access to social media from the West, a potential market of more than a billion captive users can create some impressive results.
That is certainly true for RENN, as it has already generated a cash reserve of $1.2 billion and a market cap of $1.42 billion. With a small management team and its great initial push, the company is competing well against Baidu (NASDAQ:BIDU) and Sina. (NASDAQ:SINA) Renren’s 30% year-to-year revenue growth also helps to make it a very appealing option.
Groupon Inc (GRPN)
Offering a revolutionary way to find coupons on the Internet, founder Andrew Mason turned this deal-of-the-day Internet website into one that sells discounted gift certificates for local goods and services. Starting in Chicago and spreading to Boston, New York, and beyond, the company now provides its service in hundreds of cities in North America, Asia, Europe, and South America, with nearly 40 million registered users.
GRPN filed for an IPO in order to raise up to $750 million. The stock currently is trading in the low-$20s per share, but some analysts have it as a sell. Operating a hefty market cap of 14.7 billion, slow growth is expected after a late-November downturn left its share price at $15.24, or about half of its 52-week high of 31.14. With an apparent downturn and pressure from its competitors, Groupon may not be the best investment at the present moment.
Sirius XM Radio Inc (SIRI)
Sirius has almost become synonymous with the satellite radio industry. With a huge subscriber base of faithful listeners, SIRI has three satellites that allow it to offer music, talk, sports and more to millions in North America. The company has used savvy business decisions to expand its reach in a market that is quickly becoming saturated.
For many analysts, the future is in the short-game with Sirius. A negative media image coupled with a dying business model is impacting the long-term prospects of the stock, but a number of traders have found success in capitalizing on its volatility. Since a sell-off in October 2011, the stock has been moving between $1.60 and $1.85 per share. Buying at the bottom of the cycle and selling at the top has allowed it to be a money maker in the short-term, as investors can grab profits in 6 percent to 7 percent increments.
Anyone who knows social media knows Zynga. Known for its browser-based games, the software can be used standalone or integrated as a widget on sites such as Facebook and MySpace. Zynga was founded 2007 by Mark Pincus, and four years later eclipsed 200 million monthly active users. The company’s December 15, 2011, IPO is believed to have raised $1 billion, valuing the company at nearly $7 billion, outpacing rivals such as Electronic Arts Inc (NASDAQ:EA) and Nexon Co.
With the tremendous success of its social media counterparts, Zynga has a strong outlook. The company earned nearly $900 million through September, 2011 and has consistently created returns that outpace others on the Standard & Poor’s 500 Index. Although there are some concerns about the company holding more public debt than expected, Zynga’s appearance on Wall Street gives investors another solid option for expanding their portfolios.
Scoring with Tech Stocks
There are some high-potential options available in the market today. A number of well-run tech companies have the kind of strength and momentum to create excellent growth potential.
At the current time, Groupon would probably not be on the list, due largely to its negative momentum, the increased competition and the greater availability of stock for short selling. On the other side of the coin, companies like Renren, Zynga and Facebook (when its shares become available) offer impressive long-term options, while trading the peaks and valleys on an active stock like Sirius XM Radio can provide a lucrative short-term investment. As with any new purchase, it is important to evaluate the performance of each company to ensure that it is as profitable as its product is successful.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.