Investors Homing In: Three Tech Stocks to Watch for 2025

As autumn sets in, it’s the perfect time for investors to start strategizing for the upcoming year.

With only a few months left in 2024, many are curating their watchlists for next year’s stock purchases.

Here are three tech stocks that have piqued the interest of our Motley Fool contributors: Meta Platforms (NASDAQ: META), Shift4 (NYSE: FOUR), and Microsoft (NASDAQ: MSFT).

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Meta’s Impressive Growth Continues

Jake Lerch (Meta Platforms): My top pick is Meta Platforms.

Meta is thriving, bringing in significant revenue, profit, and free cash flow. Its stock is up 64% year to date and over 380% since the beginning of 2023.

In the most recent earnings report for the three months ending September 30, 2024, Meta posted $40.5 billion in revenue, which is a 19% increase from last year.

For perspective, this revenue amount is astounding; for example, Starbucks generates less than $40 billion yearly. Moreover, Meta’s revenue is growing at a near 20% pace.

Shareholders benefit as Meta effectively converts revenue to profit, reporting net income of $15.7 billion, marking a 35% rise compared to the previous year.

Free cash flow at $15.5 billion has bolstered cash reserves to $70.9 billion. Such financial strength allows Meta to enhance shareholder returns through potential dividend rises, share buybacks, or strategic acquisitions.

However, challenges lie ahead. Regulatory actions in the U.S. and the E.U. could pose risks, alongside significant investments in the metaverse and AI technologies.

Yet, the underlying reason to consider Meta shares is its vast user base of 3.3 billion daily users, about 41% of the global population.

With so many engaged users, Meta’s digital advertising business is undeniably lucrative, and expectations are high for another strong performance in 2025.

Shift4: The Rising Fintech Star

Will Healy (Shift4 Payments, Inc.): Although it has been around since 1999, Shift4 is still emerging as a notable player in fintech. Founded by CEO Jared Isaacman, the company aims to accelerate payment processing.

Shift4 distinguishes itself from competitors like PayPal and Block by focusing on restaurants and venues such as resorts and stadiums. Noteworthy clients include the Nobu Hotel and Lucas Oil Stadium, home of the Indianapolis Colts.

Shift4 has expanded its reach into Canada, Japan, and Europe, and is exploring partnerships in new countries. Today, it serves over 200,000 customers, processing upwards of $260 billion annually.

In the first half of 2024, revenue soared by 30% to $1.5 billion, with the net income attributable to Shift4 surging to $60 million, reflecting a 50% yearly increase.

The stock price has surged by 103% over the past year, approaching its all-time highs from the 2021 market peak. Projections suggest continued growth, with a current P/E ratio of 55 and a forward P/E ratio of 18. This upward trend hints that 2025 could bring greater investor attention.

Microsoft: A Solid Investment Despite Its Price

Justin Pope (Microsoft): While it may not be the flashiest option, Microsoft remains a heavyweight in the tech sector as we look ahead to 2025. The company’s cloud growth in Q1 of fiscal year 2025 particularly stands out.

Azure, Microsoft’s cloud platform, is seeing explosive growth, fueled by the demand for AI applications that rely on cloud infrastructure. This trend positions Microsoft well within the rapidly expanding cloud market.

In the first quarter of fiscal year 2025, Azure revenue climbed 34% year over year, contributing to total revenue of $65.6 billion (up 16%) and earnings of $3.30 per share (up 10%). These results exceeded expectations and showcase the company’s robust growth.

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Microsoft: A Prime Investment in AI Growth?

Azure’s rapid expansion recently outpaced last quarter’s 30% growth rate. Microsoft’s affiliations with OpenAI, the developer of ChatGPT, position it as a robust option for those looking to delve into the growth of artificial intelligence (AI).

Analyzing Microsoft’s Valuation

Microsoft, currently valued at $3.2 trillion, trades at 31 times its projected forward earnings. While this may seem steep, many analysts deem it reasonably priced. They expect the company’s earnings to increase by 15% each year for the next several years. This results in a PEG ratio of about 2.2, which is at the top of the range typical for high-quality businesses. Microsoft’s reputation as a leading tech company justifies this price point.

With the potential for AI to shape future growth, investors may find value in paying a fair price for what could be one of the market’s strongest technology stocks today.

Is Now the Right Time to Invest $1,000 in Microsoft?

Before making a decision to invest in Microsoft stock, there are a few factors to consider:

The Motley Fool Stock Advisor team has highlighted what they believe are the 10 best stocks available for investment right now, and Microsoft did not make their list. The selected stocks are anticipated to yield considerable returns in the years ahead.

For instance, when Nvidia was featured on this list on April 15, 2005, an investment of $1,000 at that time would have grown to $829,746!*

The Stock Advisor program offers a straightforward guide to investment success, including resources on portfolio building, regular updates, and two new stock recommendations each month. Since its inception in 2002, this service has significantly outperformed the S&P 500 index by more than four times.*

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*Stock Advisor returns as of October 28, 2024

Randi Zuckerberg, a former market development director and public spokesperson for Facebook, and sister to Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board of directors. Jake Lerch holds positions in PayPal, while Justin Pope and Will Healy have no stakes in any discussed stocks. The Motley Fool is invested in and recommends Block, Meta Platforms, Microsoft, PayPal, Shift4 Payments, and Starbucks. The Motley Fool recommends options such as long January 2026 $395 calls on Microsoft and long January 2027 $42.50 calls on PayPal, among others. Please refer to the Motley Fool’s disclosure policy for more information.

The views and opinions expressed here represent those of the author, and do not necessarily align with Nasdaq, Inc.