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I’m Jonathan Mzengeza, I’m the senior analyst and portfolio manager for all the technology mandates at CIBC Asset Management.
There are tech things to watch out in 2021. We see kind of the first one being the rise of electric vehicles. 2021 will see a broader range of EVs released by more OEMs [original equipment manufacturers] as driven by several things.
Firstly, regulatory pressure. As a new U.S. administration comes in and they’re really focused on their climate initiatives, that’s going to drive broader rollout of EVs. Secondly, end-customer demand has increased significantly, as more customers are really demanding these electric vehicles as they see that as a way of them contributing to maintaining our environment. And thirdly, I would say the other reason would be new, easier ways for electric vehicles to increase their range and for production initiatives that have improved their production and that should also help.
As we see in 2021, electric vehicle sales are expected to grow by more than 50% versus last year in 2020, and this should mean that electric vehicle penetration in the installed base will grow from a little less than 2% to over 4% in 2021.
We’re looking to play companies that provide the technology required to implement that electric vehicle rollout. So, the companies that I’ll mention would be companies like Analog Devices that provide semiconductor components that are crucial for electric vehicle rollout. Look at companies like Keysight that provide the testing equipment in order to test your electric vehicles and how they work.
The second theme that I think is important is the broader rollout of 5G technology. 5G did start to roll out in 2020, but that mostly impacted countries in Asia, mainly South Korea, Japan and China. In 2021, there should be a broader rollout of 5G to more countries. We expect North America, particularly the U.S., will see a broader rollout of 5G with more 5G phones expected to be sold this year. In 2020, only about 36 million 5G phones were sold in the U.S., but it’s expected to be more than 200 to 600 million 5G phones in total in 2021. This is predominantly driven by more 5G phone availability, Apple having a full range of 5G phones that they’ve introduced at the end of 2020 and being available this year in 2021. And also the fact that more customers would want to have that 5G speed on their phones.
The other opportunity that I see is within online advertising. 2020 has seen a significant reduction in advertising overall, but it’s particularly being focused on linear TV, where advertising on linear TV has taken a significant decline, and online-type advertising has taken a significant share. We believe that 2021 is going to see an ever more significant increase in advertising revenue, especially for online. And this should be very positive for a company like Trade Desk, which has focused on online advertising, and they’re focused on key areas such as connected TV, where more and more companies are moving from linear TV to providing over-the-top services. These include things like Peacock, Discovery Channel is also going to put a streaming service and we believe that they’re going to embed advertising into that, and they’re going to use programmatic advertising provided by services like Trade Desk.
How the pandemic and vaccines will impact the outlook for tech companies this year is in two aspects. Firstly, the pandemic has caused an accelerated use of a lot of e-commerce — people ordering things online. Post-vaccine, we don’t expect the pace of e-commerce growth to continue, but we do expect e-commerce growth to still be strong. But we expect a lot of brick and mortar, and street retail to return because we expect individuals may become more confident and it’ll be more safe for them to go and buy things in retail stores. So, we don’t expect that accelerated e-commerce growth to continue, but we do expect e-commerce to still be strong.
And this should have an impact on those companies that are exposed to e-commerce, particularly the likes of Amazon and Shopify, which saw significant growth this year. We saw Amazon growth accelerating from 20% in 2019 to over 40% in 2020, and we expect that to decelerate in 2021. For Shopify, they went from high 40 to 50% growth in 2019 to over 100% growth in revenue for them in 2020, and we expect that to decelerate back to its 40 to 50% in 2021.
In terms of in the post-Covid world, companies we feel that are going to be in trouble are companies who haven’t been able to shift their business to an online world, or who haven’t been able to contend with the impact that the Covid has on a lot of the way people do different things and processes. So, we see a lot of legacy players within software, the likes of IBM, especially the systems integrators where all the consulting work was done onsite, and now they’ve got to kind of do it offsite and they can’t provide the same services. I think that these companies are going to suffer because in the post-Covid world, everything has to be done more online using cloud services and in a more intuitive and easier-to-roll-out way.