Digital Spending Trends are Here to Stay

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  • The past year has seen a strong uptick in digital transformations for companies. That includes content delivery, operations, as well as services like payment systems.

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  • With these powerful trends in place, growth is likely to continue. That will continue to attract capital to the space, and be a strong source of returns for investors going forward. One of the more powerful trends will be in digital payments.

    These companies act as “toll booths” for digital transactions, taking a very small cut on each transaction, but seeing an explosion in volume. For instance, in its first quarter as a publicly-traded company, Affirm Holdings (AFRM) beat expectations on earnings and sales. But by reporting a slowdown in its growth, shares took a dive instead.

    While providing guidance is useful, any company growing strongly right now is capable of moving higher in time, making this earnings-related selloff short-lived. Since going public, the company has shown revenue growth of nearly 98 percent on a year-over-year basis.

    Action to take: Shares look attractive as a rebound play, and are a buy under $130. Traders will likely fare better while putting up less capital by buying a call option.

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  • The August 2021 $145 call, last trading for about $30.00, is only down 15 percent on a day when shares dropped 9 percent. That’s a sign that traders see a higher share price ahead before expiration, otherwise the call trade would be down further.