Opinion: The 3 Best Tech Stocks to Own Ahead of 2025 @themotleyfool #stocks $MSFT $META $FOUR

The leaves are falling, and the weather is getting cooler. You know what that means: It’s time to start thinking about next year.

We’re running out of months in 2024, and investors are increasingly focused on what next year will bring and which stocks to buy now.

With that in mind, let’s turn our attention to three tech stocks that our Motley Fool contributors can’t stop thinking about: Meta Platforms (META -0.07%), Shift4 (FOUR 0.12%), and Microsoft (MSFT 0.99%).

Meta’s stock is up 64% year to date, and 2025 could be just as good.

Jake Lerch (Meta Platforms): My choice is Meta Platforms.

Simply put, Meta is a thriving business that generates ample revenue, profit, and free cash flow. That’s why its stock is up 64% year to date and more than 380% since the start of 2023.

In the company’s most recent earnings report (for the three months ended on Sept. 30, 2024), Meta reported revenue of $40.5 billion, which was up 19% year over year.

To begin with, that’s a staggering amount of revenue (for context, Starbucks generates less than $40 billion in revenue over the course of an entire year). Moreover, Meta is growing that revenue at a breakneck pace of nearly 20%.

Even better for shareholders, Meta converts much of that revenue into profit. The company reported $15.7 billion in net income, representing an increase of 35% from a year ago.

Finally, free cash flow was $15.5 billion, helping to bolster the company’s cash reserves, which increased to $70.9 billion. That’s important because having so much cash in the bank gives Meta the ability to increase shareholder returns via future dividend increases, share repurchases, strategic acquisitions, or capital investments.

Granted, there are concerns for Meta. Regulatory actions in both the U.S. and E.U. could hamper growth or profits. In addition, the company’s headlong charge into the metaverse and artificial intelligence is costly.

Nevertheless, the reason to own Meta shares is its enormous user base. The company has over 3.3 billion daily average users (DAUs), representing about 41% of the world population.

With so many people using one of Meta’s apps every day, the company’s digital ad business is simply too lucrative to ignore. For that reason, I expect Meta to turn in another excellent year in 2025.

This fintech stock may not be an unknown for much longer

Will Healy (Shift4 Payments, Inc.): Despite a long existence, Shift4 is far from becoming a household name, even among the fintech stocks with which it competes. CEO Jared Isaacman founded this company in 1999 to offer a faster payment-processing alternative.

Over time, Shift4 differentiated itself from fintech companies like PayPal and Block by targeting restaurants and hospitality-related venues such as resorts, casinos, and sporting venues. Among its more high-profile clients are the Nobu Hotel, Yosemite National Park, and sports venues such as Lucas Oil Stadium, home of the Indianapolis Colts.

Also, it expanded beyond the U.S. to Canada, Japan, and most countries in Europe and is pursuing strategic partnerships in other countries. This approach helped it grow to the point that it serves over 200,000 customers and processes more than $260 billion in payments annually. Not surprisingly, its financials reflect its success.

In the first six months of 2024, revenue of $1.5 billion rose 30% from year-ago levels. Shift4 also kept its expense growth in check, allowing the net income attributable to Shift4 for the first half of the year to grow to $60 million, a 50% yearly increase.

Moreover, there has been a 103% increase in the stock price over the last year, taking it close to the all-time highs it reached in the 2021 bull market.

Projections indicate the company’s growth is not slowing down. The P/E ratio is now 55, and so high is the anticipated growth that it has pushed its forward P/E ratio down to just 18.

Such increases have helped Shift4 quietly recover from the 2022 bear market. However, as Shift4 stock approaches record highs, 2025 could be the year when investors finally begin to pay attention to the stock. Hence, it might pay to open a position before others take notice.

Microsoft isn’t cheap, but it’s worth paying for.

Justin Pope (Microsoft): This isn’t a flashy pick. Yet, it’s hard to deny Microsoft a spot among the best tech stocks you can buy heading into 2025. Microsoft’s blistering cloud growth in Q1 of the company’s fiscal year 2025 was an eye-opener. Azure is Microsoft’s cloud business and where you will see most of the impact of artificial intelligence (AI). The cloud business was already booming, but AI is pouring gas on the fire because the cloud is how companies deploy and run their AI applications.

In other words, AI is funneling business to cloud companies like Microsoft. The beautiful thing is that Microsoft is just one of three companies that dominate the global cloud market.

Azure’s revenue increased by 34% year over year in the first quarter of fiscal year 2025, helping Microsoft generate total revenue of $65.6 billion (16% growth) and earnings of $3.30 per share (10% growth). Both the top- and bottom-line numbers surpassed Wall Street’s expectations. Azure’s growth accelerated from a 30% growth rate last quarter. The cloud exposure and Microsoft’s integrations with ChatGPT developer OpenAI make the stock arguably the safest way to get surefire exposure to AI’s growth tailwinds.

Microsoft isn’t cheap — the $3.2 trillion company trades at 31 times forward earnings estimates — but I think it’s reasonably priced. Analysts estimate Microsoft will grow earnings by 15% annually over the next several years, which puts the stock’s current PEG ratio at approximately 2.2. That’s about the upper limit of what I generally pay for a high-quality business’s earnings growth, but Microsoft is a top-tier business.

Given AI’s long-term growth opportunities and Microsoft’s likely involvement in them, investors should feel good paying a fair price for arguably the best technology stock one can buy on the market today.