Are Techs Making a Comeback?

Are techs back and ready for another run-up? No one really knows. If technology plays are poised for a resurgence, the catalysts of today are much different than those of the past. However, the support level that the tech-laden Nasdaq recently touched was not too far off from the bottom it hit in late 2002.

After seeing the 2002 bottom, the Nasdaq gained approximately 160% during the 5 years that followed before tumbling again. Will the Nasdaq, coming off a recent bottom, bring similar or bigger profits? We’ll have to wait and see. But why watch from the sidelines? Why not pick a few solid tech plays and ride the wave higher should there be another 5-year surge.

Using the Research Wizard, I found Zacks #1 Rank (Strong Buy) plays that are poised to deliver strong results over the long-term.

3 Tech Plays

Western Digital Corp. (WDC - Analyst Report) is seeing bullish estimate revisions. The Zacks Consensus Estimate of $3.04 per share for the year ending June 2010 is up an astonishing 43% over the past month.

The company, which makes hard drives, offers a low PEG ratio of 0.96. Its return on equity (ROE) of 19% soars past the industry average of 4%. WD’s net profit margin of 6% compares favorable to a negative industry average.

The company recently announced fourth-quarter results, delivering non-GAAP earnings of 76 cents per share. The result topped the Zacks Consensus Estimate by an impressive 181.5%.

Fourth-quarter revenue of $1.9 billion was 3% below the year-prior quarter. The company shipped 40 million hard drives during the quarter.

Management commented that in a challenging time for the worldwide economy and the hard drive industry, WD maintained profitability and stayed cash flow positive throughout the fiscal year. John Coyne, president and chief executive officer, said during the quarter, the company responded promptly to capitalize on unexpected market upside in each of its markets to produce financial results that significantly exceeded expectations, and included a return to WD’s targeted gross margin and operating expense model parameters.

WDC has seen solid momentum, out performing the market by about 30% over the past year.

Checkout the recent Zacks Equity Research Snapshot report on WDC.

Perfect World Co., Ltd. (PWRD - Snapshot Report), a player in the burgeoning world of Chinese online gaming, just announced unaudited second-quarter results.

Net income of $40.9 million was 22% above the previous quarter’s total and 69% ahead of the year-prior result. Total revenues jumped 56% year-over-year.

The company noted that strong results were primarily driven by better than anticipated performance of the newly launched 2.5D mysterious adventure MMORPG 'Battle of the Immortals' and increasingly optimistic results from a number of existing games. “We believe our fine-tuned strategy of allocating more resources to longer-term projects and larger expansion packs has really begun to show positive results," said Mr. Michael Chi, Chairman and Chief Executive Officer.

This Zacks #1 Rank (Strong Buy) is also enjoying higher Zacks Consensus Estimates. Forecasts for the year ending May 2010 stand at 38 cents per share, above the 2 months-ago level of 14 cents.

For the following year, the Zacks Consensus Estimate climbed from 44 cents to 62 cents per share over the past 2 months.

Shares of PWRD have surged past the market by more than 60% over the past year.

Take a look at the latest Zacks Equity Research Snapshot report on PWRD.

Syntel Inc. (SYNT - Snapshot Report) has seen the full-year Zacks Consensus Estimate climb from $2.20 to $2.41 per share over the past 2 months. For 2010, the Zacks Consensus Estimate stands at $2.39, versus the 2 months-ago level of $2.09.

The technology services player has a return on equity (ROE) of 40%, more than doubling the industry-average of 15%. The company boasts a solid balance sheet, showing no debt. Its net profit margin of 25% is well above the industry average of 6%.

This Zacks #1 Rank (Strong Buy) company recently posted second-quarter earnings 61 cents per share, eclipsing the previous year’s 42 cents and exceeding the Zacks Consensus Estimate by 20%. Revenue slipped 3% year-over-year.

"Syntel was encouraged by improved stabilization in the marketplace and the increasingly positive discussions initiated with our clients during the quarter," said Chief Executive Officer and President Keshav Murugesh. "While discretionary projects remain sidelined, customers are beginning to once again look at cost reduction initiatives which are aligned with their longer-term strategic objectives."

Read the latest Zacks Equity Research Snapshot report on SYNT.

Stock Screening Resources

Research Wizard – Use this sophisticated tool to screen for some of your own techs. Or, create new strategies and backtest them.

Zacks Custom Screener – Use this free tool to create your own screens.

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