3 Technology Stocks to Pick this Earnings
The ever-evolving Technology sector witnessed a number of new trends in 2013. Bring Your Own Device (BYOD), cloud computing, Big Data, Internet of Things, hybrid cloud, flash storage, social networking, 3D printing and wearable devices are some of them.
Of these, we expect cloud computing and flash storage to prosper significantly in 2014. We also believe that the anticipated stabilization in personal computer (PC) sales will attract investors in 2014.
Emergence of Hybrid Cloud
Cloud services are expected to grow significantly, as consumers prefer to use the cloud for storage purposes. Moreover, hybrid cloud that facilitates interoperability of data between internal private cloud and public cloud has gained immense importance in recent times.
According to market research firm IDC, spending on cloud services and related technology is expected to jump more than 25.0% to $100.0 billion in 2014. This presents significant growth opportunity for established players like International Business Machines (IBM) and Oracle Corp (ORCL - Analyst Report), as their legacy businesses continue to shrink.
Flash Adoption To Improve
As consumers’ dependence on cloud for storage purpose increases, demand for cloud-dedicated data centers will increase manifold. With simultaneous increase in data volumes (1000 Exabytes by 2014) the demand for flash-based storage systems in data centers will jump significantly, going forward.
In 2013, flash gained significant prominence as it was included in servers, hybrid hard disk/flash storage arrays and in all-flash arrays. According to EMC Corp.’s (EMC) 2013 survey, 56.5% of IT managers and professionals had already implemented flash technology in their storage systems.
3 Stocks to Pick from the Pack
The presence of a large number of players makes it difficult to pick sure-shot winners. By using the Zacks proprietary methodology, investors can select stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive Zacks Earnings ESP.
Zacks Earnings ESP shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Here are 3 stocks that meet both the criteria:
Oracle Corp (ORCL - Analyst Report) – This Zacks Rank #3 (Hold) company carries an Earnings ESP of +1.49%. Oracle delivered positive earnings surprises in three of the last four quarters with an average beat of 2.4%. The company plans to announce the third-quarter 2014 results by mid-late March.
Oracle is aggressively building its position in the cloud computing market, which will drive its results, going forward. Accretive cloud acquisitions, higher subscription revenues and improvement in sales force hiring rate will drive bookings.
Nimble Storage (NMBL - Snapshot Report) – Nimble is a manufacturer and marketer of hybrid flash/disk storage platform, which also offers backup and replication software. This Zacks Rank #3 (Hold) stock carries an Earnings ESP of +5.88% and will report fourth-quarter 2014 results on Feb 27.
Nimble’s hybrid storage arrays provide a balanced combination of performance, capacity, and cost effectiveness, as compared to all-flash arrays and hard disk drives. Since its Initial Public Offering (IPO) in Dec 2013, the shares have surged approximately 34.0% driven by a growing customer base, particularly in the small and medium business segment.
Micron Technology (MU - Analyst Report) – This Zacks Rank #2 (Buy) stock sports an Earnings ESP of +3.39%. Micron delivered positive earnings surprises in two of the last four quarters with an average beat of 21.0%. The company is set to announce its second-quarter 2014 results by late March.
Micron is expected to benefit from improving supply/demand balance for DRAM and NAND memory chips in 2014. The company’s strong customer base that includes Apple (AAPL) and Intel Corp (INTC) is a major growth catalyst going forward.
2014 will continue to see the emergence of new disruptive technologies. Big Data analytics and Internet of Things are expected to grow into full-fledged services as the year progresses. Moreover, the anticipated launch of wearable devices will be a major growth catalyst for the sector, going forward.