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5 Tech Stocks Poised to Trump Earnings Estimates This Season

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The coronavirus pandemic has had a sector-wide impact across the globe. However, the U.S. tech sector has been more resilient compared with the other sectors, primarily owing to the ongoing digital transformation and impressive prospects.

As of Oct 30, 79.7% of the technology sector’s market capitalization in the S&P 500 index had reported third-quarter results. Total earnings for these Tech companies are up 10.6% from the same period last year on 5.8% higher revenues, with 95.3% beating EPS estimates and 90.7% surpassing revenue projections.

On the contrary, 320 S&P 500 members or 64% of the index’s total membership had reported third-quarter results as of Oct 30. Total earnings (or aggregate net income) for these 320 companies are down 7.2% from the same period last year on 4.3% lower revenues, with 86.6% beating EPS estimates and 77.8% exceeding revenue projections.

What’s Driving the Tech Sector’s Outperformance?

The COVID-19 pandemic has, surprisingly, opened up newer avenues of growth for several industries in the broader tech sector. Thanks to the global lockdown, the adoption rate of Internet-based services and apps has been increasing rapidly as people are compelled to stay indoors.

Moreover, the work-from-home wave is bolstering demand for advanced technology-based virtual meetings and conference tools. Additionally, the work-and-learn-from-home necessity has propelled demand for PCs, notebooks, peripheral accessories, and cloud storage.

All these, in turn, are aiding growth for high-speed Internet services. Apart from this, the rising demand for robust communication networks is another positive. Further, the growing proliferation of AI technology, and cloud computing products and services in managing this pandemic situation is a tailwind. These trends are stoking demand for semiconductor chips.

Contactless payment and delivery services also gained a significant traction amid the coronavirus crisis. In addition, social-media companies registered growth in traffic and user engagement as more and more people stayed indoors due to the lockdowns and adherence to the shelter-at-home guidelines.

All these positives will encourage investors to bet on tech stocks.

How to Make the Right Pick?

With the presence of several industry participants, finding the right technology stocks with the potential to beat on earnings can be daunting. Our proprietary methodology, however, makes this task fairly simple.

You could narrow down your choices by looking at the stocks that have the perfect combination of the two key elements: a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP is our proprietary methodology for determining the stocks that have the maximum chances of beating estimates at their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

Our research shows that for stocks with this apt mix of ingredients, the odds of a positive earnings surprise are as high as 70%.

Prominent Picks

Given below are five technology stocks that have favorable combinations to beat on earnings this reporting cycle:

Oklahoma City, OK-headquartered Paycom Software (PAYC - Free Report) is slated to report third-quarter 2020 numbers on Nov 4. The company has an Earnings ESP of +3.67% and carries a Zacks Rank #2 currently. The Zacks Consensus Estimate for earnings has remained unchanged at 56 cents per share in the past 30 days.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Santa Clara, CA-headquartered NVIDIA (NVDA - Free Report) is scheduled to release third-quarter fiscal 2021 results on Nov 18. The company has an Earnings ESP of +1.75% and currently holds a Zacks Rank #2. The Zacks Consensus Estimate for quarterly earnings has been revised upward by a penny to $2.57 per share over the past month.

Mountain View, CA-based Intuit (INTU - Free Report) is set to announce first-quarter fiscal 2021 figures on Nov 19. Currently, the company has an Earnings ESP of +39.88% and carries a Zacks Rank of 3. The Zacks Consensus Estimate for fiscal first-quarter earnings has moved south by couple of cents to 38 cents in 30 days’ time.

Intuit Inc. Price and Consensus

Intuit Inc. Price and Consensus

Intuit Inc. price-consensus-chart | Intuit Inc. Quote

San Diego, CA-headquartered QUALCOMM (QCOM - Free Report) is scheduled to report fourth-quarter fiscal 2020 numbers on Nov 4. At present, the company has an Earnings ESP of +5.26% and carries a Zacks Rank #3. The Zacks Consensus Estimate for quarterly earnings has been revised upward by a penny to $1.19 per share in the past 30 days.

Chandler, Arizona-headquartered Microchip Technology (MCHP - Free Report) will release second-quarter fiscal 2021 results on Nov 5. The company has an Earnings ESP of +4.01% and currently carries a Zacks Rank #3. The Zacks Consensus Estimate for earnings has remained unrevised at $1.42 per share over the past 30 days.

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