The Dow, the S&P 500, and the Nasdaq all surged to new records on Thursday, after Congress ratified Joe Biden’s victory. Meanwhile, Wall Street ignored Wednesday’s chaos in the Capitol building after Trump committed to an orderly transition of power. Investors are also excited about the possibility of increased government spending after the sweep in Georgia gives Democrats slight control in Washington.
Signs of economic recovery also continue despite increased coronavirus-based restrictions in many parts of the U.S. Meanwhile, the December stimulus bill and gradual rollout of the coronavirus vaccine in the U.S. and around the world have helped boost market sentiment. On top of that, the fourth quarter and fiscal 2021 earnings outlook has improved steadily (also read:
An Improving Earnings Outlook to Start 2021).
Wall Street seems to think the bull case for 2021 is pretty straightforward, especially with the interest rate environment. And even though the yield on the 10-year Treasury U.S. note has climbed over 1%, rates remain historically low and the Fed is committed to keeping it core rate near zero through at least 2023.
This means investors might want to start 2021 off by looking for some possible big winners. So today we dive into tech stocks with strong growth outlooks that are all trading for under $10 a share…
Harmonic Inc. ( HLIT Quick Quote HLIT - Free Report)
Prior Close: $7.58 USD
Harmonic is a video infrastructure products firm that’s seen its stock price surge over 60% in the last six months. The firm offers video delivery technology and services that help firms provide broadcast and OTT (over-the-top, better known as streaming) video services to customers.
HLIT crushed our earnings estimates over the last two quarters, including a 160% beat in Q3. Executives said that its overall live-streaming channels deployed globally were up 15%. It also landed its first “multi-million-dollar order for the new 5G bandwidth reclamation solution.”
Zacks estimates call for the company’s revenue and earnings to start to bounce back in the fourth quarter and then climb in a big way in fiscal 2021, after a somewhat tough three quarters. HLIT’s Q1 FY21 sales are projected to jump over 28% to help it swing from an adjusted loss of -$0.10 a share to +$0.03.
Then its full-year revenue is expected to pop 24% to $464 million—which would easily top FY19’s total. Better yet, its adjusted earnings are projected to skyrocket from $0.02 this year all the way to $0.40 per share.
Harmonic currently lands a Zacks Rank #3 (Hold), given its lack of recent earnings revisions. Yet, five of the eight brokerage recommendations Zacks has for HLIT come in at “Strong Buy” or a “Buy.” HLIT shares have climbed over 90% in the last three years to triple its Communication – Components industry average.
The stock popped over 2% through mid-day trading again on Thursday. Despite its, strong run over the last six months, HLIT rests about 10% below its 52-week highs. This could give it more room to climb as the market hits new records. Alongside its cheap price tag and even though it has outperformed its peers, the stock trades at a solid discount to its industry’s average at 1.6X forwards sales vs. 2.3X.
Himax Technologies, Inc. ( HIMX Quick Quote HIMX - Free Report)
Prior Close: $7.32 USD
Himax is a fabless semiconductor firm focused on display imaging processing technologies. HIMX’s solutions are utilized in everything from TVs, laptops, and smartphones to navigation systems, virtual reality devices, and more.
The company has posted three-straight quarters of strong revenue growth, including a 46% climb in Q3. Zacks estimates call for its adjusted Q4 EPS figure to soar from $0.01 to $0.16 on the back of 51% higher sales. HIMX is projected to post similar top and bottom-line growth in Q1 FY21.
More broadly, its FY20 revenue is projected to climb 30% to $875.4 million, with FY21 expected to surge 22% to hit $1.1 billion. Investors should note that both of these estimates represent would be HIMX’s strongest revenue growth since going public. Himax is also expected to soar from an adjusted loss of -$0.07 a share to +$0.25, with FY21 expected to continue to climb all the way to +$0.44 a share.
HIMX jumped over 5% through morning trading Thursday as investors pile in on the cheap chip stock. This is part of a 115% run since the end of October, which included its big post-earnings release climb. Himax currently sits below the 52-week high it reached at the end of December and 45% below the roughly $14 a share it touched in 2017. HIMX, like HLIT, trades at a discount to its industry at 1.2X forward 12-month sales vs. 8.6X.
Himax’s positive earnings revision help it grab a Zacks Rank #2 (Buy) at the moment. HIMX also sports “A” grades for Growth and Momentum in our Style Scores system, and Himax improved its gross margin last quarter. Plus, the company is exposed to a display space that is vital in our device-heavy world.
Glu Mobile ( GLUU Quick Quote GLUU - Free Report)
Prior Close: $8.92 USD
Glu is a mobile video game company with a portfolio that includes Deer Hunter, Kim Kardashian: Hollywood, MLB Tap Sports Baseball, and other popular titles. The firm is part of the widely popular free-to-play mobile space. In fact, the broader mobile market accounts for roughly 50% of the total global gaming market that’s projected to expand from $159 billion in 2020 to over $200 billion by 2023.
Glu beat our Q3 earnings estimates by roughly 60% in early November, with sales up 48% to a company record $158.5 million. Zacks estimates call for its fiscal 2020 sales to climb 31% to $556 million, with another 11% expansion projected in FY21. At the bottom end of the income statement, GLUU’s adjusted EPS are expected to skyrocket 141% this year and another 34% next year. And Glu’s preliminary revenue guidance did not include the planned launch of four new original IP titles in 2021.
Glu’s earnings revisions help it grab a Zacks Rank #1 (Strong Buy) and 10 of the 11 brokerage recommendations Zacks has for the stock come in at a “Strong Buy.” GLUU is also looking to make another “transformative acquisition.” And Glu’s impressive balance sheet, with its cash position up 150% from the year-ago period, is expected to help Glu do just that. In fact, the $1.5 billion market cap gaming company closed the third quarter with $318 million in cash and no debt.
GLUU stock has climbed 50% in the last year to more than double its highly-ranked industry that includes everyone from Activision Blizzard (
ATVI Quick Quote ATVI - Free Report) to Mattel ( MAT Quick Quote MAT - Free Report) . Despite this run, it trades over 15% below its 2019 highs and its valuation is solid.
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