Back to top

Image: Bigstock

5 Must-Buy Stocks as Tech Rebounds on Reviving Economy

Read MoreHide Full Article

The three major U.S. indices, namely, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq began the week on a bright note. While the Nasdaq increased 1.67% to close at 13,705.59 on Apr 5, the Dow Jones Industrial, and the S&P 500 grew 1.13% and 1.44% to 33,527.19 and 4,077.91, respectively, creating new records.

The upside was driven by back-to-back positive economic data. Per the latest report from the Institute for Supply Management, the Services PMI hit an all-time high of 63.7%, up 8.4% over the February reading of 55.3%, reflecting benefits of business reopenings amid an accelerated vaccine rollout and massive government stimulus.

Moreover, according to Labor Department data released on Apr 2, businesses hired 916,000 workers in the month of March (fastest since August 2020) and unemployment rate declined to 6%. Markedly, job gains for January and February were revised up by a combined 156,000.

Further, positive data points about improving consumer confidence have fueled optimism over steady revival of a coronavirus-ravaged economy. Notably, in March 2021, U.S. Consumer Confidence rose to the highest level since the onset of the pandemic. The Conference Board’s Consumer Confidence Index reads 109.7 for March compared with 90.4 in February.

Additionally, 10-year U.S. Treasury yield fell to 1.711% on Apr 5, which provided some relief to rising inflation worries. Markedly, the rising yield has hurt investors’ appetite for technology stocks in recent months.

Tech Well-Poised to Grow

Nasdaq’s rally on Monday was driven by tech stocks like Alphabet (GOOGL - Free Report) and Facebook. Lower yield is further expected to increase interest for tech stocks among investors looking for growth opportunities.

Undoubtedly, tech stocks are benefiting from the ongoing digitalization. Adoption of cloud computing and the integration of AI and machine learning have been key catalysts. Moreover, short supply of chips is opening up opportunities for semiconductor companies.

Notably, President Joe Biden’s $2.3-trillion infrastructure overhaul spending package allocates $50 billion for the American semiconductor industry in an attempt to address the worldwide shortage of chips. The plan also sets aside an amount of $174 billion to boost the electric vehicles markets.

Further, Biden’s focus on expansion of high-speed broadband access is expected to benefit tech stocks.

Here we pick five technology stocks that are well-poised to benefit from steady economic revival. Apart from having solid fundamentals, these stocks sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, each of these stocks has a market cap of more than $10 billion and has outperformed the S&P 500 composite on a year-to-date basis.

Year-to-Date Performance

 

Top Picks

Micron Technology (MU - Free Report) is gaining from solid memory-chip demand among data-center operators due to the coronavirus-induced work-from-home and online learning wave.

Furthermore, this $103.38-billion company is well-poised to benefit from the resurgence in DRAM demand, backed by progress in customer inventory adjustments in the cloud, graphics and the PC markets.

Digitization across industries, increased uptake of cloud computing and services, acceleration in 5G adoption and the integration of AI and machine learnings are likely to fuel demand for this Zacks Rank #1 company’s chips.

The Zacks Consensus Estimate for its fiscal 2021 earnings has been revised upward by 17.1% in 60 days’ time to $4.52 per share. Earnings are expected to surge 59.72% from the prior-year reported number.

Logitech (LOGI - Free Report) is gaining from solid performance by its Gaming and Video Collaboration units. Further, the thriving cloud-based video conferencing services will continue to be the key catalyst for this Zacks Rank #1 company’s prospects.

Additionally, Logitech’s partnerships with the likes of Zoom as well as cloud platform providers like Microsoft and Google are major positives.

Markedly, this $18.03-billion company recently raised its fiscal 2021 guidance and provided outlook for fiscal 2022. (Read More: Logitech Raises FY21 & Long-Term Financial Outlook)

The Zacks Consensus Estimate for Logitech’s fiscal 2021 earnings has risen 2.2% to $5.92 per share over the past 60 days, suggesting whopping growth of 175.4% from the year-ago reported figure.

Applied Materials (AMAT - Free Report) is driven by strong momentum across Semiconductor Systems and Applied Global Services. Further, solid demand for silicon in several applications across various markets is a tailwind.

Increased customer spending in foundry and logic on the back of rising need for specialty nodes in automotive, power, 5G rollout, IoT, communications and image sensor markets is a major positive as well.

Also, strong momentum in conductor etches is benefiting this Zacks Rank #2 company’s position in DRAM and NAND.

The consensus mark for this $129.87-billion company’s fiscal 2021 earnings stands at $5.98 per share, having moved 19.4% north over the past 60 days. Earnings are expected to increase 43.4% over the year-ago period reported number.

Generac Holdings (GNRC - Free Report) is benefiting from robust demand for its home standby generators due to higher power outages, while the “Home as a Sanctuary” trend gains traction.

This Zacks Rank #2 company is riding on its push into the California market and expansion into clean energy technologies. Moreover, this $20.35-billion company is likely to benefit from its emphasis on improving the end-user experience and helping customers lower utility costs.

The Zacks Consensus Estimate for Generac’s 2021 earnings stands at $8.66 per share, having moved 2.4% north over the past 30 days. Earnings are expected to grow 34% from the figure reported in the preceding year.

McAfee (MCFE - Free Report) has been witnessing strong acceleration in its consumer security business. The company’s expanding customer base is a major growth driver.

McAfee ended fourth-quarter 2020 with 18 million Core Direct to Consumer subscribers, adding roughly 2.8 million net new subscribers compared to the fourth-quarter 2019 and 668,000 net new subscribers sequentially.

Moreover, this Zacks Rank #2 company’s plan to sell its Enterprise business to a consortium led by Symphony Technology Group (STG) in an all-cash transaction for $4 billion will help it to lower debt.

The Zacks Consensus Estimate for its 2021 bottom line is pegged at $1.50 per share, up 5% in the past 60 days indicating 13.6% growth from the figure reported in the year-ago period.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?

Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2021 today >>

Published in